Federal Court of Australia

SMBC Leasing and Finance, Inc. v Flexirent Capital Pty Ltd (Lump Sum Costs) [2026] FCA 556

ORDERS

THE COURT ORDERS THAT:

1.    The respondents pay the applicant’s costs of the proceeding fixed in the lump sum of $3,250,000.

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

REASONS FOR JUDGMENT

THAWLEY J:

1    On 27 February 2026, I made an order that the applicant’s costs of this proceeding be determined in a lump sum, if not agreed: SMBC Leasing and Finance, Inc. v Flexirent Capital Pty Ltd (Costs) [2026] FCA 182. The parties have not been able to agree.

2    The applicable principles are not in dispute. A lump sum must be fixed having regard to the information before the Court. The process of quantifying the lump sum cannot devolve into a process akin to a taxation of costs – see: Jadwan Pty Ltd v Rae & Partners (A Firm) [2023] FCAFC 182 at [9] (Markovic, Stewart and Anderson JJ). The point of the process is to facilitate a quick and cheap, yet rational and reasonable, resolution to the issue of costs.

3    By its Costs Summary dated 17 March 2026, the applicant contended that the quantum of its costs should be fixed in the amount of $3,989,857.94, its actual costs until 14 March 2026 being $7,602,921.44. By their Costs Response dated 8 April 2026, the respondents contended that the applicant’s costs should be fixed in the amount of $2,470,771.59 or $2,734,865.82. By its submissions dated 15 April 2026, the applicant revised the costs it sought to $3,678,675.26. This amount excluded the costs of the first mediation and the costs of this application from 14 March 2026. By their Supplementary Costs Response dated 22 April 2026, the respondents revised their alternative quantification of the applicant’s costs ($2,734,865.82) to $2,079,865.34 because some of the applicant’s lawyers were not on the Register of Practitioners kept by the High Court of Australia pursuant to s 55C of the Judiciary Act 1903 (Cth). The applicant further revised the costs it sought to $3,384,508.87 in a supplementary affidavit sworn on 1 May 2026 to reduce its claim for fees charged by those lawyers who were not on the High Court Register.

4    The respondents raised several issues with the applicant’s quantification of an appropriate lump sum amount, some of which were, in substance, resolved in the process just described. The main remaining issues are discussed next.

5    First, the respondents contended that the applicant’s costs for the period of 22 November 2021 to 25 July 2025 should be limited to $977,059.51, rather than the claimed $3,185,623.34, on the basis that the applicant represented that its total costs were $1,993,999 in its Calderbank letter of 23 July 2025.

6    The respondents contended that, given the applicant successfully relied on the Calderbank letter in obtaining an order for indemnity costs from 25 July 2025, the costs to which it is entitled for the period before 25 July 2025 are limited to the costs set out in the letter.

7    I do not accept that this justifies reducing the amount of costs to which the applicant is entitled. I infer from the material before the Court (and there is no evidence to the contrary) that the respondents knew the applicant’s costs were likely to be more than what was stated in the Calderbank letter. Further, the respondents were in no way prejudiced by the incorrect statement as to the level of costs. The starting point is that the applicant is entitled to appropriate compensation calculated by reference to its actual costs.

8    Secondly, the respondents observe that the applicant’s Costs Summary does not apply the Federal Court’s Scale of Costs, the Federal Court’s National Guide to Discretionary Items in Bills of Costs, or the Federal Court’s National Guide to Counsel’s Fees. In particular, the hourly rates charged by a proportion of the applicant’s solicitors were substantially in excess of the rates contained in the Scale of Costs. Further, the hourly rates charged by various counsel briefed by the applicant exceeded the rates in the Guide to Counsel’s Fees.

9    The Court is not bound to apply strictly any applicable scale of costs: Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd (No 5) [2017] FCA 63; 122 IPR 279 at [86(8)] (Bromwich J). Having regard to the complexity and conduct of the matter, I consider that the approach taken by the applicant in its Costs Summary, including its application of a general discount to solicitors’ fees payable on a party/party basis, is appropriate. I do not consider there should be any reduction to disbursements for counsel fees having regard to the experience of each of the counsel, the fact that the rates charged by each were market rates and the way the case for the applicant was conducted by those counsel who appeared from time to time.

10    Thirdly, the respondents contended that disbursements, including counsel fees, claimed in the applicant’s Costs Summary do not clearly delineate between fees incurred during the period in which the applicant is entitled to its costs on a party/party basis, and the period in which it is entitled to its costs on an indemnity basis. Moreover, the Costs Summary claims 100% of solicitors’ fees in the indemnity costs period, and 100% of counsel fees in the party/party period and the indemnity period, which the respondents contend is highly unusual.

11    I do not regard the claim for 100% of counsel fees as highly unusual or as inappropriate. I consider it reasonable. I consider 90% of solicitors’ fees in the indemnity period to be a closer approximation of what might have resulted on a taxation.

12    Fourthly, the respondents contended that the applicant had made various generally excessive claims. For instance, the applicant’s Costs Summary does not account for expenses incurred to brief and bring up to speed new professional staff who were brought onto the matter from time to time. The applicant claims fees from 22 November 2021, being over 8 months before proceedings were commenced on 20 July 2022. And the applicant’s actual costs are impressionistically very large, particularly with respect to certain work such as the preparation of pleadings.

13    In my view, these matters are each sufficiently accounted for in a general discount to the solicitors’ fees payable on a party/party basis. The applicant adopted a discount of 30% in its calculations, at a time when the issue next discussed was not apparent to the applicant.

14    Fifthly, as mentioned, a number of the applicant’s lawyers who worked on the matter were not registered on the High Court Register, which the respondents submitted constituted a bar to the recovery of fees, subject to the Court’s discretion to allow their fees but assessed at the rate of a legal clerk – see: Jadwan Pty Ltd v Rae & Partners (A Firm) (No 7) [2022] FCA 1174 (O’Callaghan J); Sharif v Vitruvian Investments Pty Ltd (No 5) [2024] FCA 134 (Colvin J).

15    The applicant ultimately accepted that the fees earned by those solicitors should be accounted for at the rate of a legal clerk, but there remained a disagreement as to the appropriate rate. The applicant’s primary approach was to apply the actual law clerk rate charged by the applicant’s firm of solicitors. By contrast, the respondents’ approach was to apply the rates in the Scale of Costs for a Clerk or Paralegal (item 1.3). The applicant’s alternative approach was to apply item 1.2 for Law Graduates or Articled Clerks in the Scale of Costs.

16    In my view, the appropriate course would be to apply the item 1.2 rate in the Scale of Costs, with the maximum 15% uplift for care and skill having regard to the significant contribution of the relevant lawyers.

17    I therefore accept as appropriate the amounts claimed by the applicant, subject to a greater reduction in professional fees of practitioners who were not on the High Court Register and a 10% reduction to the solicitors’ fees charged during the indemnity costs period.

18    Having regard to all of the circumstances, I would apply a discount of 22.5% for party/party professional fees for the period 22 November 2021 to 25 July 2025 rather than the 30% discount applied by the applicant.

19    If one were to approach the quantification of lump sum costs by reference to the table that appears on page 5 of Ms Yiasemides’ affidavit of 1 May 2026, the reduction for fees earned by non-registered practitioners during the party/party period would be $1,112,360.00 (rather than $705,025.39), the reduction during the indemnity period would be $231,006.61 (rather than $146,414.40). One would apply a 22.5% discount rather than 30% to the professional fees in the party/party period, resulting in a new sub-total of $1,866,448.36. The new sub-total for professional fees during the indemnity period of $534,270.91 would be reduced by 10% to $480,843.82. The revised total would be $3,250,937.31 (rather than $3,384,508.87).

20    Having regard to the matters referred to above, the various issues raised in the material on this application, and the issues raised in the proceedings, an appropriate level of compensation for the applicant’s costs assessed on a lump sum basis in accordance with the orders made on 27 February 2026 is $3.25 million.

Associate:

Dated:    5 May 2026