Abdi v Lu (No.2)

[2020] FCCA 3244

FEDERAL CIRCUIT COURT OF AUSTRALIA

ABDI v LU (No.2) [2020] FCCA 3244

Catchwords:
COSTS – Australian consumer law – hire purchase agreement – costs application.

Legislation:

Federal Circuit Court of Australia Act 1999 (Cth), s.79

Federal Circuit Court Rules 2001 (Cth), r.21.02, Sch.1

Federal Court Rules 2011 (Cth), Sch.1

High Court Rules2004 (Cth), r.55.01

Insurance Contracts Act 1984 (Cth)

Cases cited:

Abdi & Anor v Lu [2020] FCCA 1307

Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403

Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333

Donohoe v Britz  (No 2) [1904] HCA 25; (1904) 1 CLR 662

Peel v London & North Western Railway Co [1907] 1 Ch 507

Smith v Buller [1875] UKLawRpEq 26; (1875) LR 19 Eq 473

Wade v J Daniels and Associates Pty Ltd [2020] FCA 1708

Applicant: SULEKHA ABDI

Respondent: MING LU

File Number: MLG 3608 of 2018

Judgment of: Judge Riethmuller

Hearing date: 30 July 2020

Date of Last Submission: 13 August 2020

Delivered at: Townsville

Delivered on: 30 November 2020

REPRESENTATION

Counsel for the Applicant: Mr Hancock

Solicitors for the Applicant: Starnet Legal Pty Ltd

The Respondent appeared in person.

ORDERS

1. The Respondent pay costs to the Applicant in the sum of $16,500.00

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 3608 of 2018

SULEKHA ABDI

Applicant

And

MING LU

Respondent

REASONS FOR JUDGMENT

Background

1. This is a matter with respect to an application for costs, filed by the applicant on 26 June 2020, pursuant to s 79 of the Federal Circuit Court of Australia Act 1999 (Cth) and r 21.02 of the Federal Circuit Court Rules 2001 (Cth) (‘the Rules’).

2. The applicant in this matter previously sought relief under the Australian Consumer Law with respect to a car hire purchase agreement (‘HPA’). In Abdi & Anor v Lu [2020] FCCA 1307, judgment was given on the substantive issues for the respondent to transfer the registration of the car to the first applicant and to pay the first applicant a sum of $2,429.66. This figure reflected the difference between what the respondent owed the first applicant in those proceedings with respect to insurance claims and the amount owing to the respondent by the first applicant under the contract.

3. In the substantive matter, the monetary value of the first applicant’s claim remained obscure, even in the Amended Statement of Claim; however, a sum potentially in the low-tens-of-thousands of dollars appeared to be the ambit of the Claim.

4. The second applicant appeared to claim around $31,000.00, together with damages for lost wages and loss of a vehicle seized by the sheriff as a result of a judgment following a traffic accident (see amended Statement of Claim). The second applicant was entirely unsuccessful. The respondent claimed $26,039.00 against the first applicant pursuant to the HPA, and denied liability for any insurance claims for traffic accidents.

5. Whilst there were two applicants (wife and husband) in the substantive proceedings, only the first applicant (hereafter referred to as ‘the applicant’) was successful in those proceedings and makes a costs application. The applicant seeks party and party costs, relying upon her limited success in the proceedings. The applicant filed a schedule of costs relying upon the lump sum scale in the Rules, seeking $55,350.00.

6. The respondent opposes the costs sought, arguing that the proposed costs are not fair and reasonable and characterised them as disproportionate and excessive in nature.

Costs in this jurisdiction

1. The court has a broad power to order costs in proceedings of this nature, as referred to above, s 79 of the Federal Circuit Court of Australia Act 1999 (Cth) relevantly provides:

   79 Costs

   […]

   (2) The Federal Circuit Court of Australia or a Judge has jurisdiction to award costs in all proceedings before the Federal Circuit Court of Australia (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded. 

   (3) Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Circuit Court of Australia or Judge.

2. The power to award costs is also addressed in r 21.01 of the Federal Circuit Court Rules2001 (Cth) which provides a broad discretion, not only as to whether an order for costs is made, but also with respect to the amount of costs and how costs are calculated:

   21.02 Order for costs

   […]

   (2) In making an order for costs in a proceeding, the Court may: 

   (a) set the amount of the costs; or 

   (b) set the method by which the costs are to be calculated; or 

   (c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or

   (d) set a time for payment of the costs, which may be before the proceeding is concluded.

   […]

3. The default amount payable if costs are ordered (unless the court orders otherwise) is costs in accordance with Parts 1 and 2 of Schedule 1 of the Rules.

4. The applicant submits that she was substantively successful in her interlocutory application on 19 December 2018 and at the final hearing on 19 July 2019 and that in these circumstances, it is appropriate for the costs to ‘follow’ the event. In the interlocutory application, the respondent was ordered to return the vehicle to the applicant (although only upon payment by her of a sum outstanding under the contract) and in the final hearing orders were made in her favour. 

5. Ultimately, the applicant was successful in her claim that late fees of $100.00 per month were a penalty and also with her claim that her failure to pay her monthly instalments (at one point being more than $20,000.00 in arrears) did not result in the loss of her insurance, as a result of the protections provided by the Insurance Contracts Act 1984 (Cth).

6. There are a number of important matters relating to costs that must be borne in mind:

   a)Costs orders are not a bonus or given as damages, but reflect the reality that the party causing the litigation (the party who is unsuccessful) has also caused the other party to incur costs. Thus, the unsuccessful party should ordinarily meet the costs necessarily incurred by the successful party. Hence, the standard rule exists that costs follow the event (subject to the particular circumstances of given cases). 

   b)The Rules of the Federal Circuit Court of Australia do not make provision for any specific definitions of the ambit of allowable costs, but provide a short form lump sum scale. In these circumstances, it is appropriate to use the traditional formulation for the ambit of party and party costs: the costs necessary or proper to attain justice (the test that remains applicable in the High Court of Australia: see r.55.01 of the High Court Rules2004 (Cth)). The test should be applied on the basis of ‘a reasonably prudent [person], endeavouring to get justice, by endeavouring to get it without undue expenditure of money to incur the expense in question’: see Peel v London & North Western Railway Co [1907] 1 Ch 507 at 614. As Barton J said in Donohoe v Britz  (No 2) [1904] HCA 25; (1904) 1 CLR 662:

   … as between party and party, the luxuries of litigation must be paid for by those who indulge in them, the necessaries only are to be paid for by the losing side.

   c)Where litigation involves large or complex issues, it may be appropriate for the court to order a taxation of costs on the Federal Court scale, which uses the arguably more generous test of ‘fairly and reasonably incurred’ (see Schedule 1, Dictionary, Federal Court Rules 2011 (Cth)) rather than the modest lump sum scale in the Rules. This may be seen as an incident of the importance of proportionality of costs when exercising the discretion as to costs orders. The corollary of this proposition is that regard must be had to the proportionality of costs to the size of smaller claims (some of which can be litigated in the small claims jurisdiction without costs orders). In this respect, I note that in the Magistrates Court of Victoria, there are seven separate and rather modest scales of costs applicable by reference to the amounts of the claim, six of which cover claims under $70,000.00.

   d)Costs of lay litigants for their time and effort are not recoverable: see Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 (‘Cachia v Hanes’). This means that the respondent would not have been able to claim costs against the applicant, even if he had been successful. 

   e)The corollary of the principles in Cachia v Hanes must be that a litigant is not entitled recover the costs of lawyers collating and preparing material that would ordinarily be able to be done by a litigant.  Put simply, if a litigant does not take the time to obtain and collate the relevant materials for their solicitor (to the extent that this can reasonably be expected of an average litigant), then the additional costs incurred by the litigant for their solicitor to locate and collate their materials is outside the concept of party and party costs.  This type of work is a ‘luxury’ in the sense that ‘charges merely for conducting litigation more conveniently may be called luxuries, and must be paid by the party incurring them’: see  Mallins VC in Smith v Buller [1875] UKLawRpEq 26; (1875) LR 19 Eq 473 at 475. This is a particularly important consideration in smaller cases where costs can easily overshadow a claim.

   f)Where the court is asked to make a lump sum order, rather than sending the parties to taxation for a Registrar to consider each item of expenditure, the process is necessarily one involving impression and intuition, particularly when considering proportionality of cases to the issues in the proceedings. The parties cannot expect a detailed assessment of each item in the claim – if such is sought they must seek a taxation of costs.

   g)Where there are multiple issues where a party has succeeded, but ultimately the other party obtained a judgment, the costs don’t necessarily have to follow the event. Costs may be adjusted to reflect these matters, for example. In Wade v J Daniels and Associates Pty Ltd [2020] FCA 1708, Justice O’Bryan ordered a successful applicant to pay 50% of the respondent’s costs as the applicant was successful on only a small part of the claim.

Findings

1. The Applicant calculates her costs and disbursements pursuant to the court’s lump sum scale at Schedule 1 of the Rules as follows (noting I have inserted an ‘amount assessed’ column to reflect my findings set out in further detail below):

Item	Date	Items (Schedule 1 rule + description)	Charges	Amount Assessed
1	27/11/18	2. Initiating application including interlocutory application (interim orders)	$3,744.00	$3,744.00
2	12/12/18	3. Interlocutory application (interim) – discreet event	$1,867.00	Nil
3	12/12/18	13. Appearance of solicitor at interlocutory application hearing - full day daily hearing fee.	$3,361.50	Nil
4	19/12/18	13. Appearance solicitor at interlocutory application hearing - full day daily hearing fee.	$3,361.50	$3,361.50
5	28/6/19	5. Mediation conducted with Registrar	$3,138.00	$3,138.00
6	28/6/19	15. Photocopying x 4 of 305 page court book for respondent, court, solicitor and counsel at $0.77	$939.40	$185.40
7	19/7/19 and 06/08/19	7. Preparation by solicitor for hearing days 19 July and 6 August – two day preparation	$10,111.00	$6,728.00
8	19/7/19 and 06/08/19	7. Preparation by Counsel for hearing days 19 July and 6 August – two day preparation	$10,111.00	Nil
9	19/7/19	13. Attendance by solicitor at 19 July final hearing – full day daily hearing fee.	$2,241.00	$2,241.00
10	19/7/19	13. Appearance by Counsel at 19 July final hearing - full day daily hearing fee with 50% advocacy loading	$3,361.50	$3,361.50
11	06/08/19	13. Attendance by solicitor at 6 August final hearing - full day daily hearing fee.	$2,241.00	Nil
12	06/08/19	13. Appearance by Counsel at 6 August final hearing - full day daily hearing fee with 50% advocacy loading.	$3,361.5.00	Nil
13	18/11/19	13. Appearance solicitor at 18 November short mention - $305 with 150% advocacy loading.	$457.50	$457.50
14	27/7/20	7. Solicitor preparation for cost hearing days 30/7 – preparation of written costs submissions dated 18 June and 21 July. Reviewing two submissions by respondent dated 1 July and 27 July	$2,127.00	Nil
15	27/7/20	7. Preparation by Counsel for costs hearing 30 July – preparation of written costs submissions dated 18 June and 21 July. Reviewing two submissions by respondent dated 1 July and 27 July	$2,127.00	Nil
16	30/07/20	13. Attendance by solicitor at 30 July costs hearing - half day daily hearing fee.	$1,120.00	Nil
17	30/07/20	13. Appearance by Counsel at 30 July costs hearing - half day daily hearing fee with 50% advocacy loading	$1,680.00	$1,680.00
TOTAL	$55,824.40	$24,869.90

1. When assessing the costs using the lump sum scale, it appears that the a number of adjustments are required, for the following reasons:

   a)Item 1 includes preparation for a substantive interlocutory application, thus it is not appropriate to include a separate fee for an interlocutory application, as claimed in item 2. In this case the substantive interlocutory application was heard over two days as a result of the applicant not having her case in order on the first date, and thus the costs of the first appearance (item 3) are outside the ambit of the concept of party and party costs.

   b)Item 6 is reduced to reflect photocopying at commercial rates of around 7 cents per sheet together with the costs of a clerk of around $100.00 for an hour to attend at a commercial copy provider and collate the materials. It is now well accepted that the scale costs for copying are not appropriate when copying large numbers of pages which can be carried out at substantially less expense at a commercial copy provider.

   c)Items 8 and 13 are claims for preparation by Counsel. I am not persuaded that the preparation fee in the lump sum items is applicable to Counsel who receives a loading of 150% for the additional preparation to appear as advocate. The preparation fee covers all of the work of a solicitor from the first substantive interlocutory application to trial (including a brief to Counsel), and may not be claimed by Counsel for their preparation.

   d)I have not included items 11 and 12 as the matter could have been heard in one day, if limited to an efficient presentations of the issues that the applicant succeeded upon.

   e)I have not included item 16 as the costs application was not so complex as to require Counsel to appear, thus only the fee for the advocate in item 17 is appropriate.

2. A factor relied upon by the respondent is his offer to settle the proceedings, which he made shortly before the second day of the hearing.  The relevant parts of the offer were in the following terms, as set out in an Annexure to his Submissions filed on 3 July 2020:

   The offer is $5,500.

   The amount of the offer in respect of the above claim full proceeding includes all indemnity claims by both applicant.  This offer includes transfer costs of' vehicle [Registration number] title back to 1st defendant.

   Due to there is no offer made by both your applicants prior, This offer is inclusive costs.

   This offer of compromise is open to be accepted for 3 days, on 5th Aug 2019 4pm. after service of this offer of compromise. (Due to close our next court hearing date)

   […]

   $5,500 The amount of the offer will be paid within 21 days after acceptance of this offer.

3. The offer was not in accordance with the process set out in the Rules of court, but relied upon the principles in Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333. Those principles allow for the court to have regard to an offer, even if it is not in accord with the procedures set out in the Rules. The principles are appropriate to this court. The applicant submits this offer was “riddled with technical issues relating to grammar and typography”: see paragraph [22] of the Outline of Submissions filed 21 July 2020. However, where a litigant represents themselves I am not persuaded that attacks on the technical features of the document are well founded: the real issue is simply whether the terms of the offer were clear. In my view the terms of this offer were sufficiently clear.

4. It is clear that the offer was to settle the proceedings for a sum greater than that awarded to the applicant. However, the offer made no provision for costs that had been incurred by the applicant up to the point that the offer was made. I am not persuaded that the applicant should be denied ‘party and party’ costs up to the point that the offer was made, even if the respondent had paid the amount ultimately awarded. 

5. Making offers as ‘lump sum’ amounts creates difficulties when determining whether a party has obtained a better result than their offer, as one must first consider the costs that would be payable up until the point of the offer, before determining whether the offer has been beaten. Whether this results in the offer not being in sufficiently clear terms to be relied upon in a costs application is not something I need consider in this case. It is apparent from the lump sum scale amounts set out above, that the costs incurred by the applicant clearly exceeded (by a significant amount) the difference between the offer amount and the sum ultimately awarded at trial. I therefore find that the applicant should be taken to have obtained an outcome more favourable than the offer.  As a result it is also not necessary for me to determine whether the offer’s short window for acceptance (three days between the hearing days) was reasonable.

6. The respondent also argues that the costs are out of proportion to the amount of the claim and the issues and relate to the case of the second applicant who was unsuccessful. In particular the respondent says:

   a)Costs should only be claimed for the first applicant, not the second applicant in the substantive proceedings, who is not a party to this application. Further, he argues that the majority of costs set out by the applicant are in relation to the second applicant.

   b)The respondent submits the applicant’s solicitor had only recently been admitted in to the legal profession and would be considered a junior lawyer for the purpose of fee amounts, and that as a result the lump sum scale items, particularly for advocacy, should not be the full amount allowed in the scale.

   c)The respondent contends that the amount ordered in the final order was an ‘offset’, rather than a ‘favourable’ or successful outcome as such, for the applicant. He also submits an offset should be made for his insurance payment ordered on 27 May 2020. He says he has paid the AAMI claim in the sum of $4,639.66 as a gesture of good will.

7. I accept that many of the issues in the substantive matter related to the second applicant. I accept an adjustment is nonetheless called for with respect to the costs, due to the costs relating (in part) to the second applicant. I also note that the first applicant was successful in having the late payment charges removed and in her insurance claims and recovery of the vehicle, and that the amount was judgment in her favour in the face of a claim by the respondent for over $26,000.00.

8. I accept that the solicitor for the applicant presented as junior, his advocacy skills indicated he was not an experienced practitioner and the case otherwise could have presented more efficiently. This is already accounted for in the reduction in the costs set out above.  However, I also accept that an appearance fee of over $3,000.00 for a junior solicitor on an interlocutory application is excessive in a case of the magnitude of these proceedings.

1. The claim by the respondent that he has paid the AAMI insurance claim, for which he is required to indemnify the applicant, has been raised late.  It appears that the respondent settled the claim by AAMI, for which he was required to indemnify the applicant. The result is that there is now a dispute as to whether the applicant will pay AAMI and have them reimburse the respondent, or whether the judgment amount is no longer appropriate. If the AAMI claim has been settled (and paid) by the respondent (regardless of the terms of that settlement) then he has met some $4,639.66 of the amounts used to calculate the judgment. In these circumstances it seems practical that this amount be taken as part of the payment made for the applicant’s benefit in determining what total is outstanding following the judgment and the costs order. That is, if the respondent has settled the AAMI claim he is entitled to a credit of $4,639.66 against his indebtedness under the orders. It will be a simple matter to enquire of AAMI whether their claim has been finalised, if the applicant doubts the respondent’s claim in this regard.  I do not alter the costs order amount but leave this to the parties when striking the dollar amount that remains to be paid, as this is essentially an enforcement issue.

2. In the present proceedings I have taken into account the underlying issues and nature of the claims, noting the cross claim by the respondent that the applicant had to defend, the way in which the case was conducted, and the issues upon which each party succeeded.

Conclusion

1. The case presents a complex array of factors to take into account in determining a costs order, as discussed above. Given the small amounts involved, it is appropriate that there be careful scrutiny of the amounts sought by way of costs. Whilst the return of the vehicle was an issue in the case (as it had been repossessed for non-payment of HPA amounts) in substance the case ultimately turned upon the amount of late payment penalty charges and the terms of the insurance cover. Whilst the second applicant was wholly unsuccessful, the applicant and respondent each had some success on different issues in the litigation. 

2. Having regard to all of the circumstances of the litigation I am persuaded that the applicant should receive around two-thirds of the costs assessed on the lump sum scale. I therefore fix costs at $16,500.00

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller

Associate: 

Date: 30 November 2020