Federal Court of Australia

Swancom Pty Ltd v The Jazz Corner Hotel Pty Ltd (No 5) [2025] FCA 505

ORDERS

THE COURT NOTES THAT:

A.    The applicant has paid the sum of $55,300 to the respondents in accordance with:

(a)    orders 3 and 4 of the orders of the Court made on 30 June 2021; and

(b)    the orders of the Court made on 19 July 2024.

THE COURT ORDERS THAT:

1.    Pursuant to r 28.67(1)(e) of the Federal Court Rules 2011 (Cth), the Report of Elizabeth Mary Harris dated 28 January 2025 is adopted in whole.

2.    The orders of the Court made on 19 July 2024 are set aside.

3.    The respondents’ costs of the application payable by the applicant pursuant to order 3 of the orders of the Court made on 30 June 2021 be fixed in the sum of $325,250.

4.    The applicant’s costs of the cross-claim payable by the first respondent pursuant to order 4 of the orders of the Court made on 30 June 2021 be fixed in the sum of $187,842.

5.    The applicant pay the respondents’ costs of the interlocutory applications dated 8 August 2024, 7 February 2025 and 11 February 2025, fixed in the sum of $25,000.

6.    The costs referred to in orders 3, 4 and 5 are offset against each other, with the result that the sum of $162,408 is payable by the applicant to the respondents pursuant to those orders.

7.    The applicant having paid the respondents the amount of $55,300, the applicant pay to the respondents the balance of $107,108 within 14 days of the date of these orders.

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

REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

1    These reasons concern the assessment of the quantum of costs payable by the parties pursuant to orders of the Court made on 30 June 2021.

2    In the proceeding, the applicant (Swancom) alleged infringement of its registered trade marks by the respondents (which I will refer to collectively as the Jazz Corner Hotel parties), and the Jazz Corner Hotel parties cross-claimed seeking the cancellation of Swancom’s registered trade marks in class 41. Each of the claim for infringement and the cross-claim for cancellation was dismissed, although on the cross-claim orders were made amending the services specified in respect of two of Swancom’s marks: see Swancom Pty Ltd v The Jazz Corner Hotel Pty Ltd (No 2) [2021] FCA 328; 157 IPR 498 (Swancom No 2).

3    On 30 June 2021, the Court made orders concerning the costs of the proceeding (the Costs Orders), with reasons published in Swancom Pty Ltd v The Jazz Corner Hotel Pty Ltd (No 3) [2021] FCA 729 (Swancom No 3). The Costs Orders relevantly included the following orders:

3.    The applicant pay the respondents’ costs of the application.

4.    The first respondent pay the applicant’s costs of the cross-claim.

...

6.    The costs referred to in Orders 3 and 4 be awarded in lump sums pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth).

4    The Court also made an order directing that any question concerning the quantum of the lump sum costs be determined by a Registrar of the Court.

5    In Swancom No 3, I stated that (at [26]):

In making [the costs] orders, I recognise that there is some potential for dispute as to the categorisation of costs incurred as relating to the application or the cross-claim. However, I consider that the scope for such dispute to be relatively narrow.

6    My assessment that the scope for dispute between the parties was narrow has been shown to be wrong.

7    Swancom appealed from the judgment in Swancom No 2, and the Jazz Corner Hotel parties separately appealed from the Costs Orders in Swancom No 3. The Costs Orders were stayed pending the final determination of the appeals. On 13 September 2022, the Full Court dismissed each of the appeal brought by Swancom and the appeal brought by the Jazz Corner Hotel parties: Swancom Pty Ltd v The Jazz Corner Hotel Pty Ltd [2022] FCAFC 157; 168 IPR 42. At the time of judgment, the Full Court made standard orders for the payment of costs in each appeal, with the costs to be assessed in the absence of agreement. Subsequently, on 26 October 2022, the orders were amended to provide that the costs of the appeals were to be awarded in a lump sum and that any question concerning the quantum of the lump sum costs was to be determined by a Registrar (thereby aligning the costs orders on appeal with the costs orders at trial).

8    The order requiring that costs be awarded in a lump sum, and the order requiring that the quantum of the lump sum be determined by a Registrar of the Court, were intended to simplify and make more efficient the assessment of costs consistently with the overarching purpose in s 37M of the Federal Court of Australia Act 1976 (Cth) (FCA Act). Unfortunately, that intention was not fulfilled. The parties filed extensive evidence before the Registrar who undertook the costs assessment. Swancom relied on affidavits of Anthony Brooke Watson, a partner at K&L Gates (the solicitors for Swancom) dated 1 February 2023, 8 May 2023 and 22 May 2023. The Jazz Corner Hotel parties relied on affidavits of Jane Mary Goode, a Director of Brand Partners Commercial Lawyers (the solicitors for the Jazz Corner Hotel parties) dated 3 February 2023, 17 March 2023, 8 May 2023, 22 May 2023 and 31 July 2023. As discussed further below, the costs incurred by the parties in the course of the costs assessment were out of all proportion to the quantum of costs in issue.

9    On 19 July 2024, the Registrar made orders in respect of the costs of the trial to the effect that:

(a)    the Jazz Corner Hotel parties’ costs of the claim payable by Swancom pursuant to order 3 of the Costs Orders be fixed in the sum of $278,600; and

(b)    Swancom’s costs of the cross-claim payable by the first respondent pursuant to order 4 of the Costs Orders be fixed in the sum of $223,300,

(the Costs Assessment Orders) and published reasons for making those orders (the Costs Assessment Reasons).

10    The Registrar also made an assessment of the costs of the appeals. However, no application for review of that assessment has been made.

11    Within a short time of the Costs Assessment Orders being made, Swancom paid the sum of $55,300 to the Jazz Corner Hotel parties, being the net balance due to the Jazz Corner Hotel parties pursuant to the Costs Assessment Orders.

12    By interlocutory application filed on 8 August 2024, the Jazz Corner Hotel parties applied for review of the Costs Assessment Orders pursuant to s 35A(5) of the FCA Act. The application was supported by an affidavit of Havva Nur Celik, a solicitor at Brand Partners Commercial Lawyers, sworn on 8 August 2024.

13    Section 35A(5) provides as follows:

A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power.

14    The exercise of the power to review a Registrar’s decision is governed by s 35A(6), which provides as follows:

The Court may, on application under subsection (5) or of its own motion, review an exercise of power by a Registrar pursuant to this section and may make such order or orders as it thinks fit with respect to the matter with respect to which the power was exercised.

15    The review that is required to be conducted by the Court is not an appeal, where the issues are confined by grounds of appeal, but a de novo hearing: Harris v Caladine (1991) 172 CLR 84 at 94–95 (Mason CJ and Deane J), 123, 126 (Dawson J), 150–151 (Gaudron J) and 164 (McHugh J). As the Full Court explained in Bechara v Bates (2021) 286 FCR 166 (Bechara v Bates) at [17]:

The nature of a review under … s 35A(6) of the Federal Court Act of an order made by a registrar (often but not always in the context of the review of the making of a sequestration order in bankruptcy) has been the subject of a significant number of decisions of this Court. All are consistent. To underpin the validity of the delegation of judicial power of the Commonwealth to a non-judicial court officer there must be a rehearing de novo before a judge of the Court … . The review does not hinge, or focus, upon error in the decision of the registrar. It is a hearing de novo, in which the matter is considered afresh on the evidence and on the law at the time of the review, that is at the time of the hearing de novo …

16    Recognising the requirement for the Court to conduct a de novo hearing, consideration was given to whether the assessment of the quantum of costs to be paid by the parties pursuant to the Costs Orders should be referred to an experienced costs lawyer for inquiry and report as a referee. After hearing submissions from the parties on that question, orders were made on 3 September 2024 referring the question of the quantum of costs to a referee. The background to, and the reasons for, the referral are explained in Swancom Pty Ltd v The Jazz Corner Hotel Pty Ltd (No 4) [2024] FCA 1006 (Swancom No 4). On 16 October 2024, Elizabeth Harris of Ovid Consulting was appointed as referee.

17    On 28 January 2025, Ms Harris (whom I will refer to as the Referee) provided her report (the Referee’s Report), concluding that:

(a)    the Jazz Corner Hotel parties’ costs of the claim payable by Swancom pursuant to order 3 of the Costs Orders should be quantified in the sum of $305,250; and

(b)    Swancom’s costs of the cross-claim payable by the first respondent pursuant to order 4 of the Costs Orders should be quantified in the sum of $167,842.

18    The costs of the reference were $12,300 (excl GST).

19    By interlocutory application dated 7 February 2025, the Jazz Corner Hotel parties applied for the following orders:

1.     Pursuant to rule 28.67(1) of the Federal Court Rules 2011 (Cth):

a.     the Cost Referee’s Report of Elizabeth Mary Harris dated 28 January 2025 is adopted in whole;

b.     the orders made by Judicial Registrar Segal on 19 July 2024 are set aside and the costs are allowed in the amounts recommended by the Costs Referee as follows:

i.     the Respondents’ costs of the application payable by the Applicant pursuant to Order 3 made on 30 June 2021 in the sum of $305,250.00; and

ii.     the Applicant’s costs of the cross-claim payable by the First Respondent pursuant to Order 4 made on 30 June 2021 in the sum of $167,842.00;

c.     the costs referred to in Order 1(b)(i) are offset against the costs referred to Order 1(b)(ii) with a result that the sum of $137,408 is payable by the Applicant to the Respondent; and

d.     the Applicant having already made a part-payment in the sum of $55,300, the Applicant is to pay to the Respondent the balance of $82,108 within 14 days of the date of this Order.

2.     Pursuant to rule 28.67(1)(e) of the Federal Court Rules 2011 (Cth), the Applicant pay the Respondents’ costs of:

a.     the costs assessment before Judicial Registrar Segal; and

b.     the review of the costs assessment pursuant to the Respondent’s interlocutory application dated 8 August 2024, including the referral to the Costs Referee –

such costs to be paid on the standard basis to be taxed in default of agreement.

20    The Jazz Corner Hotel parties’ application was supported by an affidavit of Ms Celik sworn on 7 February 2025.

21    By interlocutory application dated 11 February 2025, Swancom applied for the following orders:

1.     Pursuant to rule 28.67(1) of the Federal Court Rules 2011 (Cth):

(a)     The report of Elizabeth Mary Harris dated 28 January 2025 (Cost Referee's Report) be varied as follows:

(i)     the proportion of the parties’ costs allocated to the claim and cross-claim in paragraph 44 and Table 3 (on page 17) of the Cost Referee's Report, which allocate:

(A)     40% of the Applicant's assessed costs to the cross-claim; and

(B)     70% of the Respondents’ assessed costs to the claim,

be replaced by the proportions awarded by Registrar Segal, at paragraph [54] of the Registrar's reasons dated 19 July 2024, so as to allocate:

(C)     60% of the Applicant's assessed costs to the cross-claim; and

(D)     65% of the Respondents’ assessed costs to the claim;

(ii)     the application of the above allocations to the quantification of the parties’ costs as set out in Table 3 (on page 17) and paragraph 73 of the Cost Referee’s Report, which resulted in:

(A)     the Applicant’s costs of the cross-claim being quantified in the amount of $167,841.58; and

(B)     the Respondents’ costs of the claim being quantified in the amount of $305,250.00,

be varied to provide that:

(C)     the Applicant’s costs of the cross-claim be quantified in the amount of $251,762.36; and

(D)     the Respondents’ costs of the claim be quantified in the amount of $283,445.57.

(b)     The Cost Referee’s Report as varied in accordance with sub-paragraph (a) be otherwise adopted by the Court.

2.     The costs in sub-paragraph 1(a)(ii)(C) and 1(a)(ii)(D) above be set-off against each other and against the $55,300 paid by the Applicant to the Respondents pursuant to the orders made by Registrar Segal on 19 July 2024, with the Respondents to repay the balance of $23,616.79 to the Applicant within 14 days.

3.     The Respondents pay the Applicant's costs of and incidental to the Respondent's interlocutory application dated 8 August 2024, such costs to be paid on a standard basis to be taxed in default of agreement.

22    Swancom’s application was supported by an affidavit of Mr Watson sworn on 11 February 2025.

23    In these reasons, the interlocutory applications dated 8 August 2024, 7 February 2025 and 11 February 2025 are referred to as the “costs applications”.

24    On 14 February 2025, orders were made requiring each party to file written submissions in respect of the costs applications, together with an affidavit containing the information referred to in Annexure A of the Court’s Costs Practice Note (Costs Practice Note) in respect of the costs incurred and expected to be incurred in relation to the costs assessment before the Registrar and the costs applications. In accordance with those orders:

(a)    on 28 February 2025, Swancom filed and served outline submissions and an affidavit of Mr Watson sworn on 27 February 2025; and

(b)    on 14 March 2025, the Jazz Corner Hotel parties filed and served outline submissions and an affidavit of Ms Celik sworn on 14 March 2025.

25    At the hearing of the costs applications, the dispute between the parties had narrowed. Perhaps the parties had finally exhausted themselves.

26    The Jazz Corner Hotel parties sought the adoption of the Referee’s Report in whole. The result of the adoption of the report would be that a net sum of $137,408 would be payable by Swancom to the Jazz Corner Hotel parties. As Swancom has already paid an amount of $55,300 to the Jazz Corner Hotel parties, the outstanding amount payable would be $82,108.

27    Swancom sought a variation to certain aspects of the Referee’s Report, being the Referee’s assessment of:

(a)    the percentage of the Jazz Corner Hotel parties’ costs that should be allocated to the claim (as opposed to the cross-claim); and

(b)    the percentage of Swancom’s costs that should be allocated to the cross-claim (as opposed to the claim).

28    The variation sought by Swancom was to replace the percentages assessed by the Referee with the percentages assessed by the Registrar. Otherwise, Swancom supported the adoption of the Referee’s Report. If the relevant percentages were varied as proposed by Swancom, a net sum of $31,683.21 would be payable by Swancom to the Jazz Corner Hotel parties. As Swancom has already paid an amount of $55,300 to the Jazz Corner Hotel parties, an amount of $23,616.79 would be payable by the Jazz Corner Hotel parties to Swancom.

29    For the reasons that follow, the Referee’s Report should be adopted in full.

30    It is also necessary for the Court to determine whether costs should be awarded in favour of or against either of the parties in respect of the costs assessment before the Registrar and the hearing of the costs applications. For the reasons explained below:

(a)    each of Swancom and the Jazz Corner Hotel parties should be awarded costs of $20,000 in relation to the Registrar’s assessment of the costs payable to them pursuant to the orders of the Court; and

(b)    the Jazz Corner Hotel parties should be awarded $25,000 in relation to the costs applications.

Relevant principles

31    The costs dispute between the parties raises three matters of legal principle. The first concerns the proper approach to the assessment of costs awarded on a lump sum basis. The second concerns the principles to be applied in allocating the costs of a proceeding when separate orders are made with respect to the costs of the primary claim and a cross-claim. The third concerns the principles to be applied in determining whether to adopt or vary a referee’s report. Each is considered in turn.

Assessment of costs awarded on a lump sum basis

32    Rule 40.02(b) of the Federal Court Rules 2011 (Cth) (Rules) stipulates that a party 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. The purpose of such a rule is “to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”: Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 (Beach Petroleum) at 120. The assessment of costs under a lump sum order does not require a process similar to taxation: Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051; 249 ALR 371 (Ginos Engineers) at [23]. Nevertheless, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis: Seven Network Limited v News Limited [2007] FCA 2059 at [25]. While the assessment involves the “application of a much broader brush than that applied on taxation” and “is one of estimation or assessment and not of arithmetic calculation or precision”, the approach is one which must be “logical, fair and reasonable”: Nine Films and Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046 at [8]. It is common for the court to take as its starting point the evidence of the charges for professional costs incurred and disbursements made by the lawyers of the party awarded costs, and to discount that figure to take account of the acceptability of the charges made, the conduct of the proceeding and the measure of success on issues, to arrive at a figure which as a matter of judgment is neither over-compensatory nor prejudicial to the successful party: Ginos Engineers at [24]; Telstra Corporation Ltd v Phone Directories Co Pty Ltd [2011] FCA 1463 at [5].

33    The Costs Practice Note provides guidance to litigants about the approach to the assessment of costs that will be undertaken by the Court in accordance with the FCA Act and the Rules. Relevantly, paras 3.3 and 4.1 advise litigants that:

3.3       For those costs issues that are unable to be resolved by negotiation and require the involvement of the Court, the Court's preference is to avoid, where possible, the making of costs orders that lead to potentially expensive and lengthy taxation of costs hearings. Rather, the Court will seek to adopt, and will encourage parties to utilise, the appropriate use of sophisticated costs orders and procedures, including lump-sum costs orders, consolidated costs orders, estimate of costs processes and Alternative Dispute Resolution ("ADR"). Taxation of costs hearings should be the exception and be confined to those matters that have genuinely been unable to be otherwise resolved or determined.

…

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.

34    In Paciocco v Australia and New Zealand Banking Group Limited (No 2) (2017) 253 FCR 403 (Paciocco), the Full Court noted (at [19]) that, while the Costs Practice Note suggests that most cases should have a lump sum costs order approach (unless there is some characteristic that would make it unsuitable), whether or not to make such an order is ultimately in the taxing officer’s discretion. There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order, but particular circumstances that may make a lump sum order especially appropriate include: where the taxation process was expected to be particularly complex; where a taxation process would be disproportionately expensive to the award of costs; where generally it is sought to avoid an ongoing, counter-productive dispute as to costs; and where achieving finality is a principal consideration: Soden v Croker (No 3) [2016] FCA 249 at [10]; Paciocco at [20]. It is also well established that a lump sum order may be suitable in simple as well as complex cases: Playcorp Group of Companies Pty Ltd v Bodum A/S (No 2) [2010] FCA 455 at [3]; Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432 at [51].

Allocating the costs of a proceeding

35    When separate orders are made with respect to the costs of the primary claim and a cross-claim, the principle to be applied in allocating a party’s costs between the claim and cross-claim is that stated by Dixon J (as his Honour then was) in Smith v Madden (1946) 73 CLR 129 (Smith v Madden) at 133:

In such a case the taxation of the costs of the action and of the counterclaim is governed by the principle that the party receiving the costs of the claim should recover the general costs and whatever was reasonably incurred in bringing and maintaining or defending the action, as the case may be, considered as if there had been no counterclaim, and that the party receiving the costs of the counterclaim should recover the further or increased costs reasonably incurred in bringing and maintaining or defending the counterclaim.

36    Absent a specific order of the court, there is no apportionment of costs between the claim and the cross-claim: Smith v Madden at 133. Thus, common costs, being costs incurred for the purposes of both the claim and the cross-claim, are not apportioned between the claim and cross-claim but allowed in full in respect of the claim: Smith v Madden at 137. Conversely, if an item of costs is “mixed” in the sense that there is a single charge for work but a severable part of that work relates to the claim and the other severable part of the work relates to the counterclaim, the mixed costs are to be allocated between the claim and the cross-claim accordingly: Smith v Madden at 136.

Proceeding on a referee’s report

37    Rule 28.67 of the Rules stipulates that:

(1)    After a report has been given to the Court, a party may, on application, ask the Court to do any of the following:

(a)    adopt, vary or reject the report, in the whole or in part;

(b)     require an explanation by way of a further report by the referee;

(c)     remit on any ground, for further consideration by the referee, the whole or any part of the matter that was referred to the referee for inquiry and report;

(d)     decide any matter on the evidence taken before the referee, with or without additional evidence;

(e)     give judgment or make an order in relation to the proceeding or question.

(2)    A party must not adduce in the Court evidence given in an inquiry.

38    The principles relevant to a consideration of the adoption of referee reports are well established. A convenient summary of the principles was collated by McDougall J in Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 (Chocolate Factory) at [7]-[8]. Those principles are as follows:

(1)     An application [for adoption or rejection] is not an appeal either by way of hearing de novo or by way of rehearing.

(2)     The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised.

(3)     The purpose of [the reference process] is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest.

(4)     In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.

(5)     Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report.

(6)     If the referee’s report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than “unsafe and unsatisfactory”.

(7)     Generally, the referee’s findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence.

(8)     The purpose of [the reference process] would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based.

(9)     The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire.

(10)     Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be… a proper exercise of the discretion conferred by [the relevant Court rule] to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report.

(11)     Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise.

(12)     The right to be heard does not involve the right to be heard twice.

(13)     A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised “by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it”. The real question is far more limited: “to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence”.

(14)     Where, although the referee’s reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee’s findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence.

(15)     Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified.

The Referee’s Report

39    The Referee’s Report commenced with a summary of the principles governing the assessment of costs on a lump sum basis. No criticisms were made of that summary and it is therefore unnecessary to reproduce it.

40    The Referee observed that the Costs Orders required Swancom to pay the Jazz Corner Hotel parties’ costs of the claim and required the JCH parties to pay Swancom’s costs of the cross-claim. The Referee noted that the applicable principles governing a taxation of costs of a claim and cross-claim were stated in Smith v Madden, and summarised the distinction between common and mixed costs as explained by Dixon J in that case. The Referee further observed that the decisions of the Court in Swancom No 2 (the trial judgment) and Swancom No 3 (the costs judgment) provide guidance about which work forms part of the claim and the cross-claim. The Referee drew attention to the following statements in Swancom No 3 at [26] concerning the evidence that formed part of the claim and that which formed part of the cross-claim:

… Swancom’s application claiming trade mark infringement did not require it to establish any reputation in its marks. It follows that the evidence adduced by Swancom in relation to its business, reputation and trade mark use principally related to the cross-claim and Swancom should be entitled to its costs of that evidence as part of its costs of the cross-claim. Conversely, the evidence adduced by the respondents in relation to their businesses and trade mark use principally related to the application and the respondents should be entitled to their costs of that evidence as part of their costs of the application. As to the evidence adduced by JCHPL concerning the use of the word “corner” as a trading name, such evidence was relevant to both the application and the cross-claim. In circumstances where Swancom initiated the proceeding and the respondents were brought to Court to defend the claim, in my view the respondents are entitled to be awarded their costs of that evidence as part of their costs of the application. That will include the costs associated with the proof of facts stated in the Notice to Admit that were not admitted by Swancom and which were ultimately found by the Court (at [66] of the principal judgment).

41    The Referee reasoned that:

… it is therefore necessary when assessing the costs, to form opinions on what work relates solely to the cross claim, and what work could be said to be “mixed” work where that relating to each of claim and counterclaim can be identified and severed. The remaining work, including common work, is that to be allowed as costs of the claim.

42    With respect to the necessary apportionment of the costs between the above categories, the Referee explained that the material relied on by both parties had deficiencies. Pursuant to orders made by the Registrar, the parties filed material breaking down the costs by phase and allocating a percentage to that phase reflecting that party’s costs claim. However, the parties adopted different phases, and it was therefore not possible for the Referee to undertake a phase-by-phase comparison.

43    The Referee concluded that it was appropriate to apply a global adjustment to each party’s costs, to accommodate the work relating to the claim and cross-claim. The Referee noted that her assessment of the apportionment must be impressionistic given the material to which she had reference. In completing such an assessment, the Referee recorded that she had taken into account the following matters:

(a)    the pleadings and trial submissions can readily be identified as relating to the claim or counterclaim;

(b)    the notices to produce and objections to same are relevant solely to the claim;

(c)    the affidavit evidence which went to each of the claim and counterclaim;

(d)    the interlocutory application material showed that much of it was work which would have been undertaken in any event on the claim; and

(e)    other common work, such as attendances at case management hearings.

44    The Referee explained that, applying the Smith v Madden principles regarding common costs, a proportion of the trial will involve common costs which must be allowed as costs of the claim, such as procedural matters, or counsel’s addresses relating to facts relevant to both claim and cross-claim. The Referee gave the example of a common cost which Swancom sought to divide, being the Federal Court setting down and hearing fees, which would have been incurred irrespective of the cross-claim and therefore are solely recoverable as costs of the claim.

45    With respect to the evidence, the Referee observed that it is not simply a matter of analysing the time spent by different witnesses in cross examination, although that is one relevant matter to be taken into account. The Referee also did not accept that an analysis of the number of pages in the court book or the proportion of time at trial is determinative of the proportion of costs to be allowed – they are simply two factors to be taken into account. The Referee considered that the number of lay witness affidavits prepared by each party is another relevant factor to take into account when looking at the appropriate division of work, with the Referee explaining that the work of preparing an affidavit for a lay witness in her experience is far more extensive than the work of reviewing such an affidavit or preparing a solicitor’s affidavit. Swancom filed eight lay witness affidavits relevant to the cross-claim, with only one relating to the claim, and the Jazz Corner Hotel parties filed four lay witness affidavits relevant to the claim and none relating to the cross-claim. The Referee considered that this supported a higher apportionment of costs to the cross-claim than the 20% that had been proposed by the Jazz Corner Hotel parties.

46    The Referee noted that some solicitor affidavits provided more information about the nature of the work being undertaken by the solicitors and gave the example of the affidavits relating to the use of the word “corner” which deposed to visits to venues with this word in their name, which visits must then form part of the claim costs. The Referee concluded that this supported a higher allocation to the claim than the 40% proposed by Swancom.

47    The Referee considered that work relating to the general conduct of the proceeding, such as negotiation regarding the various consent orders, work relating to the proposed application for security for costs, and the application to amend the statement of claim, all go to the claim and concluded that this also supported a higher allocation to the claim than the 40% proposed by Swancom.

48    The Referee noted that, in her experience, mixed costs are not usually simply divisible on a 50/50 basis when the actual work additional to that required for the claim is considered. For example, there will be work relating to the court book which is required irrespective of the fact that it contains documents solely relating to the cross-claim. In a similar sense, the Referee observed that the time in preparation for trial cannot be divided simply on a 50/50 basis. The Referee stated that, in her experience, she would expect that a considerable proportion of counsel’s preparation time related to reviewing the affidavit material, preparing objections to evidence, and preparing opening submissions. On the one hand, there was a greater number of lay witness affidavits relevant to the cross-claim but, against that, the affidavits of one particular individual canvassed a broad range of matters. The Referee found that given that the work required to be undertaken by each party differed, the allocation of costs to each party need not total 100%. Rather, it is a matter of looking at what proportion of the costs of that party are reasonably likely to relate to the work performed on the claim and cross-claim respectively.

49    Taking all of the foregoing matters into account, the Referee considered that 70% of the costs of the Jazz Corner Hotel parties reflected the likely level of their costs of the claim and 40% of Swancom’s costs reflected its likely costs of the cross-claim.

50    In relation to the approach to a lump sum assessment, the Referee observed that, whilst a lump sum cost assessment is not a taxation of costs, the costs to be allowed must reflect the costs likely to be allowed on a taxation. This involves two adjustments to the actual costs. First, the test of cost recovery is the party/party test and, second, the basis of quantification must reflect the scale of costs. This second step involves an adjustment of the actual hourly rates of solicitors to the scale hourly rates and adjusting counsel’s actual rates to those considered reasonable. An additional consideration applies to the solicitors’ professional fees, as whether any further adjustment is required to address the non-hourly rates items in the scale.

51    The Referee further observed that, although it is the usual practice of the court to apply a discount to the amount that the party was liable to pay to its lawyers, that does not mean that a percentage discount is mandatory (citing Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640 at [57]). The Referee noted that the court is astute not to cause an injustice to the successful party by applying an arbitrary “failsafe” discount on the costs estimate (citing Beach Petroleum at 123). In the present case, the Referee considered that the deficiencies in the material relied on by the parties provided grounds to apply a discount and for the same reason, the Referee concluded it was not appropriate to apply any skill and care loading to the solicitors’ fees.

52    The Referee allowed the hourly rates of solicitors at various levels of seniority claimed by each of the parties, along with those charged by the respective junior counsel. The Referee noted that the hourly rates of senior counsel of both parties were considerably higher than the maximum rates in the National Guide to Counsel Fees, but that this guide had not been updated since 1 July 2013. The Referee considered that the rate of Swancom’s senior counsel (being $800 per hour) would be allowed on taxation, and that a rate of $900 should be allowed in respect of the Jazz Corner Hotel parties’ senior counsel (reduced from $1,000).

53    The Referee ultimately assessed Swancom’s costs as $419,603.94. Applying the allocation to the cross-claim of 40%, the Referee determined the amount payable to Swancom as $167,842 (rounded from $167,841.58).

54    The Referee assessed the Jazz Corner Hotel parties’ costs at $436,070.11. Applying the allocation to the claim of 70%, the Referee determined the amount payable to the Jazz Corner Hotel parties was $305,250 (rounded from $305,249.08). The details of the Referee’s assessment were set out at Table 3 of her report, which is reproduced as follows:

The Registrar’s decision

55    As stated by the Full Court in Bechara v Bates at [17], a review under s 35A(6) of the FCA Act of an order made by a registrar does not hinge, or focus, upon error in the decision of the registrar. It is a hearing de novo, in which the matter is considered afresh on the evidence and on the law at the time of the review. For that reason, it is unnecessary on this review to consider in detail the Costs Assessment Reasons.

56    Nevertheless, on this review, Swancom seeks a variation of the Referee’s Report. The variation sought by Swancom is to substitute the Registrar’s assessment for the Referee’s assessment of:

(a)    the percentage of the Jazz Corner Hotel parties’ costs that should be allocated to the claim; and

(b)    the percentage of Swancom’s costs that should be allocated to the cross-claim.

57    In considering Swancom’s submissions, it is necessary to have regard to the aspects of the Costs Assessment Reasons that relate to the allocation of costs between the claim and the cross-claim, including the Registrar’s approach to the principle stated in Smith v Madden in the circumstances of the present case.

58    In the Costs Assessment Reasons (at [47]-[48]), the Registrar referred to the principle stated in Smith v Madden and observed that Dixon J identified four categories of costs: costs solely attributable to the claim; costs solely attributable to the cross-claim; mixed costs where it is possible to divide a single item of costs in two parts; and common costs being costs that serve as much the purpose of the claim as the cross-claim.

59    The Registrar made the following findings with respect to the application of the principle in the present matter (at [52]-[53]):

52    In my view, Smith v Madden is not influential in resolving the division of costs issue. The first three categories of costs allow for an appropriate division of costs. In relation to “common” costs, the inability to divide these costs is subject to any special order (see Smith v Madden at 133) or other expression of the intention of the Court. In this case, the costs judgment at [26] makes it clear that even though the evidence adduced by Swancom in relation to its business, reputation and trade mark use (only) “principally” (ie not “solely”) related to the cross-claim, Swancom was entitled to the costs of that evidence as part of its costs of the cross-claim. Conversely, even though the costs of the evidence adduced by JCHPL concerning the use of the word “corner” as a trading name are “common” costs according to Smith v Madden, the costs judgment found it necessary to expressly state that (only) the Respondents are entitled to be awarded their costs of that evidence as part of their costs of the application. Secondly, at least one precedent suggests that in determining the quantum of costs on a lump sum basis, the Court will generally divide costs between primary claims and a cross-claim without specifically considering whether there are ‘common” costs: see Koonara Management Pty Ltd v Rockliff (No 3) [2020] FCA 523 at [73]–[74]. In other words, in determining quantum, the Court exercises a broader discretion than is available to the taxing officer at a taxation. Finally, on the information provided by the parties, and excluding the costs identified in [26] of the costs judgment, the quantum associated with “common” costs appears to be relatively small.

53     In considering the division of costs issue, I have had specific regard to the overview of the evidence in the proceedings (including the witnesses on each side) set out in the trial judgment, Swancom Pty Ltd v The Jazz Corner Hotel Pty Ltd (No 2) [2021] FCA 328 at [26]–[30]. Apart from that, the costs judgment at [26] suggests to me that it would be fair and reasonable that the Respondents should recover a higher percentage of their overall party and party costs than Swancom, to account for their entitlement to the costs of the evidence adduced by JCHPL concerning the use of the word “corner” as a trading name and the costs associated with the proof of certain facts stated in the Notice to Admit. As I understand the Respondents’ evidence, these costs are not significant.

60    The Registrar concluded that 60% of Swancom’s costs should be attributed to the cross-claim while 65% of the Jazz Corner Hotel parties’ costs should be attributed to the claim (at [54]).

Should the Referee’s Report be adopted in full?

The parties’ submissions

61    The Jazz Corner Hotel parties submitted that the Referee appropriately adopted the principles in Smith v Madden and that the Referee’s Report should be adopted in full.

62    The Jazz Corner Hotel parties further submitted that the Referee provided a proper foundation for the lump sum assessment, taking into account: the facts as analysed by the solicitors with carriage of the proceeding and by two costs consultants; her own review of the pleadings and filed materials; the unambiguous scope of the Costs Orders; her own experience; and the assistance provided by Swancom No 3.

63    Swancom submitted that the approach of the Registrar to the allocation of costs as between the claim and cross-claim was correct and that, in purporting to allocate the allowable costs by reference to the decision in Smith v Madden, the Referee misapplied the relevant principles for the determination of costs as a lump sum in the circumstances of the present case. In particular, Swancom submitted that the Referee appears to have proceeded on an assumption that there were likely to have been significant common costs incurred by Swancom which she was required to account for, without regard to the particular circumstances of the case which indicated that the majority of Swancom’s costs were separate or divisible costs incurred in relation to the cross-claim. Swancom said that those circumstances included that:

(a)    The majority of Swancom’s costs (more than 70%) were incurred in the preparation of its evidence in response to the cross-claim and in preparation for and appearing at trial. Other than filing fees (which Swancom says were not significant), those costs were wholly divisible as between the claim and cross-claim, with the cross-claim predominant.

(b)    Almost all of Swancom’s evidence was prepared in response to the cross-claim. Its evidence in support of its claim comprised a single solicitor’s affidavit, while its evidence in response to the cross-claim comprised a detailed and lengthy affidavit from its director as to its business and reputation, together with an expert report and affidavits from six industry witnesses attesting to its reputation.

(c)    The overwhelming majority of the witnesses who appeared at the trial and were cross-examined related to the cross-claim.

(d)    Almost 60% of the trial was occupied by the cross-claim. The claim and cross-claim involved separate issues and were separately addressed in opening, while the evidence of Swancom’s witnesses relating to the cross-claim (including objections to the evidence of those witnesses) occupied significantly more time at trial than the evidence of the sole witness related exclusively to the claim.

(e)    The overwhelming majority of the other work undertaken in relation to the proceeding was separately divisible as between the claim and cross-claim. In particular, pleadings and submissions in relation to the claim and cross-claim were wholly separate. Further, the statement of cross-claim was longer than the statement of claim, while the submissions in relation to the cross-claim were either of equivalent, or not materially different, length and complexity to the submissions on the claim.

64    In support of those submissions, Swancom principally relied on its costs summary provided to the Registrar which was contained in the affidavit of Mr Watson affirmed on 8 May 2023.

65    Swancom submitted that the Referee erred in making provision for the allocation of common costs without identifying such costs or dealing with the evidence which suggested that the quantum of common costs was not substantial. Swancom further submitted that by making an assumption as to the existence of significant common costs, and substantially reducing Swancom’s allocation of allowable costs despite evidence which suggested that for Swancom more costs had been incurred in defending the cross-claim than in pursuing the claim, the Referee failed to provide “a proper foundation for the lump sum assessment”, or to ensure that there was “an appropriate basis for the Court to be able to make a judicial decision rather than a guess” (citing Sandalwood Properties Ltd (Subject to a Deed of Company Arrangement) v Huntley Management Ltd (No 2) [2019] FCA 647 at [10]-[12]).

Consideration

66    It was common ground between the parties that the principle stated in Smith v Madden was applicable to the assessment of costs for the purposes of the Costs Orders. The fact that the costs were to be assessed on a lump sum basis did not alter the applicability of the principle.

67    Respectfully, it is not at all clear that the principle in Smith v Madden was applied by the Registrar in undertaking the costs assessment. The Registrar’s conclusion that Smith v Madden “was not influential in resolving the division of costs issue” strongly suggests that the Registrar did not apply the principle in allocating each party’s costs between the claim and the cross-claim. The reasons given by the Registrar for taking that approach are, with respect, not correct. The Costs Orders are clear in their terms and no other order was made to qualify them or require costs to be assessed on another basis. The Court’s statement in Swancom No 3 at [26] does not qualify the Costs Orders. The statement was in the form of guidance to the parties (with the optimistic aim of reducing disputation) and was consistent with the principle in Smith v Madden. The fact that the Court, in a different case, when assessing the quantum of costs on a lump sum basis, divided the costs between the primary claims and a cross-claim without specifically considering whether there were common costs, was of no relevance to the Registrar’s task. The assessment of costs concerned the Costs Orders which were clear in their terms.

68    In contrast, the Referee correctly understood that the Costs Orders were to be applied in accordance with the principle in Smith v Madden.

69    I am not persuaded that there was any error of principle made by the Referee: Chocolate Factory at [7]. As stated earlier, an application under r 28.67 is not an appeal or a hearing de novo. Generally, a referee’s findings of fact should not be re-agitated before the court. I do not consider that the Referee’s Report reveals an error of principle, absence or excess of jurisdiction, or patent misapprehension of the evidence: Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340 at [10]; Chocolate Factory at [7]. The Referee’s Report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, and I consider that there was sufficient factual material before the Referee to reach the conclusions she did: Chocolate Factory at [7]. Contrary to Swancom’s submission, the Referee did not proceed on an assumption that there was a substantial quantum of common costs or any particular level of common costs. Rather, as stated in the Referee’s Report (at [22]), the Referee approached the required task by assessing what work related solely to the cross-claim and what work could be said to be “mixed” work where that relating to each of claim and cross-claim could be identified and severed, with the remaining work to be allowed as costs of the claim.

70    In respect of the proportion of the Jazz Corner Hotel parties’ costs that are properly attributable to the claim, the difference between the assessment made by the Registrar and the assessment made by the Referee is not large. The Registrar concluded that 65% of the Jazz Corner Hotel parties’ costs are properly attributable to the claim, whereas the Referee concluded that the appropriate percentage is 70%. At the hearing, Swancom was unable to identify any aspect of the Referee’s assessment which demonstrated error.

71    In respect of the proportion of Swancom’s costs that are properly attributable to the cross-claim, the difference between the assessment made by the Registrar and the assessment made by the Referee is more significant. The Registrar concluded that 60% of Swancom’s costs are properly attributable to the cross-claim, whereas the Referee concluded that the appropriate percentage is 40%. The evidence relied on by Swancom in support of its contention that this aspect of the Referee’s Report should be varied comprised three affidavits of Swancom’s solicitor, Mr Watson, dated 1 February 2023, 8 May 2023 and 22 May 2023. When analysed, the affidavits do not provide any material support for Swancom’s contention and, indeed, undermine it.

72    In his affidavit sworn 1 February 2023, Mr Watson stated (emphasis added):

11.    It is difficult to separate the Applicant's costs of the Cross-claim from its costs of its claim. This is because a vast majority of the attendances of K&L Gates solicitors and paralegals, counsel and some of the disbursements relate to both the claim and the cross-claim. For example, the following attendances in most instances are mixed between both: preparation for and attendances at directions hearings; attending trial; drafting and reviewing submissions; preparation of the court book; preparation and review of some of the evidence; research; settlement negotiations; attendances regarding a notice to admit; briefing counsel; attending mediation; conferences with counsel and client; general correspondence between counsel, client, court and other solicitors; preparing objections to evidence; attending conferences with witnesses; preparation and review of authorities and list of authorities; receiving and reviewing judgment; costs submissions; and disbursements such as for the preparation of the court book, mediator's fees, transcript fees and court hearing fees.

12.    There are some fees and disbursements incurred which were discrete and able to be allocated to either the claim or the cross-claim, such as: drafting of pleadings; reviewing pleadings; attendances regarding security for costs; attendances regarding the Respondents' FOI request; attending a view of the respondents' business premises; certain interlocutory applications regarding pleading amendments; responding to notices to produce; communications with IP Australia; and some of the disbursements, such as, court filing fees, and expert witness fees. However, the vast majority of the attendances relate to matters in paragraph 11 above and are impossible to separate with any precision.

73    As submitted by the Jazz Corner Hotel parties, applying the principle in Smith v Madden, costs that are unable to be separated between the claim and the cross-claim are to be allocated to the claim.

74    In his affidavit sworn 8 May 2023, Mr Watson stated that he (with other solicitors) “attempted to conduct a breakdown of the costs of this proceeding identifying, for each stage of the proceeding, what proportion of the costs are attributable to the claim and what proportion are attributable to the cross-claim”. Mr Watson explained that his estimate of the costs attributable to the claim and cross-claim was prepared “adopting a broad-brush approach in accordance with my understanding of the authorities in relation to a lump sum determination of this kind”. The Jazz Corner Hotel parties submitted, and I accept, that Mr Watson’s estimate constitutes a high level apportionment of costs which, in many categories, does not provide a clear explanation of the basis of the estimate. Certain stages of the proceeding, such as pleadings and evidence preparation, are clearly allocated as relating to the claim or the cross-claim. However, other stages involve a percentage allocation for which little support is provided. For example, it is questionable whether it is appropriate that the costs of the mediation be allocated on a 50/50 basis, given that mediation costs would have been incurred in respect of the claim in any event. Further, the stages of the proceeding identified by Mr Watson are not able to be attributed to specific work. For example, one of the stages is the period between the close of pleadings and “up to and including mediation”. The most significant stage from a cost perspective is “preparation for and attendance for trial” which Mr Watson proposed should be allocated as 60% to the cross-claim. The support provided for that allocation is both minimal and problematic. For example, Mr Watson assumed that the work done in the preparation of written opening submissions and objections was even as between the claim and cross-claim, but the basis for that assumption is not explained. Mr Watson also based his estimate on the fact that “85% of the witnesses who appeared at the trial and were cross-examined related to the cross-claim”, but that fact provides no information as to what work was done in respect of the claim or cross-claim. Notwithstanding the above problems with Mr Watson’s methodology, he concludes (at para 11) that approximately 42% of Swancom’s total costs are attributable to the cross-claim.

75    In his affidavit dated 22 March 2023, Mr Watson applied the same methodology to the costs of the Jazz Corner Hotel parties. The evidence therefore suffers from the same deficiencies.

76    In undertaking her assessment, the Referee had available to her all of the evidence adduced by the parties before the Registrar. It is clear from her report that the Referee engaged closely with that evidence and did not accept it uncritically. The Referee concluded that there were significant deficiencies in the evidence provided by both parties. In respect of the costs report prepared by Catherine Dealehr of the Australian Legal Costing Group for the Jazz Corner Hotel parties, the Referee concluded that there were various matters raised by Swancom which cast a level of doubt about the accuracy of the allocations made by Ms Dealehr. Likewise, the Referee concluded that the lack of detail in the Swancom evidentiary material, including the absence of information regarding the breakdown of solicitors work or that of senior counsel, did not enable the Referee to test the accuracy of the percentage applied to each phase of the proceeding.

77    The Referee’s approach was an orthodox application of the Smith v Madden principle. I am satisfied that the Referee arrived at an appropriate sum on a logical and reasonable basis, after undertaking a suitably close enquiry and taking into account the requisite level of detail to make a costs determination that is fair, logical and reasonable in accordance with law: WM Wrigley JR Company v Cadbury Schweppes Pty Ltd [2006] FCA 1186; Beach Petroleum at 123; Paciocco; see also Hudson v Sigalla (No 2) [2017] FCA 339 at [30]. I therefore consider that the Referee’s Report should be adopted in full and that costs should be assessed in the following lump sum amounts:

(a)    $305,250 payable by Swancom to the Jazz Corner Hotel parties; and

(b)    $167,842 payable by the first respondent to Swancom.

Further costs to be awarded

78    It follows from the foregoing that the Jazz Corner Hotel parties have been successful on the costs applications. The further questions to be determined are:

(a)    whether any variation should be made to the Registrar’s award of costs in respect of the costs assessment before the Registrar; and

(b)    whether an award of costs should be made in respect of the costs applications determined by this judgment.

Costs of the Registrar’s assessment

79    The Registrar included an award of $20,000 for each party in relation to the costs of the lump sum assessment as part of the Costs Assessment Reasons (at [56] and [58]).

80    At the Court’s direction, each party adduced evidence of the costs incurred in relation to the costs assessment before the Registrar. The evidence revealed a staggering level of expenditure by the parties.

Swancom’s costs

81    Swancom’s costs were summarised in Mr Watson’s affidavit sworn 27 February 2025. Mr Watson explained that it was not possible to determine what particular costs or proportion of Swancom's costs of the costs assessment before the Registrar were specific to the trial as opposed to the appeal, and the figures presented related to both. As noted earlier, no application was made to review the Registrar’s lump sum assessment of the costs of the appeal (which, understandably, were considerably less than the costs of the trial).

82    Mr Watson’s affidavit did not disclose the total costs billed by his firm to Swancom in respect of the costs assessment before the Registrar. Instead, the affidavit disclosed the total costs billed by his firm to Swancom in respect of the costs assessment before the Registrar, the Referee’s report process and the costs applications determined by this judgment, which was an amount of $172,025.80. It appears from other figures presented in the affidavit that the vast majority of those costs (approximately 80%) were incurred in the costs assessment before the Registrar. It is a staggering and unacceptable amount to be expended in relation to a costs assessment, where the costs to each party in the proceeding were in the vicinity of $500,000.

83    In his affidavit, Mr Watson adjusted the hourly charge rates of the solicitors who undertook the relevant work to accord with the Federal Court Scale of Costs and derived an adjusted costs figure of $131,485.48 for the costs assessment before the Registrar. To arrive at a party and party costs estimate (on a lump sum basis), Mr Watson then applied a 35% deduction to solicitors’ fees and 10% deduction to counsel’s fees, and arrived at an amount of $96,455.56 for the costs assessment before the Registrar.

The Jazz Corner Hotel parties’ costs

84    The Jazz Corner Hotel parties’ costs were summarised in Ms Celik’s affidavit sworn 14 March 2025. Like Mr Watson, Ms Celik explained that it was not possible to determine what particular costs or proportion of the Jazz Corner Hotel parties’ costs of the costs assessment before the Registrar are specific to the trial as opposed to the appeal, and the figures presented related to both.

85    Ms Celik’s affidavit disclosed the total costs billed by to the Jazz Corner Hotel parties in respect of the costs assessment before the Registrar, being an amount of $120,752.77. That is also a staggering and unacceptable amount to be expended in relation to a costs assessment in this proceeding.

86    In her affidavit, Ms Celik notes that the hourly charge rates of the solicitors who undertook the relevant work are in accordance with the Federal Court Scale of Costs, and expresses her opinion that counsel’s hourly rate is reasonable, and accordingly makes no adjustment to the rates charged. To arrive at a party and party costs estimate (on a lump sum basis), Ms Celik applied a 30% deduction to solicitors’ fees and 10% deduction to counsel’s fees, and arrived at an amount of $92,820.97 for the costs assessment before the Registrar.

Consideration

87    The costs incurred in respect of the costs assessment before the Registrar are part of the costs of the proceeding. Section 43 of the FCA Act gives the Court a broad discretion in awarding costs. The discretion must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation: Northern Territory v Sangare (2019) 265 CLR 164 at [24].

88    Section 37N(4) of the FCA Act stipulates that the Court, in exercising its discretion to award costs, must take account of any failure by a party to comply with the duties imposed by subsections (1) or (2). Relevantly, subsection (1) requires each party to conduct the proceeding in a way that is consistent with the overarching purpose, which includes the objective of resolving disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

89    In my view, both parties failed to comply with the overarching objective as stated above in respect of the costs assessment before the Registrar. The costs incurred in the costs assessment by both parties are grossly disproportionate to the amount in dispute on the question of costs and the complexity of the dispute.

90    In the circumstances, I consider that the award of costs that was made by the Registrar in the costs assessment is the appropriate award to be made. Each party will be awarded a lump sum of $20,000 on account of costs. That is a broad brush estimate of party and party costs that ought to be recoverable in respect of a costs assessment undertaken for a proceeding of this nature and scale. Given the Costs Orders that were made, it was necessary for each party to incur costs in verifying the costs incurred in the proceeding, in respect of the cross-claim by Swancom and in respect of the claim by the Jazz Corner Hotel parties.

91    Accordingly, an additional amount of $20,000 will be added to the Cost Referee’s assessment on account of the costs of the costs assessment before the Registrar, with the result that:

(a)    $325,250 will be payable by Swancom to the Jazz Corner Hotel parties; and

(b)    $187,842 will be payable by the first respondent to Swancom.

Costs of the costs applications

92    The Jazz Corner Hotel parties have been successful in the costs applications and I see no reason why the usual rule that costs follow the event ought not apply. Acknowledging the history of the proceeding, and to avoid further disputes as to costs, I consider it appropriate to order that the costs of the costs applications be awarded on a lump sum basis in a fixed sum. This approach is consistent with overarching purpose in s 37M of the FCA Act and the principles stated in Paciocco at [20].

93    The Jazz Corner Hotel parties’ costs with respect to the Referee’s Report and the costs applications (both incurred and anticipated) were summarised in Ms Celik’s affidavit sworn 14 March 2025 as follows:

(a)    costs in respect of the Referee’s Report (including the fees charged by the Referee) were expected to total $17,215; and

(b)    costs in respect of the hearing of the costs applications were expected to total $27,836,

being a total amount of $45,051. To arrive at a party and party costs estimate (on a lump sum basis), Ms Celik applied a 30% deduction to solicitors’ fees and 10% deduction to counsel’s fees, and arrived at an amount of $36,831.20. No loading was applied for skill, care and responsibility.

94    I agree generally with the methodology adopted by Ms Celik with respect to the assessment of party and party costs on a lump sum basis. However, I consider that the costs incurred by the Jazz Corner Hotel parties on the costs application (but not in respect of the Referee’s Report) are disproportionate to the nature and scale of the issues in dispute. I consider it appropriate to make a further discount to those costs, such that a lump sum of $25,000 is payable in respect of the costs of the costs applications (comprising both the costs in respect of the Referee’s Report and the hearing of the costs applications).

95    Accordingly, a further order will be made for Swancom to pay to the Jazz Corner Hotel parties costs (in respect of the costs application) fixed in the sum of $25,000.

Associate:

Dated:    20 May 2025