FEDERAL COURT OF AUSTRALIA

Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 3) [2018] FCA 1608

ORDERS

THE COURT ORDERS THAT:

1.    Order 9 of the Court made on 22 August 2018 be set aside.

2.    The Respondents pay the Applicants’ costs of the proceeding fixed in the amount of $840,000.

3.    The proceeding otherwise be dismissed.

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

REASONS FOR JUDGMENT

BESANKO J:

1    I delivered reasons in this proceeding on 27 July 2018 (Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 2) [2018] FCA 1109). The applicants were to bring in draft minutes of order reflecting the conclusions in the reasons which they subsequently did. None of the respondents appeared on the handing down of judgment and, in fact, none of them have taken any further part in the proceeding. Each of the first, second and third respondents went into liquidation on 27 March 2018 and the fifth respondent was made bankrupt on his own petition on 3 April 2018. I made final orders on 22 August 2018 and those orders included an order in paragraph 9 that the respondents pay the applicants’ costs of the proceeding, as agreed or assessed, subject to order 10. The latter order provided that the applicants file any interlocutory application and supporting affidavits seeking a lump sum costs order by 29 August 2018.

2    On 3 September 2018, the applicants filed an interlocutory application seeking the following orders:

1.    Order 9 made by the Court on 22 August 2018 be varied or otherwise set aside, and in lieu thereof the Respondents pay the Applicants’ costs fixed in an amount to be determined by the Court.

2.    The Respondents pay the Applicants’ costs of and incidental to this interlocutory application, fixed in an amount to be determined by the Court.

3    The respondents have had notice of this application, but, as I have said, they have not appeared or played any part in the application.

4    The applicants have refined the orders they seek to be the following:

 1.    Order 9 of the Court made on 22 August 2018 be set aside.

2.    The Respondents pay the Applicants’ costs of the proceeding fixed in the amount of $840,000.

 3.    The proceeding be otherwise dismissed.

The intent of the last order is to recognise that outstanding matters, such as damages or an account of profits, are not being pursued.

5    The applicants rely on three affidavits.

6    First, the applicants rely on the affidavit of Mr Christopher Williams sworn on 21 August 2018. In his affidavit, Mr Williams refers to the liquidation of the first, second and third respondents, and the bankruptcy of the fifth respondent. It is not necessary for me to set out any further details.

7    The second and third affidavits upon which the applicants rely are affidavits of Ms Suzanne Ward sworn on 3 September 2018 and 13 September 2018 respectively. Ms Ward’s evidence is relevant to the quantum of any costs order.

8    In Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; (2017) 253 FCR 403, the Full Court said (at [19]-[20]):

Whilst the Costs Practice Note now suggests that most cases should have a lump sum costs order approach applied unless there is some characteristic that would make it unsuitable, a lump sum costs order is not mandated in all instances. In all cases it is a matter for the Court to exercise the discretion given to the Court by the Federal Court Act and the Rules as appropriate: see Sigalla at [18]-[19].

There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality.

(see also LFDB v SM (No 2) [2017] FCAFC 207.)

9    The proceedings in this case have been long and protracted. The history of this proceeding and other proceedings between the same parties (or some of them) is set out in my reasons referred to above (at [20]-[35]). The liquidation of three of the respondents, the bankruptcy of a fourth and the non-appearance of a fifth means that the taxation of costs is likely to be unopposed. The applicants should not be put to the inconvenience and expense of a lengthy taxation in those circumstances, particularly where their prospects of recovery must be doubtful. Even if there were opposition, it is likely to be long and protracted and that is to be avoided in proceedings which have already been long and protracted. In my opinion, this is an appropriate case for a lump sum costs order.

10    Ms Ward describes herself as an executive costs lawyer. She has substantial experience in the field of legal costing over a period of 15 years. She states that in her opinion, the preparation of a bill of costs in this matter would take several months and a Registrar’s estimate may similarly take several months to issue on top of that. She expresses the opinion that if the bill of costs was then required to be taxed, final costs orders might not be obtained for well over a year and following an expensive and lengthy taxation of costs hearing(s). In the opinion of Ms Ward, if an order for lump sum costs is not made, the likely duration and costs to be incurred by the applicants in the taxation process for a matter of this size and complexity is likely to be in excess of $180,000 and not completed before June 2019. Ms Ward sets out the steps that would be required and the costs of those steps.

11    Ms Ward provides her opinion as to the costs of the proceeding. She expresses the opinion that the amount claimed by way of a lump sum of $840,000 provides a substantial discount upon fair and reasonable costs on a party and party basis. Ms Ward has calculated that sum by starting at a figure for the assessment of total party/party costs of $1.2 million (rounded), billed in fees. She has then applied a discount of 30% to this starting figure to arrive at what she considers a fair and reasonable assessment of party/party costs payable as part of a gross lump sum order of $840,000 excluding GST. Ms Ward expresses the opinion that this discount is a reduction which is consistent with comparable authorities.

12    Ms Ward also expresses the opinion that the appropriate amount to be added for “skill, care and responsibility” given the complexity of the matters in dispute is at least 20%. She explains how she arrives at that figure. Ms Ward states that she has taken into account discretionary factors that would be, in her opinion, reasonably considered by a taxing officer.

13    In her second affidavit, Ms Ward makes the point that interest is payable on the costs that the respondents were ordered to pay the applicants. Should the matter proceed to taxation and the costs are taxed at, say, $900,000, this equates to an interest liability of $66,454 per annum or $185 per day.

14    Ms Ward explains that her starting figure was the total actual costs incurred by the applicants. The amount of $1.2 million (rounded) comprises $713,000 in solicitors’ fees and $487,000 in disbursements. Ms Ward explained that she had calculated this figure using the actual billed amounts recorded in the electronic file ledger and hard copy tax invoices issued to the applicants and provided to her by the applicants’ solicitors as part of the letter of instructions she received. Ms Ward explains that, based on her experience in similar cases and the circumstances of this matter, she considers the figure of $840,000, including the costs of this application, to be a substantial discount on the applicants’ likely recoverable party/party costs. She expresses the opinion that were the matter to proceed to taxation, the applicants would likely receive greater costs than this lump sum amount. She expresses the opinion that the applicants’ party/party costs following taxation are likely to be in the range of $960,000 to $1 million, excluding GST.

15    I accept the opinions expressed by Ms Ward which were supported by the reasons she expressed and the material she produced. Obviously in the circumstances, the opinions stand unchallenged.

16    I will make the orders sought by the applicants.

Associate:    

Dated:    25 October 2018

SCHEDULE OF PARTIES