Federal Court of Australia

Roberts-Smith v Fairfax Media Publications Pty Limited (No 46) [2023] FCA 1630

ORDERS

THE COURT ORDERS THAT:

1.    Australian Capital Equity Pty Ltd (ACE) pay the respondents’ costs of the Third Party Costs Application filed on 21 June 2023 to the date of these orders, assessed on an indemnity basis.

2.    Order 6 made on 11 December 2023 be amended to read:

6.    The costs ordered to be paid:

a.    by ACE pursuant to Order 5 made on 11 December 2023;

b.    by ACE pursuant to Order 1 above; and

c.    by the applicant pursuant to Order 3 made on 28 November 2023;

be determined in a lump sum pursuant to rule 40.02(b) of the Federal Court Rules 2011 (Cth), if not agreed between the parties.

3.    The Third Party Costs Application be otherwise dismissed.

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

REASONS FOR JUDGMENT

BESANKO J:

1    The successful respondents in these proceedings made an application for an order that the applicant pay their costs assessed on an indemnity basis. On 28 November 2023, I made an order to that effect (Roberts-Smith v Fairfax Media Publications Pty Limited (No 45) [2023] FCA 1474). On 12 December 2023, the respondents gave the applicant notice by letter that they sought an order that the costs ordered to be paid under this order be determined in a lump sum pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth), if not agreed between the parties. Rule 40.02 provides that a party or a person who is entitled to costs may apply to the Court for an order that costs be awarded in a lump sum, instead of, or in addition to, any taxed costs.

2    The successful respondents also sought an order that Australian Capital Equity Pty Ltd (ACE) pay their costs of the proceedings assessed on an indemnity basis. They sought other orders in the alternative, but it is not necessary to mention those orders for present purposes. That application led to subpoenas issued by the respondents, applications by the addressees to set aside the subpoenas, which were refused by me (Roberts-Smith v Fairfax Media Publications Pty Limited (No 43) [2023] FCA 886), and appeals from my decision which were dismissed by the Full Court of this Court (Seven Network (Operations) Limited v Fairfax Media Publications Pty Limited [2023] FCAFC 185).

3    On 7 December 2023 and seven days after the appeals had been dismissed, I made various timetabling orders with a view to a hearing of the third party costs application on 11 and 12 March 2024.

4    During the afternoon of 8 December 2023, the Court was advised that ACE had determined to consent to the substantive relief sought in the respondents’ Interlocutory application dated 21 June 2023. Their solicitors, Herbert Smith Freehills, attached proposed orders to that effect and indicated that counsel was available to attend on 11, 12 or 13 December 2023 at certain identified times. The matter came before me on 11 December 2023. The following orders were made, relevantly:

5.    Australian Capital Equity Pty Limited (ACE) pay:

a.    the Respondents’ costs of the proceedings, assessed on the indemnity basis, as sought in order 3 of the Third Party Costs Application filed by the Respondents on 21 June 2023 (Third Party Costs Application).

6.    The Respondents’ costs ordered to be paid by ACE in accordance with order 5 are to be assessed pursuant to Division 40.2 of the Federal Court Rules 2011 (Cth), if not agreed between the parties.

The case management hearing was otherwise adjourned to Tuesday, 12 December 2023 at 4.00 pm.

5    Three matters were outstanding at that point in time. The first matter was whether ACE should pay the respondents’ costs of the third party costs application to the date of the orders assessed on an indemnity basis or on a party/party basis. The second matter was whether an order should be made under r 40.02(b) that costs be awarded in a lump sum instead of, or in addition to, any taxed costs. The third matter was the order that the third party costs application be otherwise dismissed. The third matter is not contentious; such an order is to be made once the prior matters are resolved.

6    The matter came back before the Court on 12 December 2023. I was advised that ACE now agreed to an order that it pay the respondents’ costs of the third party costs application to the date of the orders assessed on an indemnity basis. The matter which was not resolved, and upon which I heard argument, was whether an order should be made that the costs be awarded in a lump sum.

7    This ruling relates to order 5 made on 11 December 2023 and the order I will make to the effect that ACE pay the respondents’ costs of the third party costs application filed on 21 June 2023 to the date of the orders assessed on an indemnity basis. It also relates to the order made on 28 November 2023 to the effect that the applicant pay the respondents’ costs of the proceedings assessed on an indemnity basis. Counsel for the third party made submissions against the making of such an order and counsel for the applicant adopted those submissions. Counsel for the respondents made submissions in favour of such an order.

8    The trial in this matter was a very substantial one. It occupied in the order of approximately 110 days and evidence from 42 witnesses and there were substantial interlocutory and other applications prior to, and during, the trial. It seems to be common ground that the costs are likely to be substantial and in the order of many millions of dollars. The taxation of costs in the traditional sense could be a very protracted and expensive process.

9    The Parliament has recognised that modern litigation can be very expensive and protracted and has attempted to address inefficiencies and unnecessary costs by a number of means, including identifying the overarching purpose of the civil practice and procedure provisions and imposing obligations on parties and their lawyers (see s 37M and s 37N of the Federal Court of Australia Act 1976 (Cth)). The overarching purpose and obligations apply to litigation about costs as much as any other aspect of a proceeding.

10    The Costs Practice Note of the Court addresses, inter alia, lump-sum costs orders. Clause 4.1 provides that the Court’s preference wherever it is practicable and appropriate to do so is to make a lump-sum costs order. Clause 4.2 provides that this procedure will always be at the discretion of the judge and that the parties will be given a fair opportunity to present their views as to the appropriateness of utilising a lump-sum costs procedure. Clause 4.9 deals with a judge involving or seeking the assistance of a registrar. Clauses 4.10 to 4.12 address the material to be put forward in support of an application for a lump-sum costs order. A formal application for a lump-sum costs order is not required unless the Court otherwise directs. An affidavit in support of a lump-sum claim should be filed. Clause 4.11 is significant. It is as follows:

The Costs Summary must be clear, concise and direct and not resemble a bill of costs in taxable form, nor should it contain submissions on the law. The intention of the lump-sum costs procedure is to streamline and expedite the determination or resolution of the quantum of costs question and not to replicate the taxation process.

11    The material to be provided in response is identified in clauses 4.13–4.14.

12    A couple of matters about the Practice Note should be noted. First, the Practice Note can and will be adapted to the particular circumstances of the case. Secondly and relatedly, one of the ways in which the Practice Note will be adapted is to ensure it does not operate to deprive a party of a fair opportunity to put such matters as reasonably support his or her interests.

13    In Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; (2017) 253 FCR 403, the Full Court of this Court essentially made these points in the following passages (at [17]–[20]):

17    The Costs Practice Note provides for the Court to make use of sophisticated costs orders and procedures, and to take such steps as it considers necessary to ensure that it has the requisite level of detail to make a costs determination that is fair, logical and reasonable and to avoid orders that lead to potentially expensive and lengthy taxation hearings: Costs Practice Note at [3.3].

18    We emphasise that in making a lump sum award of costs, the Court in undertaking the task of assessing costs is not precluded from undertaking a close inquiry of costs relating to a particular issue or category of costs, should the Court consider it appropriate to do so: see e.g. Hudson v Sigalla (No 2) [2017] FCA 339 at [30] (‘Sigalla’). The Court is able to adopt its own procedures in inquiring into costs, is able to be flexible in how it conducts that inquiry, including by the obtaining of suitable assistance whether by referee’s report or other reporting, and is able to acquire the level of detail needed to make a determination that is fair, logical and reasonable.

19    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].

20    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.

14    I refer also to the discussion of the issue by the Full Court of this Court in Zreika v Royal (No 2) [2019] FCAFC 237; (2019) 141 ACSR 261 at [22]–[31] and, in particular, at [26] and [31] as follows:

26    Third, the overarching purpose in ss 37M and 37N of the Federal Court of Australia Act is relevant to the decision, taking into account likely reduction in the use of the Court’s resources and costs as between the parties where lump sum costs orders are appropriately made. A lump sum costs order may be appropriate to avoid a lengthy and expensive taxation, especially where there has been prior protracted “trench warfare” between the parties: see Coshott v Prentice (No 2) [2018] FCAFC 1 at [19]. In the Court’s view, “trench warfare” is a fair description of the course of proceedings between the parties to this litigation.

…

31    The question of whether a lump sum costs order is appropriate in any given case is a matter for the discretion of the Court making the determination having regard to the facts and circumstances of the individual case. While the circumstances in which a lump sum costs order was made or not made in other cases may assist in informing the discretion, they do not bind the manner in which a court must exercise its discretion in a different case in part because cases are never factually the same in all respects and the Costs Practice Note recognises that different methodologies may be used in exercising the discretion.

15    It is interesting to note that a number of these matters were recognised by von Doussa J in 1995 in Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 (Beach Petroleum) that was in a context in which the Court could order that a person is entitled to a gross sum specified in the order instead of taxed costs (see von Doussa J at 123, letters B, C and D).

16    Another matter in favour of the orders sought by the respondents is that the Court can vary a lump sum costs order should it become clear that the interests of justice require that that be done. In other words, should it become clear, for example, the rights of the party with the obligation to pay costs cannot be adequately protected by a lump sum costs order, then the Court can revoke the order and substitute therefor an order for a traditional taxation (see Kerembla Pty Ltd v XL Insurance Company SE, trading as Brooklyn Underwriting (No 2) [2023] FCA 970). The Full Court of this Court referred to an analogous point in Paciocco (at [18]) when it said that a lump-sum order for costs did not prevent the Court “from undertaking a close inquiry of costs relating to a particular issue or category of costs”.

17    At first, the third party seemed to argue that it had not had a sufficient opportunity to address the issue of whether a lump sum costs order should be made, but that argument was not pursued. It then argued that the material in support of such an application was inadequate. It acknowledged that such an application could be made at any time. However, it contended (as I understood it) that there was no material to indicate that such an order was appropriate and coupled with the fact that the application can be made at any time, it should at this point in time be dismissed. I do not accept that submission. These proceedings involved a large common law matter. On any view, the costs are likely to be very substantial. A traditional taxation will be expensive and protracted. It seems to me to fit the criteria in Paciocco (at [20]) (see Beach Petroleum at 123, letter B per von Doussa J). The preparation and hearing of a traditional taxation may well occupy a very substantial period of time. On balance, I consider that lump-sum costs orders should be made. I will make the following orders:

(1)    Australian Capital Equity Pty Ltd (ACE) pay the respondents’ costs of the Third Party Costs Application filed on 21 June 2023 to the date of these orders, assessed on an indemnity basis.

(2)    Order 6 made on 11 December 2023 be amended to read:

6.    The costs ordered to be paid:

a.    by ACE pursuant to Order 5 made on 11 December 2023;

b.    by ACE pursuant to Order 1 above; and

c.    by the applicant pursuant to Order 3 made on 28 November 2023;

be determined in a lump sum pursuant to rule 40.02(b) of the Federal Court Rules 2011 (Cth), if not agreed between the parties.

(3)    The Third Party Costs Application be otherwise dismissed.

Associate:

Dated:    21 December 2023

SCHEDULE OF PARTIES