FEDERAL COURT OF AUSTRALIA

Kumar v Secretary, Department of Social Services [2019] FCA 735

ORDERS

THE COURT ORDERS THAT:

1.    Costs be awarded to the first respondent in a lump sum in the amount of $13,725.68.

2.    The applicant pay the first respondent’s costs of $13,725.68.

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

REASONS FOR JUDGMENT

LOGAN J:

1    On 21 December 2018, for reasons delivered ex tempore, I dismissed with costs what was, nominally, an application by Mr Nitesh Kumar under s 39B of the Judiciary Act 1903 (Cth) (Judiciary Act) for particular constitutional writs relating to decisions made by a delegate of the Secretary to the Department of Social Services (Secretary) and the Administrative Appeals Tribunal. At the same time and as a sequel to that dismissal, I made a vexatious proceedings order under s 37AO of the Federal Court of Australia Act 1976 (Cth) (FCA Act) in respect of particular proceedings by Mr Kumar: see Kumar v Secretary, Department of Social Services [2018] FCA 2119 (principal judgment). These reasons for judgement must be read in conjunction with the principal judgment.

2    Upon dismissing the application and making the vexatious proceedings order, I ordered that Mr Kumar pay the lump sum costs of the Secretary. The Secretary was the respondent to the substantive application and the applicant for the order under s 37AO of the FCA Act. I then made consequential directions to the end of determining on the papers whether to make such an order in light of affidavit evidence and related written submissions filed by the parties.

3    The Secretary has submitted, under r 40.02(b) of the Federal Court Rules 2011 (Cth) (Rules), that Mr Kumar should pay his costs, fixed in the sum of $21,778.18. In support of that submission, the Secretary filed an affidavit made by a Ms Jacquelyn Vetter, a solicitor in the employ of his solicitors, Sparke Helmore Lawyers, and a related written submission.

4    Mr Kumar has not filed either any affidavit or any submissions in response.

5    According to the Court’s Costs Practice Note (GPN-COSTS) (Costs Practice Note), paragraph 4.1, “The Court’s preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order.” That statement as to preference in the Costs Practice Note is immediately qualified by the further statement, at paragraph 4.2, that, “a lump-sum costs procedure will always be at the discretion of the judge”. That qualification is necessary in light of the presently materially unfettered nature of the statutory power to award costs conferred by s 43(1) of the FCA Act. The awarding of costs in a specified sum is, nonetheless, expressly specified, in s 43(3)(d) of the FCA Act as an example of the type of order as to costs which may be made in the exercise of the discretionary power conferred by s 43(1). That preference and the discretionary quality of the costs power which falls for exercise according to the circumstances of a particular case were each expressly recognised by the Full Court in Paciocco v Australia and New Zealand Banking Group Ltd (No 2) (2017) 253 FCR 403, at [16] - [20] (Paciocco). Paciocco confirms what a reading of the Costs Practice Note would otherwise suggest, which is that there is much scope for innovation in relation to the use of, and practice concerning, lump sum costs orders to the end of reducing delay and costs associated with the final ascertainment of the amount of an entitlement to costs. Further, the hitherto practice of almost invariably consigning the determination of costs to registrars on taxation as a matter of course should no longer be followed without at least reflecting on whether the making of a lump sum order is more efficient and effective in the circumstances of the case to hand.

6    The fixing of costs in a lump sum can offer the benefit of a saving in both time and expense relative to the procedure for taxation of costs set out in the Rules. Equally, it can be unnecessarily consumptive and thus a misuse of judicial time and may deny to the parties the benefit of a direct exchange with a registrar as to the merits or otherwise of an estimate or bill of costs. It is to be remembered that the particular expertise in relation to costs issues reposes in the Court’s registrars. The Costs Practice Note (paragraph 4.9, under the heading, “Registrar Assistance”) contemplates a number of ways in which a judge might involve a registrar in relation to a lump sum costs application. Were a registrar to be involved as a “consultant”, which is one of the ways mentioned, care would have to be taken to ensure that procedural fairness was afforded to each of the parties in respect of any issues that may emerge because of that consultation.

7    As it happens, the Secretary has not requested that any assistance be sought from a registrar. Nor did I consider, given the lump sum amount sought and the issues that fell for determination, that any form of registrar assistance was warranted.

8    Ms Vetter’s affidavit takes the form of what the Costs Practice Note terms a “Costs Summary”. It is evident from her affidavit that Sparke Helmore has charged the Secretary for legal work on a time costing basis. In turn, it is also evident that counsel has at least partially adopted this method of charging.

9    The hourly rates adopted by Sparke Helmore for the partner (Mr Matthew Hawker), other lawyer (Ms Vetter) and Law Clerk who have undertaken work in this matter are within the hourly rates specified in Schedule 3 to the Rules. Further, the hourly and daily rate adopted by counsel, Mr Black, a junior at the Queensland Bar, is within the amounts specified in the Court’s National Guide to Counsels Fees.

10    The affidavit does not, in terms, attest that either Mr Hawker, Ms Vetter or Mr Black is registered either as solicitor or, as the case may be, barrister on the Register of Practitioners kept by the Registrar of the High Court of Australia for the purposes of s 55C of the Judiciary Act. The right to practise in, materially, this Court is dependent on that registration, not just on the possession of a practising certificate issued under State law: Judiciary Act, ss 55B(2) – 55B(3). In turn, the Secretary’s entitlement to recover costs is dependent upon those he retained having an entitlement to practise in this Court: Guss v Veenhuizen (No 2) (1976) 136 CLR 47.

11    A need for such attestation is not specified in the Costs Practice Note, as perhaps, with respect, it ought to be. In my experience, Mr Black of Counsel appears regularly and without question as to his entitlement to practise before the Court. Further, my experience is that the firm Sparke Helmore regularly acts in matters before the Court without any gainsaying of the right of its partners or employed solicitors so to practise. In these circumstances, I consider that I should act on the basis that the requisite registrations were in place.

12    I readily accept that the present case is one in which it is apt to make a lump sum costs order. The making of such an order is certainly not confined to a case of short hearing duration and where the issues concerned were relatively straightforward and compressed. However, the practice is often peculiarly apt in such cases.

13     It does not follow from the fact that Mr Kumar has not chosen to oppose the making of such an order, that time costing is a method of charging recognised in the Rules and that the rates adopted are within the limits specified in Schedule 3 and the National Guide to Counsel’s Fees that costs should be fixed in the lump sum sought. I must still be satisfied that the allowance of that sum is, in the circumstances of this particular case, appropriate.

14    In Wide Bay Conservation Council Inc v Burnett Water Pty Ltd (No 9) (2011) 194 FCR 250 (Wide Bay Conservation v Burnett Water) at [31]-[34], with particular reference to Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 (von Doussa J), which is a root authority in this Court on the subject, and to a summary offered by Sackville J in Seven Network Ltd v News Ltd [2007] FCA 2059, I canvassed principles applicable to what was then termed the fixing of costs in gross. Those principles remain applicable, save that, in contrast with the earlier rules of court, the Rules no longer embody the “necessary and proper” test, referred to in the summary offered by Sackville J. That said, it remains the case that the Court must be confident that the amount fixed by way of a lump sum is “logical, fair and reasonable”.

15    Also in Wide Bay Conservation v Burnett Water, I canvassed, at some length, a number of observations made about the vices and incongruities presented by the adoption of time charging as a basis for rewarding professional services. For example, a well-experienced legal practitioner may take no more than an hour to assimilate and advise upon a particular subject. A less-experienced practitioner may come to tender like advice but only after undertaking perusals that the experienced practitioner would soon realise were unnecessary and conducting lengthy research and self-education. If all of this took, say, one day, why should the less-experienced, time charging practitioner receive a greater reward than the experienced practitioner? In my view, a particularly apt observation was that offered by Gleeson CJ in 1998 in a “Commentary on Paper by Lord Browne-Wilkinson”, which I set out in Wide Bay Conservation v Burnett Water, at [123]:

Charging for professional legal services on the basis of the time taken to render those services rewards delay, inefficiency, and slow thinking. Time costing is an appropriate mechanism, in-house, for checking upon the efficiency of a lawyer’s operations. It is not, I believe, an appropriate basis for charging for professional services … Time charging is of particular significance in a process, such as litigation, which is a good example of Parkinson’s Law! Work expands to fill the available time. When people are being paid on the basis of time spent, why wouldn’t it?

16    In the “costs summary” portion of Ms Vetter’s affidavit, the following statements are made:

9.    Based on my investigation of the time recorded for this file on Elite [the name of Sparke Helmore’s time costing system] to date, I am able to provide the following summary in respect of each person who has performed work on this file in relation to these proceedings:

10.    Based on my investigation of the time recorded for this file on Elite to date, I am able to say that the First Respondent has incurred $18,045.18 (excluding GST) in professional fees payable to Sparke Helmore Lawyers in connection with this matter, excluding the fees incurred in relation to Recusal Application (being $1,853.99 excluding GST) and excluding the costs preparing this costs summary. About $1,873.82 of that total amount relates to preparing an application for security for costs which was ultimately not determined by the Court.

11.    In addition, the First Respondent is liable to pay disbursements of $7,740 (excluding GST) for Counsel's fees, excluding fees incurred in relation to the Recusal Application (being $1,400 excluding GST). Counsel's fees of $7,740 consist of:

(a)    $500 for preliminary advice and attendance at the first case management hearing;

(b)    $220 for work relating to the First Respondent's application for security for costs;

(c)    $3,500 for researching and drawing the First Respondent's defence and written submissions, and conferring with Sparke Helmore Lawyers in connection with the documents filed on behalf of the First Respondent;

(d)    $300 for work relating to the second case management hearing;

(e)    $1,220 for perusing the Applicant's written submissions and material, including affidavit with annexures of 5,400+ pages;

   (f)    $2,000 for preparing for and attending the final hearing.

12.    Counsel's fees were charged at $200 per hour or $1,200.00 per day as appropriate (both figures excluding GST). Counsel's rates are within the Federal Court's National Guide to Counsel's Fees.

13.    The First Respondent is also liable to pay disbursements of $505 for a filing fee of the interlocutory application for security for costs.

14.    The First Respondent has incurred a total of $26,290.18 (excluding GST) in professional fees and disbursements in this matter (excluding in relation to the Recusal Application) (ie, $18,045.18 plus $8,245). The First Respondent seeks payment of its costs and disbursements in the lump-sum of $21,273.88, consisting of:

  (a)    $13,533.88 (excluding GST), being approximately 75% of professional fees incurred.

     (b)    $7,740 (excluding GST), being 100% of Counsel's fees.

     (c)    $505, being 100% of the Court's filing fee.

15.    The amount sought excludes costs and disbursements relating to the Recusal Application.

16.    The First Respondent does not claim any additional amount for skill, care and responsibility.

17    The reference in the costs summary to the recusal application is a reference to a determination by the earlier docket judge, Reeves J, that he ought not further to have docket responsibility for this proceeding: Kumar v Secretary, Department of Social Services [2018] FCA 1710. The Secretary has, quite properly, recognised that it would not be fair and reasonable to seek to include related costs in any lump sum that will quantify Mr Kumar’s costs liability.

18    For a case of the present kind, this costs summary provides the requisite level of detail for a trial judge well familiar with the issues to make an assessment of costs for the purpose of fixing a lump sum. Absence of evidence from an independent, expert costs assessor, sometimes desirably adduced for assistance in the fixing of costs in more complex cases, is no bar to the fixing of costs.

19    I very well remember the prolixity of the material, both affidavits and submissions, filed by Mr Kumar. That material was, in the main, irrelevant. To reach that conclusion, someone with a trained eye at least had to peruse it. It is only fair and reasonable that there be due allowance for this in the fixing of costs. It does not follow that every lawyer involved, solicitor or counsel, had to read or even peruse all of it. Further, it was undoubtedly necessary to understand Mr Kumar’s history of litigation both in courts and tribunals and the outcomes in each in order to come to grips with the merits of the claim he sought to advance in the present proceeding and why it was that a vexatious proceedings order was appropriate.

20    There is a notable difference in the hourly charge out rates as between counsel and solicitors. Solicitors may well have higher overheads than the Bar, with a consequential effect on hourly charge out rates. The need to meet such overheads in a solicitor’s firm and billing targets may mean that some legal work that could equally, if not better, and certainly less expensively, be undertaken by the Bar is retained within a solicitor’s firm. Similar considerations might intrude in the internal division of time as between a partner and an employed lawyer. Looking at the division of time (including that which one may impute was spent by counsel) evident from the costs summary, I have the impression that each of these considerations may be present here to a degree.

21    I well remember Mr Black’s fair, careful and concise submissions, oral and written, which greatly assisted the disposal of the case by reasons for judgement delivered ex tempore. It does not follow that all of the time spent in preparation should be allowed in respect of that part of the counsel’s fee disbursements portion of the amount sought. Traditionally, a good litigation solicitor made observations on brief that were intended to assist counsel in the working up of a case for presentation in court. My experience in practice was that all too many solicitors no longer offered such observations but contented themselves only with the provision of formal instructions when briefing counsel. Nonetheless, I am prepared to accept that some of the time spent by the solicitors involved in this matter may have conferred such a benefit on Mr Black.

22    The Secretary has also sought that there be some allowance for the security for costs application which he made, including, as a disbursement, the filing fee. The dismissal of the proceeding made it unnecessary to deal with that interlocutory application. While I can understand the utility of such an application as an alternative or “fall back” in the event that the Court had not been disposed to make an order of dismissal, that it was unnecessary to deal with it indicates to me that related costs ought not to form part of the lump sum which I fix.

23    The process entailed in the fixing of lump sum costs is not intended – nor should it descend into – a meticulous, item-by-item examination akin to that of a taxation of costs. As is apparent from the costs summary, the Secretary has, in detailing the components of the lump sum sought, discounted the solicitor’s fees incurred by him by 25% but not discounted at all counsel’s fees. In my view, for reasons which I have set out above, and in light of my familiarity with the issues in the case, the discounting is insufficient in relation to solicitor’s fees and some discounting is also warranted in relation to counsel’s fees. A more appropriate discount, in my view, is 50% in respect of solicitor’s fees and 25% in respect of counsel’s fees. I would not allow the filing fee in respect of the interlocutory application that did not proceed. That makes the resultant components of the lump sum:

24    I therefore fix costs in a lump sum of $13,752.68.

25    I should also record that it proved necessary to correct a slip in the order of 21 December 2018. I noticed that slip when dealing with the present costs application. The order has been corrected so that it accurately reflects that made by me.

26    There will be orders accordingly.

Associate:    

Dated:    22 May 2019