Federal Court of Australia

Lawrence v Sammut, in the matter of Lawrence [2023] FCA 1170

ORDERS

THE COURT ORDERS THAT:

1.    The applicant pay the respondents’ costs of this proceeding, including reserved costs, on a lump-sum basis.

2.    The question of the quantum of lump-sum costs be referred to a Registrar of this Court for any further directions which may be considered necessary and for determination.

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

REASONS FOR JUDGMENT

GOODMAN J

A.    Introduction

1    On 9 March 2023 this proceeding was dismissed by consent, save as to the determination of the question of costs. The parties subsequently filed written submissions on that question and agreed that it would be determined on the papers.

2    The respondents seek, and the applicant resists, orders that the applicant pay the respondents’ costs of the proceeding and that the quantum of costs be determined on a lump-sum basis by a Registrar of the Court on the papers. The applicant contends that: (1) there should be no order as to costs, with each party bearing its own costs; and (2) if an award of costs is made against him, then such an order should be the subject of specific deductions.

3    For the reasons developed below the orders sought by the respondent, other than that the determination is to occur on the papers, should be made.

B.    Background

4    On 21 March 2022, the respondents secured the issue of Bankruptcy Notice BN 255765 to the applicant by the Official Receiver. The Notice required the applicant to pay $58,513.15 to the respondents.

5    On 5 April 2022, the applicant commenced this proceeding by filing an application to set aside the Notice. The application asserted that the applicant had a counter-claim, set-off or cross-demand in respect of the debt the subject of the Notice. The parties subsequently filed and served the evidence upon which they proposed to rely at the hearing. On 19 September 2022, I set the proceeding down for hearing, together with proceeding NSD 1022 of 2021, on 3 and 4 April 2023.

6    On 24 November 2022, the parties attended a mediation but were unable to resolve their differences. The applicant was represented by counsel at that mediation.

7    On 14 December 2022, without any prior indication that he proposed to do so, the applicant paid $58,513.15 – that is, the amount the subject of the Notice – into the respondents’ solicitor’s trust account.

8    There appears to have been some correspondence between the parties after 14 December 2022 and before 9 March 2023. However, no party has placed that correspondence into evidence on this application, although each party has purported to refer to the substance of parts of that correspondence in their submissions.

9    On 9 March 2023, the parties attended a case management hearing. Counsel for the respondents indicated that in light of the payment made by the applicant on 14 December 2022, the respondents sought an order for the dismissal of the proceeding. Mr Twyford, solicitor, who appeared for the applicant, informed the Court that the applicant did not oppose such an order but wished to be heard on the question of costs. As noted above, I ordered that the proceeding be dismissed save as to the question of costs and a timetable for the filing of submissions was subsequently set.

C.    CONSIDERATION

Should there be an award of costs?

10    Each of the parties filed written submissions. The applicant’s submissions were prepared in some instances by the applicant himself, and on one occasion by Mr Twyford on his behalf. I have reviewed and considered all those submissions carefully (together with the evidence filed on behalf of the applicant). Having done so I observe, with respect, that the submissions prepared by Mr Twyford address the salient issues, but the remaining submissions for the applicant and the applicant’s evidence were not so focussed and were discursive, addressed many irrelevant issues, and were at times incoherent. Set out below is my consideration of the salient points raised in the submissions and evidence filed on behalf of the parties on this application.

11    It is well-established that the Court has a broad discretion as to costs: s 43(2) of the Federal Court of Australia Act 1976 (Cth). In the ordinary course – where the Court has decided on the merits of the case – costs “follow the event”. That is, the party who is unsuccessful because of the Court’s determination is required to pay the costs of the successful party. However, different considerations apply where, as in the present case, the Court has not determined the merits of the case. In Chapman v Luminis [2003] FCAFC 162 the Full Court of this Court (Beaumont, Sundberg and Hely JJ) explained at [7]:

The authorities establish the following propositions in relation to the making of costs orders in circumstances such as the present:

-    where a proceeding terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201;

-    this does not mean that a Court can never make an order for costs. Often it will be unable to do so, but in other cases an examination of the reasonableness of the conduct of the parties may provide the basis for an order, or a judge may be confident that one party was almost certain to have succeeded if a matter had been fully tried: Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 625 (McHugh J);

-    a distinction is to be drawn between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court’s discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should be bear the costs: ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 171 ALR 227 at 231-232 (Burchett J).

(emphasis added)

See also Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681 at 689 [37] (Payne JA; Basten and Meagher JJA agreeing); Bridging Capital Holdings Pty Ltd v Self Directed Super Funds Pty Ltd [2022] FCA 361 at [16] (Stewart J).

12    One factor of particular relevance to the exercise of the discretion in the present case is whether a party, after litigating for some time, effectively surrenders to the other. I am satisfied that, as the respondents submitted, the applicant effectively surrendered to the respondents. He did so when he consented to the making of an order for the dismissal of the proceeding on 9 March 2023, in circumstances where he had paid the amount the subject of the Notice on 14 December 2022.

13    The applicant submitted that there was no surrender because his prospects in the proceeding were not hopeless. However, this is a non-sequitur. A surrender may occur regardless of the strength of a party’s case.

14    The applicant also submitted that there should be no costs order because the order for dismissal of the proceeding was part of a settlement of this proceeding (and of proceeding NSD 1022 of 2021). However, there is no evidence of such a settlement, and in any event the question of costs was expressly left open in the orders made by consent.

15    The applicant also submitted that there should be no costs order because he did not act unreasonably in pursuing the proceeding. However, it is not necessary to find that he acted unreasonably in pursuing the proceeding before requiring him to pay the respondents’ costs in circumstances where he effectively surrendered to the respondents.

16    The applicant also submitted that his payment of the amount sought in the Notice was not a “supervening event” (see the extract from Chapman at [11] above) because the proceeding was not ended on the occurrence of that event, and rather continued for some four months. I accept that the payment was not a supervening event, namely an event external to the parties which might provide a reason not to make any award of costs. However, this does not assist the applicant and instead emphasises the surrender by the applicant. Further, the fact that the proceeding was not dismissed until 9 March 2023 does not assist the applicant, particularly in the absence of evidence before the Court of the communications between the parties between 14 December 2022 and 9 March 2023.

17    The applicant also submitted that costs should not be awarded to the respondents on the basis that the respondents engaged in disentitling conduct. In summary, the applicant contended that the respondents:

(1)    made no effort to approach the Court to end the proceeding in December 2022;

(2)    continued to prepare for hearing after the applicant had paid the amount sought in the Notice; and

(3)    failed to issue a “clear warning” to the (then) self-represented applicant following his payment of the sum sought in the Notice.

18    I do not accept this submission. It was open to the applicant to seek to discontinue the proceeding at any time and there was no obligation upon the respondents to take any steps for the benefit of the applicant, particularly in circumstances where the applicant had been represented by counsel at the mediation only weeks before. Further, to the extent that it is submitted that the respondents acted unreasonably after 14 December 2022, the Court is not able to assess this submission when there is no evidence before the Court of the correspondence between the parties between 14 December 2022 and 9 March 2023.

19    For the above reasons, the appropriate exercise of the discretion is to require the applicant to pay the respondent’s costs.

Should the costs payable by the applicant be limited?

20    The applicant submits that any costs that he is ordered to pay ought to be limited in the following ways.

21    First, to only encompass costs incurred in this proceeding (and not proceeding NSD 1022 of 2021). Such an order is unnecessary as the usual effect of an order for costs is to provide for the recovery of costs incurred in that proceeding only.

22    Secondly, to not include costs of the parties’ mediation (which, the applicant contends, “canvassed other various matters”). Such an order is unnecessary for the same reason.

23    Thirdly, to not include costs incurred from the date of 14 December 2022. As noted above, the Court is not able to make any assessment of the conduct of the parties between 14 December 2022 and 9 March 2023.

24    Of course, it will be open to the parties to make any salient submissions concerning costs during the taxation process provided those submissions are consistent with the process for an assessment on a lump-sum basis, which process I find below to be appropriate.

Should costs be awarded on a lump-sum basis?

25    The respondents seek an order that costs be awarded on a lump-sum basis, as determined by a Registrar of the Court on the papers. The applicant did not address this issue. I consider that the following circumstances of this proceeding warrant the making of an order that costs be awarded on a lump-sum basis, as determined by a Registrar.

26    First, the exercise of the Court’s discretion to award costs is informed by the Court’s Costs Practice Note (GPN-COSTS), which records at [4.1] the Court’s preference for the making of lump-sum costs orders wherever it is practicable and appropriate to do so: see Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 at 406 to 407 ([16] to [20]) (Allsop CJ, Besanko and Middleton JJ); Coshott v Prentice (No 2) [2018] FCAFC 221 (Kerr, Farrell and Gleeson JJ) at [4]. Secondly, this proceeding has already been wasteful of the respondents’ time and costs. A taxation process would likely generate more costs and further delay, particularly in circumstances where on this application the applicant has put before the Court voluminous materials irrelevant to the issues to be decided. Finally, Registrars of this Court are well-placed to determine the sum of a lump-sum costs award because of their regular work in that area.

27    I do not propose to make orders that the quantum of costs be determined on the papers. This is a matter appropriately decided by the Registrar to whom the proceeding is to be referred.

D.    Conclusion

28    Orders to the effect of those sought by the respondents, other than that the determination is to occur on the papers, should be made. I will make orders accordingly.

Associate:

Dated:    3 October 2023