Federal Court of Australia

Rahman v Kent (No 2) [2025] FCA 129

ORDERS

THE COURT ORDERS THAT:

1.    The orders of the Registrar on 22 November 2024 be set aside.

2.    The sum of $25,000 paid into court by the appellant as security for the respondent’s costs of the appeal, and accrued interest on that sum if any, be released to the appellant.

3.    The parties bear their own costs of:

(a)    the appellant’s interlocutory application filed on 20 March 2024 and determined by a Registrar on 22 November 2024; and

(b)    the appellant’s interlocutory application filed on 18 December 2024.

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

REASONS FOR JUDGMENT

(Delivered ex tempore; revised from the transcript)

STEWART J:

1    Incredibly, before me is an interlocutory application in an appeal proceeding that was finally determined nearly three years ago in May 2022: Rahman v Kent [2022] FCA 485. It is an application by the appellant, Fahmid Rahman, under s 35A(5) of the Federal Court of Australia Act 1976 (Cth) for the review of the exercise of a power by a Registrar of the Court. Such an application is a hearing de novo; there is no need to identify any error in the Registrar’s decision: Bechara v Bates [2021] FCAFC 34; 286 FCR 166 at [27] per Allsop CJ, Markovic and Colvin JJ.

2    To adequately understand the present application, some context is required.

3    Mr Rahman and the respondent, Messrs Kent and Orlizki trading as Kent Attorneys, were at one time in a client-solicitor relationship. On the basis that Mr Rahman had not paid its fees from May and June 2015, nearly 10 years ago, in the sum of $15,251.14, in November 2018, Kent issued a bankruptcy notice against Mr Rahman. In December 2018, Kent filed a creditor’s petition against Mr Rahman in what was then called the Federal Circuit Court of Australia. Mr Rahman ultimately paid Kent’s fees, but on 12 February 2019 was ordered by a Registrar of that Court to pay the costs of the creditor’s petition proceeding (Costs order #1). The Registrar quantified that liability in the sum of $10,630.11.

4    Mr Rahman’s review of the Registrar’s costs order was dismissed by the primary judge in the Circuit Court, and the Registrar’s costs assessment was confirmed. Moreover, the primary judge ordered Mr Rahman to pay Kent’s costs of the review application (Costs order #2).

5    Exercising a liberty to apply, Mr Rahman sought the review by the primary judge of Costs order #2. That application was dismissed with costs (Costs order #3).

6    The appeal to this Court was directed against the three costs orders on the basis that Kent was, as a firm of solicitors, self-represented and therefore could not claim its own professional fees as costs under the principle identified in Bell Lawyers Pty Ltd v Pentelow [2019] HCA 29; 269 CLR 333.

7    Kent applied for security for its costs in the appeal, which Mr Rahman resisted. On 19 May 2021, a Registrar of the Court ordered that Mr Rahman, by 13 July 2021, “provide security for the Respondents’ costs of the appeal in the sum of $25,000 by payment of that sum into Court or in a form approved by a Registrar”. The Registrar also ordered that Mr Rahman pay the costs of the application for security for costs (Costs order #4). By that time, Kent was no longer self-represented, so the Bell Lawyers limitation on recovery did not apply to that costs order.

8    Mr Rahman paid the sum of $25,000 into court as security for Kent’s costs of the appeal on 13 July 2021.

9    On 3 May 2022, I allowed the appeal and made orders that had the effect of setting aside the quantification of Costs order #1 but leaving that liability still to be quantified and setting aside Costs order #2 and Costs order #3 by providing that the parties bear their own costs of the reviews before the primary judge. I also ordered that Kent pay the costs of the appeal (Costs order #5). Costs order #4 was not challenged in, and was not disturbed by, the appeal.

10    In summary, the extant costs orders at the time of the application before the Registrar that is currently before me on review were the following:

(1)    Costs order #1, ie that Mr Rahman pay the costs of the creditor’s petition in the Circuit Court as taxed or agreed;

(2)    Costs order #4, ie that Mr Rahman pay the costs of Kent’s application for security for its costs of the appeal as taxed or agreed; and

(3)    Costs order #5, ie that Kent pay the costs of the appeal as taxed or agreed.

11    None of those costs orders has been taxed or agreed. Mr Rahman has sought in the hearing today to tender emails by which he says Costs order #1 has been quantified by agreement, but I refused to accept the tender in the face of Kent disputing such an agreement. To have accepted the tender would have led to further disputation and potentially a requirement for oral evidence. Due to the small amount at stake in that costs order, as will be seen, resolving that dispute would not have assisted me to decide the issues that I have to decide today.

12    On 20 March 2024, Mr Rahman filed an interlocutory application for an order for the return of the sum of $25,000 that he had paid into court nearly three years earlier.

13    On 12 July 2024, Kent served on Mr Rahman a bill of costs in respect of Costs order #1, ie the costs of the creditor’s petition, claiming the amount of $4,819.26 in respect of Kent’s costs and disbursements. It will immediately be observed that that sum is nearly half the original sum ordered by the Registrar on 12 February 2019 before the application of the principle in Bell Lawyers required Kent’s own professional fees to be deducted. The sum is comprised of $4,131.26 in disbursements, of which more than $300 is for the filing fee for the bill of costs. The remainder, $688, is Kent’s solicitor’s professional fees in 2024 incurred in preparing the bill of costs. The result is that only $3,826.26 is actually for the creditor’s petition and $1,003 is for preparing and filing the bill of costs.

14    On 11 July 2024, Kent filed a bill of costs in this Court in respect of Costs order #4, ie the costs of the security for costs application, claiming the amount of $30,853 in respect of Kent’s costs and disbursements. That is a breathtaking sum having regard to the fact that only $25,000 was ordered as security for costs for the appeal and, more particularly, the sum at stake in the appeal was at most only $10,630.11. I say “at most” because Kent in any event claims nearly $4,000 as not being precluded by the principle in Bell Lawyers and therefore as still being recoverable whatever the outcome of the appeal. So, on Kent’s position, the appeal was worth less than $7,000 yet it claims recoverable party and party costs of more than $30,000 on an interlocutory application for security for its costs of the appeal. However one looks at it, the sum incurred and claimed is grossly disproportionate to what was at stake in the interlocutory application. I would expect that a substantial portion of Kent’s bill of costs for $30,853 will not be allowed on taxation.

15    A few observations from the bill of costs will illustrate the point. Almost all the work on the application was done by Kent’s solicitor, David Angelkov, who had 16 years’ experience and who charged at the rate of $600 per hour rather than by his associate, Catherine Tong, who had nine years’ experience and charged at a rate of $400 per hour. One would have expected the straightforward security for costs application to have been principally handled by the associate.

16    Junior counsel was engaged by Mr Angelkov at $320 per hour, but rather than brief counsel to prepare the written submissions, Mr Angelkov prepared them himself at a cost of $3,109 (at $600 per hour) which was then essentially duplicated by counsel’s 10 hours of preparation for the hearing of the security for costs application at a cost of $3,200. Also, Mr Angelkov engaged an expert costs consultant to prepare a report when such a report was surely not necessary or justified in such an application. The expert charged $4,000, but the costs claimed for commissioning the report include $767 for Mr Angelkov to prepare a letter of instruction to the expert and $720 to read the expert report, ie $5,487 for an unnecessary expert’s report. Perhaps most wasteful and disproportionate of all is Mr Angelkov’s charge of $780 for 1.3 hours taken to read the Registrar’s decision on the security for costs application, a decision that is a mere 33 paragraphs over less than 10 pages, several pages of which are taken up with boilerplate material setting out the governing legislative provisions and quotes from the leading cases. There is no basis on which more than five minutes could have reasonably been required to read the Registrar’s reasons.

17    In short, the costs that Kent claims for the security for costs application are grossly overstated. On a broad-brush basis I would estimate that the sum of $10,000, or perhaps $15,000 at the most, would be allowed on taxation.

18    Turning now to the costs order in Mr Rahman’s favour, Costs order #5, Mr Rahman was represented in the appeal by counsel on a direct brief. Counsel has furnished an invoice in the sum of $17,655 for the appeal. Mr Rahman has otherwise been unrepresented in the proceedings. Scrutiny of counsel’s cost agreement, which was tendered by Mr Rahman, shows that it is likely that the indemnity principle does not prevent recovery of those costs. They can, therefore, be considered as likely offsetting Kent’s claim for costs although no bill of costs has yet been filed.

19    On 22 November 2024, a Registrar of the Court dismissed Mr Rahman’s application for the release of the sum paid into court and ordered that Mr Rahman pay Kent’s costs of the application (Costs order #6). Kent has submitted a claim for those costs in the lump sum of $5,695 but the Registrar, quite correctly, has declined to assess the costs until after the present review application is determined.

20    On 18 December 2024, Mr Rahman filed an interlocutory application for the review of the Registrar’s decision. By r 3.11(2) of the Federal Court Rules 2011 (Cth), that application was required to have been brought within 21 days of the exercise of the power under review, ie by 13 December 2024. The application was accordingly a few days late. To its credit, Kent does not take any issue with that. I would in any event have been inclined to grant an extension of time.

21    Mr Rahman’s submission, at its essence, is simply that the $25,000 was paid as security for the costs of the appeal, which he won including a costs order in his favour, so the security should be released to him, ie Kent was awarded no costs on the appeal so the purpose for which the security was provided has fallen away. He points to the obvious prejudice that he has faced in being out of that money since he paid it in July 2021 and, in particular, since the appeal was allowed in May 2022. It was more than two years after that, and only after he had applied for the release of the security, that Kent filed its bill of costs.

22    Kent’s submission, at its essence, is simply that the costs of the security for costs application form part of the costs of the appeal; therefore, the sum in court stands as security for those costs so it should not be paid out until those costs have been taxed or agreed and then paid. Kent submits that it is premature to release the security until the competing costs claims have been quantified by agreement or taxation so that the ultimate balance is certain.

23    In my view, it is clear that costs ordered on an interlocutory application in an appeal form part of the costs of the appeal for which security for costs was ordered. To illustrate the point, had Kent won the appeal and been awarded its costs of the appeal, there would be no basis to resist the security in court being available for the costs of the interlocutory application for security for costs as well as the costs of the substantive appeal itself. On that basis, the $25,000 in court stands as security for Costs order #4.

24    However, that is not the end of the matter. In deciding whether or not to release the security paid into court under r 2.42 of the Rules, I exercise a wide discretion – the Court is “entitled to take into account any circumstances relevant to the exercise of its discretion in a proper and judicial manner”: Bou-Simon v Attorney-General (Cth) [2003] FCA 1303; 133 FCR 230 at [22] per Tamberlin J. See also Deputy Commissioner of Taxation v Widdup (No 2) [2023] FCA 377 at [61] per Wigney J. Relevant to the exercise of that discretion is whether the retention of the sum in court is reasonably necessary to secure the outstanding costs claim.

25    As explained, the sum claimed is grossly disproportionate to what was at stake. Further, there is the probability that Mr Rahman has a good claim for the costs of the appeal which will be set-off against and extinguish Kent’s costs claim.

26    I also take into consideration that on one view Costs order #4 should not have been made; a fairer approach to the costs of the application for security for costs would have been for those costs to be costs in the appeal – it was by no means a foregone conclusion that the discretion to order security for costs would be exercised in Kent’s favour. Mr Rahman had a respectable argument that an order against him would run the risk of stifling the appeal, and only $25,000 was ordered as against $72,298.80 that was initially claimed and then reduced to $56,000. On one view, Mr Rahman was the successful party on that application. He should not have had to pay the costs of it.

27    Mr Rahman has applied today from the bar table and without prior notice for the review and setting aside of Costs order #4, but I refuse that application because of the long passage of time (nearly four years) and the likelihood that the parties have subsequently made decisions in the proceeding based on the assumption that that order remains in place. It would do a potential injustice to revisit that order at this late stage. There is good reason why the law places a high value on finality in litigation.

28    All things considered, in my view, there is no sound basis to retain the sum that is held in court. Costs order #5, once finally quantified, is likely to be greater than, or at least equal to, the sum of Costs order #1 and Costs order #4. Taken together with the other factors I have identified, fairness demands that the sum held in court should be released to Mr Rahman. I will therefore set aside the Registrar’s order to the contrary.

29    I also consider that there should have been no order for costs in the application for the release of the security before the Registrar, and there should be no order for costs in the review application before me. It is the costs orders that have been made along the way that have continued to bedevil the resolution of this tortuous, otherwise piffling, dispute.

30    It is now beyond time that the parties take seriously their obligations to conduct litigation in this Court responsibly, proportionately and in a manner that is as quick, inexpensive and efficient as possible: Federal Court of Australia Act, ss 37M and 37N. There seems to be no reasonable basis on which either party could justify persisting with the taxation of their competing and likely mutually extinguishing costs claims, thereby racking up further costs and potentially further competing claims. They should draw a line under this sorry saga and get on with other things.

Associate:

Dated:    26 February 2025