FEDERAL COURT OF AUSTRALIA

Coshott v Prentice (No 2) [2017] FCA 394

ORDERS

THE COURT ORDERS THAT:

1.    The applications for review of the taxation of costs be dismissed.

2.    The applicants pay the costs of the respondent.

3.    Liberty be granted to the respondent to apply for a lump sum costs order within seven days.

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

REASONS FOR JUDGMENT

JAGOT J:

1    This is an application for review of taxations of two bills of costs carried out by a Registrar of the Court as a taxing officer.

2    The first issue is the proper construction of r 40.27 of the Federal Court Rules 2011 (Cth). Rule 40.27 is in the following terms:

(1)    If a notice of objection under rule 40.25(1) has not been filed, only the party who has filed the bill may attend the taxation.

(2)    If a notice of objection has been filed, only the party who has filed the notice of objection and a party who has filed a notice of response under this Division may attend the taxation.

(3)    A party is bound by the party’s notice of objection or notice of response, with the effect that:

(a)    no amount will be taxed off any item to which objection has not been taken in the notice of objection; and

(b)    no amount will be allowed for any item to which objection has been taken in the notice of objection but not responded to in the notice of response.

(4)    Despite subrule (3) the taxing officer will only allow costs to which a party is entitled.

(5)    At the taxation, a party may apply to the taxing officer for leave to make oral submissions for the purpose of explaining or clarifying an objection in the notice of objection or a response in the notice of response.

(6)    The taxing officer is to tax the bill in accordance with this Part and on completion is to issue a certificate of taxation.

3    The applicants submitted that the Registrar erred by disallowing costs, in whole or part, to which the respondent had not taken objection. This, the applicants said, contravened r 40.27(3)(a) which provides that “no amount will be taxed off any item to which objection has not been taken in the notice of objection”. I raised the operation of r 40.27(4) which resulted in the applicants, by their counsel, making further submissions to the effect that the words “Despite subrule (3)” in r 40.27(4) should not be given their natural and ordinary meaning as to do so would undermine r 40.27(3) and the apparent object of the provisions about taxation in the Rules which are designed to narrow the scope of the items in dispute by forcing the parties to object and respond. Construed literally, submitted the applicants, r 40.27(4) would impose an intolerable burden on the taxing officer to review every item in a bill of costs to ensure that he or she allowed only “costs to which a party is entitled”. As a result, the words “Despite subrule (3)” in r 40.27(4) should be construed to mean “Apart from subrule (3)” so that subrule (4) applies only to items to which objection has been taken and a response made. In respect of this class of items, it was submitted, subrule (4) operates. Otherwise, subrule (3) operates.

4    These submissions, while elegantly developed by the applicants’ counsel in writing and orally, do not persuade me that the applicants’ construction is to be preferred. Rule 40.27 is ambiguous but I am unable to find sufficient certain ground in the text or context to depart from the ordinary meaning of the word “despite” which, when used as a preposition, is “in spite of” or “notwithstanding”. The word “despite” describes a relationship in which one thing (in this case subrule (4)) operates against and prevails over another thing (in this case subrule (3)). The word is not apt to describe a relationship in which one thing (subrule (4)) operates only to the extent that another thing (subrule (3)) does not operate. If the applicants’ construction had been intended then words conveying a different relationship, of separate fields of operation of subrules (3) and (4), could have been used, such as “apart from subrule (3)” (as the applicants suggested) or “except for subrule (3)”.

5    Another indication that the taxing officer will only allow any costs to which a party is entitled, irrespective of the process of objection and response, is that r 40.27(3) starts with the words “A party is bound by”. While I accept that the effect is then prescribed by reference to not disallowing or allowing items it seems to me that the intent of subrules (3) and (4), read together, is that it is the parties who are bound by their objections and responses, not the taxing officer.

6    Nor do I accept that the burden imposed on the taxing officer by my preferred construction of r 40.27(4) will be intolerable or, indeed, any greater than that for which the applicants contend. To explain, the applicants’ construction is not as simple as it might first appear. This is because an objection and response may deal with part of an item only. On the applicants’ construction, the taxing officer would be bound by subrule (3) for that part of an item to which there had been no objection or no response, but subject to subrule (4) for the balance of the item where there had been both an objection and response. It seems to me that, if anything, the effort to ensure that the correct rule was applied to the correct part of the item would impose a greater burden on the taxing officer than discharging an obligation to ensure that a certificate of taxation issues only for costs to which a party is entitled.

7    Contrary to the submissions for the applicants, while I accept that it is desirable for the process of taxation of costs to be as efficient as possible, I do not accept that any construction which would permit a party to obtain a certificate of taxation for a greater sum of costs than that to which the party is entitled would be desirable. The operation of r 40.27(4), in my view, is ultimately protective of the interests of justice because it imposes an obligation on the taxing officer to ensure that a certificate is issued only in respect of those costs to which a party is entitled.

8    The construction which I prefer gives subrule (4) its natural and ordinary meaning, prevents the parties from raising any issue about an item which has not been the subject of objection and response, but leaves the taxing officer free to otherwise ensure that a certificate of taxation relates only to costs to which a party is actually entitled. This satisfactorily gives effect to all of the relevant provisions in the overall context set by this part of the Rules.

9    In the present taxations, the Registrar’s overall approach was sceptical of the applicants’ claims for costs because of the lack of any supporting material. Consistently with this, the Registrar disallowed a large proportion of the costs claimed, including costs which the applicants contend were not the subject of objection. Leaving aside the fact that the applicants could not identify which items were said to fall within this category and would have required further time to do so (time which I would not have been minded to grant given the history of the matter), I do not see this as involving any error of principle by the Registrar in contravention of r 40.27(3)(a). To the contrary, the Registrar was complying with r 40.27(4). For reasons which he gave, the Registrar was not satisfied that the applicant was entitled to many of the costs items claimed. The Registrar would not have discharged the obligation imposed by r 40.27(4) had he nevertheless allowed those items.

10    It follows that I also do not accept the second suggested error that the Registrar wrongly disallowed amounts to which purported objection only had been taken, because the objection did not comply with r 40.25(1)(b). Rule 40.25(1) requires the notice of objection to accord with Form 130, identify “each item or part of an item to which objection is taken” (subrule (1)(a)), and state “briefly but specifically” (subrule (1)(b)):

(i)    why the item or part of the item should be disallowed; and

(ii)    the amount by which it is contended the item should be reduced; and

(iii)    any authority on which the party relies.

11    The second suggested error depends on the notion, which I do not accept, that a notice of objection which does not comply with r 40.25(1)(b) may be treated as no notice of objection at all for the purposes of r 40.27(3) (and presumably otherwise). I disagree. In the first instance at least, it is for the taxing officer to decide if a notice of objection exists and the items to which it applies for the purposes of r 40.27. Whether anything more can arise than this depends on the nature of the non-compliance and the circumstances.

12    The third suggested error relates to GST on disbursements. The Registrar disallowed this component of both bills on the basis that the applicants had not provided any supporting evidence for the claims for GST on disbursements.

13    General Practice Note (GPN-COSTS) dated 25 October 2016 applied to these taxations. The practice note deals with GST in paragraph 6. The overall effect of the provisions is that only a party who is not entitled to an input credit should claim GST. Relevant paragraphs include:

6.5     With respect to including or excluding GST in a bill of costs, if the Costs Applicant is entitled to claim input tax credits (as, for example, many corporations are) then fairly and reasonably incurred costs and disbursements should be claimed in accordance with the Scale and exclusive of GST (ie no GST is added).

6.6     Alternatively, if the Costs Applicant is not entitled to claim input tax credits (as, for example, many individuals are not) then fairly and reasonably incurred costs and disbursements should be claimed as follows:

(a)     disbursements should be claimed in the amount incurred inclusive of GST;

(b)     costs should be claimed:

(i)     inclusive of GST for: Scale items 1.1 and any other Scale item that expressly requires or permits the application of item 1.1, however in all circumstances the amount claimed must not exceed the cap listed in Item 1.1, inclusive or exclusive of GST[20] or Scale Item 12; and

(ii)     otherwise in accordance with the Scale (ie. no GST is added).

GST Disclosure

6.7     Within any Costs Summary or bill of costs, the Costs Applicant must make a GST disclosure clarifying whether the Costs Applicant is registered for GST purposes and entitled to claim an input tax credit ("GST Disclosure") (refer to the verification in Part A of Annexure A or the certificate in the example bill of costs (pdf-90kb) on the Court's website).

6.8     If a Costs Applicant fails to make a GST Disclosure or otherwise make clear their status for GST purposes, the Court will proceed with the estimate or other costs process on the basis that the Costs Applicant is entitled to claim the input tax credit and therefore any GST component of the costs or disbursements claimed will be excluded in accordance with paragraph 6.6 above.

14    The applicants in the present case made no GST disclosure. As such, the Registrar acted consistently with paragraph 6.8 in disallowing the GST component for disbursements.

15    The fourth suggested error is the applicants’ contention that I should infer that the Registrar failed to consider the whole of the evidence in deciding what items to allow and disallow. One example should suffice to explain why this ground of review does not justify further consideration of the amounts the Registrar disallowed.

16    The applicants tendered a set of documents which became exhibit 4. These were described in a covering letter dated 16 December 2016 from the applicants’ former solicitor as his diary notes for work in proceedings SYG 2055 of 2013, one of the proceedings the subject of taxation and review. The diary notes appear to be a copy of an electronic record of work, albeit without any evidence on the face of the document disclosing who prepared it, how or when it was prepared, or for what purpose. For 19 December 2013 there is an entry, “Attd FCCA 2.0”. In the bill of costs item 424 appears, described as “instructing counsel Reg Tesoriero”, for two hours at $550 with a claimed amount of $1100. The Registrar disallowed item 424. The applicants say that the Registrar, in disallowing the entirety of this amount, must have overlooked a corresponding invoice from a barrister in the same matter which contains an entry as follows:

19/12/2013. Appear before Registrar Tesoriero at return of subpoena, settle consent orders – 1 hour.

17    The applicants described this invoice as corroborating the diary entry and submitted that, as the barrister’s fee was allowed in full, the Registrar must have overlooked the corroborating effect of the barrister’s invoice when disallowing the solicitor’s costs. The applicants said that this and other examples disclosed the same kind of error, justifying intervention on the review consistently with the principles described in Cassimatis v Australian Securities and Investment Commission [2016] FCA 131; (2016) 334 ALR 350 at [8] to [16].

18    This submission cannot be accepted. For one thing, as the Registrar explained in [27] of his reasons, if the applicants wished to rely on their former solicitor’s diary notes then some evidence from their former solicitor to explain and support those notes was required. For another thing, the barrister’s invoice does not corroborate the diary note. The barrister’s invoice, apart from being for a different amount of time (one hour not two hours), does not disclose one way or another whether the former solicitor attended before Registrar Tesoriero on 19 December 2013. The Registrar was entitled not to accept the diary notes, which he correctly described as second-hand hearsay, as probative of work actually carried out by the applicants’ former solicitor given that no evidence from the former solicitor had been adduced and nothing on the face of the diary notes supported any rational inference about their preparation.

19    The other observation which should be made is that the applicants’ non-compliance with r 40.34(2)(b) doomed the applications for review. Rule 40.34(2) provides that an application for review of a taxation by a taxing officer:

…must be in accordance with Form 133 and state, briefly but specifically:

(a)    the items in the bill that are subject to challenge; and

(b)    whether the party wants the item included, deleted or varied and, if varied, the amount of the variation.

20    It was apparent from the submissions for the applicants that they wanted the disallowance of numerous items varied but the application was not accompanied by any information identifying the amount of the variation sought. As a result, if the applicants had succeeded in persuading me that the review should proceed because of some error of principle or for other good reason, the applicants would have needed a further opportunity to identify the variations sought. Given that they had ample opportunity to comply with r 40.34(2)(b) before the hearing and had not done so in the face of the respondent’s complaints that it was prejudiced as a result, I would not have been minded to give the applicants this opportunity.

21    It is no answer to this problem to invite me, as the applicants did, to take a broad-brush approach to the overall amounts claimed. It is true that this approach was endorsed in the context of review of the remuneration of a receiver (Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; (2015) 108 ACSR 545 at [60]). The present context is different. If I were to do what the applicants request by taking each bills of costs as a claim from which I should make such discounts as seem appropriate to me, the effect would be to set at naught both the provisions of the Rules which apply to the taxation of bills of costs and review of taxations and the well-recognised expertise and breadth of discretion of taxing officers in carrying out the task of taxation.

22    The applications for review of the taxation of costs in both proceedings are to be dismissed and the applicants should pay the costs of the respondent in both matters.

Associate:

Dated:    3 May 2017