FEDERAL COURT OF AUSTRALIA

Hislop v Paltar Petroleum Limited (No 4) [2017] FCA 1632

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiff be awarded costs in a lump sum in respect of the costs orders made in the plaintiff’s favour on 8 September 2017, 12 September 2017 (noting that two costs orders were made in the plaintiff’s favour on that date) and 26 September 2017, together in the sum of $425,000.

2.    The plaintiff pay the costs of the application for a lump sum costs order.

3.    The defendants’ application for a stay of order 1 above is refused.

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

REASONS FOR JUDGMENT

GLEESON J:

1    The plaintiff (“Mr Hislop”) sought a lump sum costs order of $549,698.97 in respect of four costs orders made on 8 September 2017, 12 September 2017 (two orders) and 26 October 2017.

2    The defendants did not dispute that a lump sum order was appropriate but disputed that the amount sought was fair and reasonable. The defendants submitted that the costs should be fixed in an amount in the order of $405,000.

3    After considering the evidence, written submissions and oral submissions, I ordered the defendants to pay costs in an amount of $425,000 for the following reasons.

Legal Framework

4    Section 37M of the Federal Court of Australia Act 1976 (Cth) provides:

The overarching purpose of civil practice and procedure provisions

(1)    The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:

(a)    according to law; and

(b)    as quickly, inexpensively and efficiently as possible.

(2)    Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:

(a)    the just determination of all proceedings before the Court;

(b)    the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c)    the efficient disposal of the Court’s overall caseload;

(d)    the disposal of all proceedings in a timely manner;

(e)    the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

(3)    The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.

(4)    The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:

(a)    the Rules of Court made under this Act;

(b)    any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court.

5    Rule 40.02 of the Federal Court Rules 2011 (“Rules”) provides relevantly:

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; or …

6    The usual rule, which applies in this case, is that costs are payable on a party and party basis: rr 40.01 and 40.02. Costs as between party and party are defined in the Dictionary (Sch 1 to the Rules) as “only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation”. In contrast, an award of costs on an indemnity basis is intended to compensate a party fully for costs where it was unreasonable for the party to be subject to any expenditure of costs, such as where a hopeless proceeding is brought: see Bitek Pty Ltd v iConnect Pty Ltd [2012] FCA 506; (2012) 290 ALR 288 (“Bitek”) at [12].

7    Specification of a lump sum is not the result of a process of taxation or assessment of costs; the sum can only be fixed broadly having regard to the information before the Court; the approach taken to estimate costs must be logical, fair and reasonable: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [22]. The task is one of estimation or assessment and not of arithmetic: Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2014] FCA 346 at [17(e)]. The sum of costs fixed should be proportionate to the nature, including the complexity, of the case: Bitek at [18].

8    The starting point for the fixing of costs is the charges rendered by Mr Hislop’s solicitors. Then, there may be an “impressionistic discount of the costs actually incurred or estimated, in order to take into account the contingencies that would be relevant in any formal costs assessment”: Bitek at [18], citing Hamod v New South Wales [2011] NSWCA 375 at [820]. However, the court must be “astute not to cause an injustice”: Bitek at [23].

9    In Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640, Brereton J made the following observations concerning the application of a discount in determining a lump sum costs order, where costs were ordered to be paid on an indemnity basis:

[56]    The first defendant submits that there should be a further global percentage reduction of 15%, for two main reasons: first, because on assessment, even on the indemnity basis, a successful party invariably recovers something less than its actual costs, typically 15% where the assessment is on an indemnity basis; and secondly, the necessarily broad-brush approach of the court to assessment on a lump sum basis – involving some risk that the sum includes costs that would not be recovered on assessment – coupled with the savings to the costs creditor in time and costs through avoiding a detailed assessment, and the loss to the costs debtor of the opportunity to scrutinise and object to a detailed bill, has resulted in a practice of applying a discount on lump sum assessments.

[57]    While it is undoubtedly the usual practice of the court when making a lump sum costs order to apply a discount for the reasons mentioned, that does not mean that the Court must apply a percentage discount to the sum sought by the successful party and the Court “must be astute not to cause an injustice to the successful party” by applying “an arbitrary ‘fail safe’ discount on the costs estimate submitted to the court”.Thus if the court can be confident that there is little risk that the sum includes costs that might be disallowed on assessment, the case for a discount is seriously undermined.

(footnotes omitted)

10    Thus, in Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [13] and [14], Einstein said:

[13]    In adopting a broad-brush approach to gross sum awards the Courts have invariably applied a discount to the amounts claimed and in many cases a substantial such discount. The authorities treating with discount amounts include:

i.    In Canvas Graphics Pty Ltd v Kodak (Australasia) Pty Ltd [1998] 23 FCA; BC9800050, Canvas Graphics sought a gross sum costs order from Kodak. Canvas Graphics had prepared three draft bills, which were said to have been prepared on a party/party basis, which totalled $610,069, against which the sum of $18,325 had to be set off. Ultimately O’Loughlin J made gross sum costs orders totalling $233,325. The solicitor client bills had totalled $1,181,564.50. O’Loughlin J stated:

“It would defeat the exercise of assessing a lump sum if one were to make an individual analysis of the many entries in this draft bill that justify criticism. However, examples can be given in order to show that there must be a substantial mark down ....”

[The reduction applied to Canvas Graphics’ solicitor client bills was just over 80%.]

ii.    Sparnon v Apand Pty Ltd (Unreported, Federal Court of Australia, 4 March 1998, Von Doussa J; BC9800513) concerned a trial that occupied 45 sitting days and raised complex issues of fact and law (BC9800513 at 4). The actual bills rendered by the solicitors to Apand were $1,040,135.80. This sum included $466,400 for solicitors and $364,570 for counsel’s fees (BC9800513 at 5). Apand sought an order for gross sum costs on a party/party basis of $971,287 (BC9800513 at 7), a discount of 10%. Von Doussa J found that this was not a reasonable deduction (BC9800513 at 8). He allowed $252,592.21 for solicitor’s fees (55.5% of the solicitor client amount) and $162,505.44 for counsel’s fees and disbursements (44.5% of the solicitor client amount).

iii.    In Sony Entertainment v Smith (2005) 215 ALR 788; [2005] FCA 228; BC200500963, Jacobson J calculated a gross sum amount as follows:

“196. As to the amount of a gross sum order, the applicants seek $302,997.89, being 60% of actual costs incurred ($504,996.47), as detailed in the affidavit of Mr Michael Williams, partner for Gilbert & Tobin, solicitors for the applicants. They submit that this represents an amount commensurate with taxed party/party costs. They claimed a further $6,000 of the $10,000 likely to be incurred on the damages hearing.

...

201. It seems to me appropriate to award 40% of the amount sought by the applicants, being $205,998.58.”

[The reduction applied to the applicants’ actual costs was 40% of 60%, which equates to a reduction of 75%. (For some reason the amount of $205,998.58 ordered does not equate to a 75% reduction, although it is still a reduction of about 60%)]

[14]    It is however trite to observe that this is an area in which it is generally imprudent to endeavour to extrapolate from the circumstances of one piece of litigation to those of another. Having said that it is certainly the case that a prudent approach is an informed approach. To that end the sundry authorities referred to by the parties certainly serve to inform the ultimate decision set out in these reasons [it being unnecessary to identify each of those authorities in these reasons].

11    In Re Aquaqueen International Pty Ltd [2015] NSWSC 500 at [18], Black J said:

Section 98(4) of the Civil Procedure Act 2005 (NSW) relevantly provides that the Court may make an order to the effect that a party to whom costs are to be paid is entitled to a specified gross sum instead of assessed costs. That power is commonly exercised where costs have been incurred in a lengthy or complex case although it is not in its terms limited to such a case: Simone Starr-Diamond v Talus Diamond (No 4) [2013] NSWSC 811 at [8]. The power to make a gross sum costs order should only be exercised where the Court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it, and the court typically applies a discount in assessing costs on a gross sum basis: Ritchie’s Uniform Civil Procedure NSW [s 98.65]; Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23. In Hamod v State of New South Wales [2011] NSWCA 375 at [816]- [817], Beazley JA (with whom Giles and Whealy JJA agreed) summarised factors relevant to the making of a gross sum costs order as follows:

“The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp); the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Ritchie’s Uniform Civil Procedure NSW at [s 98.45].

The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith; (2005) 215 ALR 788 at [90], [194]–[195]; Hadid v Lenfest Communications Inc [2000] FCA 628.”

12    “In assessing quantum, the Court is entitled to take into account the evidence that is before it; its own observations of the proceeding and the judge’s own experience”: Fewin Pty Ltd v Burke (No 3) [2017] FCA 693 (“Fewin No 3)”) at [61]. It is open to the Court to have regard to any applicable scale of costs which regulates the recoverable amount on a party/party basis: LFDB v SM (No 4) [2017] FCA 753 (“LFBD”) at [9]. In Bitek at [20], Kenny J accepted that the cost scales under Sch 3 of the Rules (entitled “Costs allowable for work done and services performed”) applied to her assessment of an appropriate lump sum costs order.

13    In Bitek, Kenny J fixed costs ordered to be paid on a party/party basis by reference to a calculation that included an allowance of 10% for skill care and responsibility under item 11 of Sch 3 and a reduction of 17.5% in the lump sum assessment of party and party costs. At [21], her Honour accepted that the “relatively limited” reduction of 17.5% was appropriate in the circumstances of the case, which included the fact that the costs were incurred in a short time period and did not involve a significant number of interlocutory procedures or attendances, or extensive instructions to be sought from the applicant.

14    In Fewin (No 3), Markovic J made lump sum costs orders in relation to several costs orders, including both orders to pay costs on an indemnity basis and on a party/party basis. Her Honour recorded that counsel had charged rates within (or well within) the National Guide (at [65], [69], [73] and [78]) and her Honour expressed the opinion that rates charged by solicitors were reasonable, noting that no evidence was led to challenge the reasonableness of the rates charged, work undertaken or time spent on particular items of work (at [69]). Where the costs entitlement was on the ordinary (party/party) basis, rather than the indemnity basis, Markovic J applied a discount of approximately one-third (at [70], [75] and [79]).

15    In LFDB, Griffiths J allowed an application for lump sum costs in full. The quantum allowed appears to have included 75% of solicitors’ fees (which appear to have been calculated by reference to rates charged outside the scale) and 100% of disbursements including counsel’s fees. Griffiths J accepted a submission that senior counsel’s fees were higher than those in the National Guide (at [21]) but concluded that they were not unreasonable having regard to the complex and technical issues presented by the substantive proceedings, as well as the wider history of the matter.

Court’s guidelines

16    The Court has published a scale of Costs allowable for work done and services performed under the Sch 3 of the Rules (“Federal Court Scale”) and the National Guide to Counsel fees, issued on 28 June 2013.

17    The Federal Court Scale applies to costs to be allowed by a taxing officer on a taxation of costs and to “short form bills” prepared under Div 40.3 of the Rules. In particular, para 1.1 of the Federal Court Scale provides:

1.1    Attendances by a lawyer requiring the skill of a lawyer (including attendances in conference, by telephone, on counsel, appearing in court, instructing in court and travelling), for each unit of 6 minutes a sum in all circumstances not exceeding $58:

(a)    having regard to the lawyer’s skill and experience; and

(b)    having regard to the complexity of the matter or the difficulty or novelty of the questions involved.

18    The Guide states:

Since 2003, the Federal Court has issued periodically guides to the amounts which may be applied by taxing officers of the Court nationally in making estimates or taxing (including provisionally) party and party costs under the relevant rules of the Court. Updates have adjusted for market and cost-of-living changes.

The use of the guide for this purpose was reinforced in the new procedures and requirements for preparation, estimation, provisional taxation and taxation of party and party bills of costs and the new scale of costs contained in the Federal Court Rules 2011 (see item 16.1 in Schedule 3 to those Rules).

19    The relevant rates in the Guide are:

(a)    For “appearance at hearing (daily rate including conference)”:

(i)    $900-$4,200 for junior counsel;

(ii)    $2,060-$6,400 for senior counsel;

(b)    Hourly rate for preparation time; conferences (not occurring on day of hearing); settling applications, statements of claim, affidavits or other documents; written submissions (where not allowed above):

(i)    $265-$530 for junior counsel;

(ii)    $425-$740 for senior counsel.

20    On behalf of Mr Hislop, it was accepted that the Guide was relevant to the determination of a lump sum costs order but it was said not to be prescriptive. In particular, it was submitted, in effect, that the amounts in the Guide provided an inappropriately low benchmark for the reasonable costs of senior counsel in this case.

Quantum claimed by Mr Hislop

21    The amount of $549,698.97 comprised:

(a)    fees of Mr Hislop’s lawyers, Johnson Winter & Slattery (“JWS”), adjusted by reference to the Federal Court Scale (“adjusted JWS fees”) of $227,182.39; and

(b)    disbursements including counsel fees of $322,516.58.

22    The adjusted JWS fees were calculated by calculating the JWS fees by reference to the rates said to be permissible under the Federal Court Scale (as opposed to the rates actually charged) and then applying a 15% discount to that sum. The portion of the lump sum claimed for disbursements was calculated by including 100% of the disbursements incurred in the litigation.

Fees

23    The affidavit of Mr Johnson, a partner of JWS, included the following table setting out the categories of work incurred in the litigation:

24    Mr Johnson also set out a table identifying the fees incurred in the litigation, calculated by reference to the Federal Court Scale.

25    On Mr Johnson’s figures, which were not disputed, the fees calculated using the Federal Court Scale represented approximately 87% of the fees actually charged.

26    Mr Johnson expressed the following opinions:

[16]    I have had regard to the recent judgements in the Federal Court in which applications were made for lump-sum costs orders.

[17]    Taking into account those decisions, the comprehensive nature of the judgements in favour of the Plaintiff in this proceeding, the fact that the Plaintiff incurred considerable costs with lawyers in the US in relation to this matter which he is not seeking to recover (see paragraphs 35-36 below), the urgent, intense and complex nature of the matter (see paragraphs 29-41 below) and my own experience, I am of the opinion that the amounts sought to be recovered …are fair and reasonable and do justice between the parties.

…

[24]    … I consider that based on the urgency, intensity, complexity and other special features of this matter (see paragraphs 29 - 41 below), that a lump-sum for fees of $227,182.39 representing 85% of the fees recalculated using the Federal Court Scale is appropriate and does justice between the parties especially in circumstances where no loading or uplift has been included for skill, care and consideration; and no amounts are sought to be recovered for the Plaintiff’s significant costs incurred with his US lawyers in the Costs Orders Period (see paragraphs 35-36 below). This also represents approximately 74% of the actual fees JWS incurred.

Disbursements

27    The disbursement comprise:

(1)    Senior counsel’s fees        $203,170.00

(2)    Junior counsel’s fees        $100,125.00

(3)    Other                 $ 19,221.58

28    The other disbursements included process service fees, transcript fees, court fees, searches, photocopying, folders and dividers (external), in-house photocopying, taxi fares and couriers, and delivery fees.

Special features of the litigation identified by Mr Johnson

29    Mr Johnson expressed the view that the fees charged by JWS and counsel were justified on the basis of the high level of skill, care and responsibility required in the matter and identified the following “special features” of the case:

(1)    Urgency: the circumstances required the work to be done on an urgent basis. Instructions were received on 4 August 2017. The s 237 application and the application for the injunction were filed on 11 August 2017. The application for the injunction was heard late in the afternoon of Friday 11 August. The s 237 application was finally heard on 18 and 20 September 2017. In that time, not only were extensive affidavits and submissions required to be prepared in a very short time frame but Mr Hislop’s lawyers dealt with five urgent applications and appeared in Court on more than ten occasions.

(2)    Intensity: the work was very intense not only because it involved reviewing and preparing evidence for an injunction and then an urgent hearing but also because Mr Hislop had to respond urgently to an unusually large number of applications made by the defendants in this period and had to seek to have set aside a notice to produce issued by the defendants. The fact that the matter was in Court on more than 10 occasions required intense preparation and coordination amongst the solicitors, Mr Hislop and counsel.

(3)    Complexity: the subject matter of the proceedings involved complex corporate dealings between Australian and American companies in relation to the ownership, exploration and financing of significant gas exploration permits in Australia. The work required interpreting numerous and complex contracts, some of which were amended many times, and understanding the foreign law aspects of a number of those agreements. It also required detailed analysis of complicated financial arrangements between the parties and searching for and reviewing lengthy and complex public filings with regulators made by a number of companies.

(4)    Value: the value of the subject matter of the proceedings is in the tens of millions of Australian dollars.

(5)    Location of client and witnesses: Mr Hislop and one of Mr Hislop’s two witnesses, who reside out of the jurisdiction, were not, at any relevant stage in the same jurisdiction nor in Australia. Given the urgency of the matter, tele-conferences needed to be arranged to suit at least three jurisdictions at times which involved conferences early in the morning, late at night and on weekends and including with counsel. This made communications more complex and difficult than usual and added to time spent and urgency.

(6)    United States involvement: Mr Hislop was simultaneously instructing US lawyers in relation to proceedings in the US (which have now been filed). Because of the potential for overlap and in order to minimise duplication, it was necessary for JWS to continuously liaise with the US lawyers. Many tele-conferences took place between JWS, counsel, Mr Hislop and his US lawyers for this purpose as well as significant email communications.

(7)    In the period covered by the costs orders, Mr Hislop incurred fees to his US lawyers of US$177,566 which included work done in relation to both the US proceedings and the Australian proceedings. The fees referable to the Australian proceeding are not being claimed in Mr Hislop’s application for a lump-sum costs order.

(8)    United States interpretation: it was necessary to consider the impact of US laws on the interpretation of various agreements and arrangements and in relation to the conduct of directors’ meetings and voting which occurred in the US.

(9)    Access to records: Mr Hislop was replaced as CEO and President of Nation Wyoming Inc on 11 May 2017 and was removed as a director of Nation Australia Pty Ltd (“Nation Australia”) on 19 June 2017. The foreign witness David Siegel and the witness Andrew Logan were also both removed as directors of Nation Australia on 19 June 2017. Mr Logan was terminated as Chief Executive Officer of Nation Australia effective 30 June 2017. As neither Mr Hislop nor Mr Hislop’s witnesses had access to the books and records of Nation Australia, reliance had to be placed on documents obtained from the defendants and from public records in the US. Four notices to produce and a subpoena to the defendants’ solicitors were issued by Mr Hislop for this purpose.

(10)    Interlocutory applications: the work done in relation to the following interlocutory applications diverted time and attention from the preparation of the s 237 application and hence added to the intensity and urgency of the work:

(a)    the defendants’ unsuccessful application, made on 6 September 2017 seeking to dissolve the injunction;

(b)    the defendants’ security for costs application, which was abandoned on the day it was due to be heard;

(c)    Mr Hislop’s successful application to set aside the notice to produce issued by the defendants on 29 August 2017 seeking instructions and legal advice;

(d)    Mr Hislop’s successful application for leave to issue the subpoena; and

(e)    the defendants’ unsuccessful application to challenge the subpoena.

(11)    Counsel were required to attend Court on 10 occasions in addition to the two days for the s 237 application hearing.

30    I accepted that the litigation is fairly characterised by Mr Johnson as involving more than usual urgency and intensity, for the reasons he identified. I also accepted that the litigation involved significant complexity, although I did not accept that it was unusually complex in comparison to the range of litigation conducted in this Court. I did not accept that the international aspects of the litigation, including the location of clients and witnesses overseas and the conduct of related proceedings overseas proceedings took the matter outside of the degree of complexity commonly exhibited in commercial litigation in this Court. I did accept that the each of the matters identified by Mr Johnson are matters that increased the level of skill, care and responsibility required in the matter.

Comparison to defendants’ estimated costs

31    Mr Johnson referred to an affidavit sworn by Louise Massey, a lawyer then acting for the defendants. The affidavit specified the rates charged by the then defendants’ solicitors. Mr Johnson noted that those rates are higher than JWS’s rates. Mr Johnson also sought to compare Mr Hislop’s total costs and disbursements during the relevant period ($630,326.03) with Mr Massey’s estimate of $310,610.79, and made observations as to reasons why it is reasonable that Mr Hislop’s costs would significantly exceed those of the defendants, why it was likely that the defendant’s actual costs were significantly higher than estimated.

Defendants’ evidence and submissions

32    The defendants relied upon an affidavit of Peter Butler, a partner of Herbert Smith Freehills (“HSF”). HSF did not act for the defendants in the litigation during the period the subject of the costs orders.

33    Mr Butler’s affidavit annexed a letter from Valerie Higinbotham of Costacomp Pty Ltd, containing her observations and comments upon Mr Johnson’s affidavit. Ms Higinbotham is a costs expert with substantial experiences in matters of costs and taxations and is a member of the Law Society of New South Wales Costs Working Group. Mr Butler expressed his own view that the observations and comments in Ms Higinbotham’s letter appear reasonable. However, Mr Butler also said that it was not possible for him to form a view about the reasonableness of the costs claimed based only on the information available to him.

Fees

34    Ms Higinbotham expressed the view that it would be unreasonable to include $227,182.39 for JWS’s fees in a lump sum costs order for the following reasons:

(1)    70% of the total of the JWS fees (29% of the total of the lump sum sought) is for work by senior lawyers claiming for all of their work at $580.00 per hour, with a total claim of over $187,000.00;

(2)    20% of the JWS fees relate to correspondence and “dealing with the client” which usually results in less than full recovery when converted to Schedule 3;

(3)    25% of the JWS fees relate to reviewing documents, a task which is likely to have included duplicated work as a result of multiple solicitors (plus counsel) being involved in the matter;

(4)    25% of the JWS fees relate to pleadings, applications, affidavits and submissions, tasks which are likely to have included duplicated work as a result of multiple solicitors and counsel being involved in the matter.

35    Broadly, Ms Higinbotham expressed the views that it was unreasonable:

(a)    that JWS did not delegate work to mid-level lawyers; and

(b)    for the apparent extensive reliance by JWS on senior and junior counsel in addition to the heavy involvement of senior solicitors.

36    Ms Higinbotham expressed a view as to a reduction to the JWS adjusted fees to arrive at an amount for reasonable costs.

Disbursements

37    Ms Higinbotham made the following comments:

(1)    counsels’ fees should be subject to a reduction of $90,000 (in total) to reflect “the involvement of multiple senior solicitors and the excessive charge rates of counsel”;

(2)    the in-house copying charge is unreasonable and a reduction to this charge by 50% (i.e. $2,500) would not be unreasonable.

Consideration

Generally

38    I did not give any significant weight to Mr Johnson’s comparison of Mr Hislop’s total costs with the defendants’ estimated costs because I considered that the calculations of Mr Hislop’s total costs were based upon rates significantly in excess of rates derived from the Federal Court Scale, which I regard as a more appropriate benchmark in the determination of lump sum costs on a party/party basis.

39    I was satisfied that it was appropriate to determine the lump sum costs on the basis of the rates used by Mr Johnson to calculate the adjusted JWS fees, having regard to the identified seniority of the various JWS lawyers and the relative urgency, complexity and intensity of the proceeding and the potentially high value of the subject matter.

40    I was not satisfied that I should give significant weight to the fact that Mr Hislop incurred fees to his US lawyers which are not included in the quantum claimed, in the absence of evidence to enable an assessment of any amount foregone.

41    I did not give significant weight to the opinions expressed by Ms Higinbotham, in the absence of persuasive reasoning to support those opinions.

Fees

42    The Federal Court Scale makes separate provision for costs allowable for preparing documents and reading at rates different from the maximum rate in para 1.1, as well as providing for the allowance of an additional amount for care, skill and responsibility. Accordingly, it is not reasonable to assume that the full amount of JWS’s adjusted fees would have been allowed on a taxation.

43    I accepted the submission made by senior counsel for the respondents, Mr Giles SC, that there should be a discount to account for the probability that a substantial amount of the costs incurred in corresponding and dealing with clients (15% of total costs, in contrast with 5% of total costs in attending court) would not have been allowed on a taxation of costs. That submission is consistent with Kenny J’s observation in Bitek at [21] to the effect that a relatively low discount was warranted where there were not significant costs incurred in obtaining instructions.

44    I also accepted that there should be a discount to recognise the likelihood that, on a taxation, there would have been a discount having regard to time spent by lawyers on preparing for the hearing (particularly 45% of total costs claimed on preparing pleadings, applications, submissions; reviewing defendants’ pleadings, applications and affidavits; and preparing evidence) having regard to counsel’s charges, which must have included significant time on similar tasks.

45    I note that JWS’s adjusted fees include approximately 324 hours (or 70% of the total hours billed) at the highest scale rate of $580 per hour. Based on my experience in practice as a solicitor, this is a very high proportion of work undertaken by the most skilled legal practitioners. However, my experience is also that significant efficiencies often result from the appropriate deployment of very skilled practitioners. It is not self-evident that JWS’s adjusted fees should be discounted solely on this basis.

46    In my view, the most appropriate way to account for the matters identified by Mr Giles SC was to reduce JWS’s adjusted fees by approximately 20%, so that the amount included in the lump sum for those fees was $183,000.

Disbursements

47    I did not accept that it is fair and reasonable to include 100% of counsels’ charges in the lump sum costs order. In my view, the Guide is intended to provide guidance as to fair and reasonable rates to be allowed for the purpose of a lump sum costs order in a case like this and the ranges provided are intended to be relevant to the range of litigation conducted in this Court.

48    I accepted that this litigation did involve a significant degree of urgency and intensity, and also that the matter was relatively complex. I also accepted that the subject matter of the proceedings is potentially very valuable, in the order of tens of millions of dollars. However, these matters do not place the litigation outside the ordinary range of litigation conducted in the Court.

49    While I accepted Mr Johnson’s evidence that the rates in the Guide are significantly lower than the rates regularly charged by pre-eminent commercial senior counsel in Sydney in matters of this nature, Mr Johnson did not go so far as to suggest that competent counsel could not have been retained at rates falling within the ranges in the Guide. To the extent that it was suggested on Mr Hislop’s behalf, I did not accept that the relationship between the rates in the Guide and rates charged by pre-eminent counsel is relevant to the quantification of a lump sum costs order that is fair and reasonable.

50    I was prepared to accept that it is fair and reasonable to allow an amount for counsels’ charges in excess of the ranges set in the Guide having regard to the special features of the litigation and the evidence of the rates charged by counsel for the defendants, but I did not accept that the allowance should be significantly in excess of those ranges. In saying this, I am not intending to suggest that counsels’ fees were excessive. Rather, that a fair and reasonable lump sum costs order did not involve imposing upon the defendants’ the full costs of Mr Hislop’s particular choice of counsel including senior counsel who charged well outside the ranges specified in the Guide.

51    For these reasons, I allowed 64% of senior counsel’s fees (63.6% of senior counsel’s daily rate is $7,000, which is significantly above the top of the range in the Guide) and 90% of junior counsel’s fees (90% of junior counsel’s daily rate is $4,500, which is also above the top of the range in the Guide) in the lump sum order, with the result that I discounted Mr Hislop’s disbursements by $80,000.

52    Mr Giles SC did not make submissions in support of Ms Higinbotham’s proposed deduction on account of in-house copying expenses, and I was not satisfied that this relatively small deduction was warranted.

53    Accordingly, I included an amount of $242,000 in the lump sum costs order on account of disbursements.

Associate:

Dated:    2 February 2018

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