FEDERAL COURT OF AUSTRALIA

Re.Group Pty Ltd v Kazal (No 6) [2019] FCA 168

ORDERS

THE COURT ORDERS THAT:

1.    The costs of the Applicants payable by the Second Respondent pursuant to Order 1 made on 23 April 2018 be fixed in the sum of $415,000.00.

2.    The Applicants be at liberty to enforce the sum ordered in Order 1 without the need for any further grant of leave by the Court.

3.    The contempt proceeding be stood over for a case management hearing on 15 March 2019 at 9.30 am at which time the Applicants are to inform the Court of the extent to which the costs have been paid.

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

REASONS FOR JUDGMENT

PERRAM J:

1    On 23 April 2018 the Court ordered the Second Respondent to pay the costs of the Applicants’ contempt proceeding against him on an indemnity basis. It also ordered that those costs should be assessed by a registrar on a lump sum basis.

2    On 18 June 2018, the Applicants filed an affidavit of Mr Perkins who gave evidence that the costs the Applicants claimed under the order, including the costs of preparing their costs summary, was in the amount of $466,103.78. The contempt proceeding took place within a larger case which has yet to be heard. Mr Perkins also provided an additional affidavit which indicated that the costs of the Applicants for the entire proceeding was $973,248.74. The costs of preparing the additional affidavit were $5,760, which resulted in the Applicants claiming a total lump sum of $471,863.78. Mr Perkins was assisted in the preparation of both affidavits by Ms Rosati, who is the principal of DGT Costs Lawyers, a law firm specialising in legal costs.

3    On 18 September 2018, the Second Respondent’s solicitors responded with their own estimate prepared with the assistance of a legal costs specialist, Ms Ward. Ms Ward is the special counsel of a costs legal firm, Pattison Hardman. A number of aspects of the Applicants’ claim were disputed. The Second Respondent sought a reduction of at least $121,608 from the amount claimed by the Applicants. Subsequently submissions were exchanged. On 16 October 2018 Deputy District Registrar Segal made an order fixing the lump sum costs at $415,000 and on 30 November 2018 published reasons for that determination.

4    On 5 November 2018 the Second Respondent filed an application to review a taxation which lies under r 40.34 of the Federal Court Rules 2011 (Cth) (‘the Rules’). However, Registrar Segal did not conduct a taxation and the Court has no power to review his lump sum order under that rule. What occurred is that on 23 April 2018 I determined that the costs were to be determined in a lump sum. The Court’s power to do that is contained in r 40.02(b) which allows that costs ‘may be awarded in a lump sum, instead of, or in addition to, any taxed costs’. I could have determined the lump sum myself but instead I exercised the power in r 1.37 to direct ‘a Registrar to do, or not to do, an act or thing’ by directing him to assess the lump sum amount of the costs. Rule 40.02(b) appears in column 2 of Sch 2 to the Rules so that by r 3.01 the Registrar had power to deal with the determination of the lump sum costs. As such the decision by the Registrar was an exercise of the Court’s power under r 40.02(b) so that a right to review it lies under s 35A(5) of the Federal Court of Australia Act 1976 (Cth). By r 3.11(2) that application must be made within 21 days of the date upon which the power was exercised. The present application was filed within that time although it was not the correct application. I do not think in the present circumstances that there is anything to be gained by requiring that the Second Respondent file the correct application and I will treat the application as if it were an application under s 35A(5).

5    The nature of a review of a registrar’s exercise of a power of the Court under s 35A(1) is well-established. Although the word used in s 35A(6) is ‘may’ the Court must conduct a review if it is sought: Dekkan v Macquarie Leasing Pty Ltd [2008] FCA 1235 at [5]. What is reviewed is the exercise of power by the registrar (rather individual findings in isolation): Deputy Commissioner of Taxation v Commercial and General Law (SA) Pty Ltd [2011] FCA 1269 at [98]-[99]. The review involves a hearing de novo in which the Court may review both questions of fact and law: 3Bears Childcare Centre Pty Ltd v Deputy Commissioner of Taxation [2018] FCA 1690 at [13]. At the hearing the parties may, if they wish, adduce further evidence: G & J Gears Australia Pty Ltd v Brobo Group Pty Ltd [2006] FCA 330 at [55].

6    The Second Respondent has not sought to rely upon any additional evidence and did not nominate any part of the Registrar’s reasons as exhibiting any particular error. The suggestion was, as I understood, that I would simply perform the Registrar’s function afresh.

7    These reasons assume a familiarity with the Registrar’s reasons. I do not propose to engage in the detailed process which the Registrar did but will, in the absence of any suggestion to the contrary, simply focus on the central issues he identified.

8    The issues between the parties were essentially six in number. First, the Second Respondent submitted that one could not be sure that the costs claimed for the contempt proceeding did include work which was related to the main case. When the Registrar first began to deal with the lump sum determination the Applicants’ evidence only extended to an assessment of the costs of the contempt case to the figure of $466,103.78. The issue of overlap was not clear from that evidence and he sought further evidence. That resulted in the second affidavit which contained the estimate of costs for the whole proceeding of $973,248.74.

9    There is no evidence that the costs claimed for the contempt proceeding also form part of the costs claimed for the overall proceeding. This was the Registrar’s view and I have been taken to nothing which would indicate that he was wrong.

10    Secondly, there was a dispute about the charge out rates of the Applicants’ solicitors. The Second Respondent disputed the appropriateness of the rates charged by Mr Todd and Mr Perkins on the basis of the rates set out in the costs scale and because of Mr Perkin’s experience a solicitor with only six years of post-admission practice. Mr Todd, a partner, was nominally charged at $780/$790 per hour. Mr Perkins was charged out at hourly rates of $540/$580/590. These rates were subject to an agreed contract discount of 10%. On top of that it was volunteered by the Applicants as part of the costing process that a further 10% discount should be applied. When that is done Mr Todd’s rate becomes $640 and Mr Perkins’ $478. An award of costs at that rate under an indemnity costs order seems to me acceptable.

11    Thirdly, there was a dispute about the charge out rates of senior counsel. Senior counsel charged $10,000/$11,000 per day and $1,000/$1,100 per hour. The Applicants accepted a 10% discount which reduces the top rates to $9,900 and $990 respectively. Given the indemnity nature of the costs I see no reason to discount these rates further. Mr Leopold is a well-known senior counsel and this is a complex case. It appears the Registrar incorrectly recorded the discounted hourly rate as $999 rather than $990, but it does not appear this mistake carried into the final calculation of the lump sum.

12    Fourthly, there was then a dispute about whether the Applicants should have had two solicitors in Court. I agree with the Registrar’s conclusion that it was reasonable for the Applicant to have two solicitors in Court having regard to the nature of the matter.

13    Fifthly, the Registrar reduced the costs the Applicants were entitled to in relation to the assessment of their costs. The Applicants had claimed $41,318.00 comprising $23,558.18 in solicitors’ costs and $17,600 in consultants’ fees. The Registrar allowed $9,000 for solicitors’ costs and $12,000 for consultants’ fees. The cost consultant had spent $12,000 on preparing the costs summary for the contempt aspect of the matter and the Registrar allowed this in full. He disallowed a further $5,760 claimed in relation to the costs consultant for the preparation of the second costs estimate. The second estimate was of the whole of the costs of the proceeding. The Registrar did not feel it was necessary to carry out that exercise to solve the problem he had sought assistance on. Overall the Registrar thought that it was disproportionate to spend $41,318.00 on assessing the costs when the solicitors’ overall costs were $161,198.10. He therefore reduced the solicitors’ costs to $9,000. I agree with this approach.

14    Sixthly, there was a debate as to whether a general discount should be applied the costs to reflect the possibility that they might include costs which were unreasonably incurred. The Registrar accepted that a discount of 10% was appropriate on the solicitors’ costs but not the overall costs claimed. I see no reason to depart from that conclusion.

15    In those circumstances, I would reach the same conclusion as the Registrar. The costs of the Applicants payable by the Second Respondent pursuant to Order 1 made on 23 April 2018 are to be fixed in the sum of $415,000.

Associate:

Dated:    21 February 2019