Amcor Ltd v Barnes
[2016] VSC 306
•15 April 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2007 08181
| AMCOR LIMITED AND OTHERS (according to the attached schedule) | Plaintiffs |
| v | |
| TREVOR MARK BARNES AND OTHERS (according to the attached schedule) | Defendants |
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JUDGE: | GOURLAY JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 and 12 November 2015 |
DATE OF REASONS: | 15 April 2016 |
CASE MAY BE CITED AS: | Amcor Ltd and ors v Barnes and ors |
MEDIUM NEUTRAL CITATION: | [2016] VSC 306 Revised 2 June 2016[1] |
[1]Amendments due to typographical errors in the original reasons to paragraphs 68, 69 and 99 are marked in bold.
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COSTS – Gross costs assessment – Costs of taxation – Interpretation of Rule 63.36 Supreme Court (General Civil Procedures) Rules 2015 – GST on disbursements
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APPEARANCES: | Counsel | Solicitors |
| For the Defendant and Plaintiffs by counterclaim in S CI 2014 09420 and Plaintiffs in S CI 2007 08181 | Ms C McCudden | Gilbert + Tobin |
| For the 2nd to 4th Defendants in S CI 2007 08181 | Ms Murphy | Mills Oakley |
Costs have been awarded to Holihan and the Holihan parties (‘Hoihan’) to be paid on a party party basis. Justice Vickery found that the matter was complex and unusual with multiple parties with multiple separate and combined claims and that the usual order that costs should follow the event should apply. However, His Honour found that despite the applicants success in defending the Respondents (‘Amcor’) claims against them the conduct of Mr Holihan in participating in the scheme to back date documents ‘was calculated to defeat or delay the administration of justice by setting up a false trail’.[2]
[2]Amcor Ltd v Barnes (No 5) [2013] VSC 51 at para 62.
Further, his Honour found that:
In the case of Holihan and the Holihan Parties, the conduct provides a basis for refusing to make an award of full costs in their favour, and making an award of costs which is appropriately discounted.[3]
[3]Amcor Ltd v Barnes (No 5) [2013] VSC 51 at para 64.
As a result of these findings, Justice Vickery ordered that Amcor pay 75% of the applicant’s costs of defending the proceeding and pay 100% of the applicant’s costs in relation to expert evidence obtained for the defence of the proceeding.
The applicant applied for the costs to be assessed on a gross costs basis pursuant to Order 63.07(2) of the Supreme Court (General Civil Procedure) Rules 2015 and on 31 October 2014 Associate Justice Wood made an order that the costs of the applicants were to be assessed on a gross costs basis with costs to be calculated on scale.[4]
[4]The unreported decision made 31 October 2014 in both proceedings.
Associate Justice Wood stated in Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors (No 4)[5] commencing at paragraph 9:
[5][2013] VSC 669.
9Croft J determined that a gross sum was the appropriate method for quantification of costs in this case. Selected passages that appear in paragraphs 10 to 12 that follow are worth noting:
10Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) stated:
… before exercising the power to fix a gross fee, the Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable. On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary ‘fail safe’ discount on the costs submitted to the Court.
11On the question of a failsafe discount, however, there is nothing wrong with the concept. It is the arbitrary application of such a discount that is problematic. Von Doussa J went on to stated ‘…even though there is no statutory obligation on a judge to discount figures provided by the successful party on a ‘fail safe’ basis, it is acknowledged in Leary v Leary that there may well be occasions on which a judge will make such a discount.
12Croft J in Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors (No 3) summarised the object of the Rule as follows:
1.The clear objet of rule 63.07 of the Rules is, in my view, similar to the object of the corresponding Federal Court rule, as discussed by Sackville J in Seven Network Limited v News Limited, as follows:
(i)The purpose of the subrule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum v Johnson (No 2), at 120, per von Doussa J, applying Leary v Leary ([1987] 1 All ER 261; Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, at 742 [21] per Giles JA).
(ii)An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place. On the contrary, the Court applies a much broader brush than would be used on a taxation of costs pursuant to O 62: Beach Petroleum v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738, at 742 [21] per Giles JA.
(iii)The Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable. The Court should be astute to avoid both overestimating the recoverable costs and underestimating the appropriate amount, for example by applying an arbitrary discount to the amounts claimed: Beach Petroleum v Johnson (No 2), at 123, per von Doussa J.
(iv)Although the power to assess a gross sum for costs involves the exercise of a discretion, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis. These include the principles contained in O 62 r 19 (embodying the ‘necessary or proper’ test) and those stated in Stanley v Phillips [1966] HCA 24); [1966] HCA 24; (1966) 115 CLR 470, at 478, per Barwick CJ (on a party and party taxation the emphasis is upon obtaining adequate representation to enable justice to be done, not upon the propriety of steps taken to ensure maximum success in the cause): Auspine Ltd v Australian Newsprint Mills Ltd [1999] FCA 673; (1999) 93 FCR 1, at 4-5 [12]-[15], per O’Loughlin J; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629, at [6]-[8], per Mansfield J.
(v)Although the methodology permitted by O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 52 and Sch 2 provide assistance in fixing an appropriate gross sum: Charlick Trading Pty Ltd v ANRC, at [10], per Mansfield J.
Generally a gross costs assessment commences with the applicant filing and serving an independent expert’s report of the costs claimed pursuant to the Costs Orders. In this matter the orders as to the costs have some complexity. In contrast to the Sunland matters[6] the costs are awarded on scale and on a party party basis. The respondent chose not to rely on an opposing report in response to the applicants’ expert report.
[6]In Sunland the costs orders were that the costs were to be paid on an indemnity basis with reference to the hourly rates of charge in the costs agreements.
Any expert engaged to provide a report in a gross costs matter has an overriding obligation not to act as an advocate for the party engaging them and to prepare a report that reflects their independent assessment of recoverable costs payable to the receiving party. The appointment of an expert enables increased transparency, as well as preserving the applicant’s privilege, by applying a broader brush approach to the quantification of the costs orders than would occur on a taxation of a detailed bill of costs.
The parties have filed the following documents in the application:
Date
Applicants’ Disbursement report – J Young – (‘first Young report’) later amended
31 January 2015
Respondent’s response to the first Young report – D Paver (‘response report’)
28 February 2015
Applicants’ Remaining Costs report – J Young – (‘second Young report’)
31 May 2015
Respondent’s response - Ms McCudden advised the Court that the respondent (‘Amcor’) would not be providing a report in response, but would seek to test Ms Young’s reports by cross-examining her.
Applicants’ report as to costs of gross costs application – J Young – (‘third Young report’)
11 August 2015
Affidavit of C A Holihan as to the GST liability of Holihan and his companies
24 September 2015
Affidavit of S A Edwards as to the GST liability of Holihan and his companies
10 November 2015
Prior to considering the amount of costs claimed by Holihan I will address the issue of the payment of GST on the disbursements claimed in the report. Holihan is entitled to be paid different percentages for the costs of the proceeding and the costs of the expert reports and evidence. Therefore I will address the solicitors’ costs of the proceeding as a whole and then the issue of Counsel’s fees for the proceeding (pre-Trial and trial fees) and other disbursements. The same approach will be adopted for the costs of the expert including the solicitors’ costs relating solely to the expert, the costs of Counsel and the expert fees. Next I will address costs of the gross costs application including the costs before Justice Vickery, Associate Justice Wood and myself. The application of Rule 63.36 to these costs will also be considered.
Once these issues are decided the costs of the proceeding will be reduced by 25%.
The payment of GST on the disbursements.
The affidavit of Mr Holihan sworn on 24 September 2015 states that he is the sole director and secretary of the third and fourth defendants (ACB Co Purchaser and Achilla). Achilla was established to be the trading company for the business of manufacturing corrugated boxes and ceased trading in mid-2010. Achilla is registered to claim GST and claimed input tax credits paid on legal fees in the first year of the litigation. However, in 2008 the Holihan parties received accountant’s advice that these expenses were not true trading expenses and therefore not claimable. Since July 2008, Achilla has not claimed an input tax credit on legal fees.
Similarly, ACB Co Purchaser is registered for GST, was established as an asset holding company, but has never traded. ACB Co Purchaser has not claimed input tax credits for GST paid on legal fees for the litigation. The accountant’s advice is that the company is unable to claim GST input tax credits in relation to legal fees in these proceedings.
Mr Holihan is registered for GST in relation to consulting work, however he has never carried on a business in his own name and never claimed GST. On accountant’s advice he has never claimed GST input credits for legal fees paid in relation to the proceedings and will never be able to.
In a previous party party taxation in 2011, Holihan swore an affidavit on 28 June 2011 in relation to claims of GST paid on disbursements claimed in bills of costs the subject of Orders made on 11 August 2010 and 18 August 2010. His Counsel submitted that this affidavit was made in error and is not now relied upon.
Stuart Alfred Edwards swore an affidavit on 10 November 2015. He states that he is a chartered accountant and director of Wheeler Grenfell Pty. Limited. Holihan, Achilla and ACB Australia are clients of Wheeler Grenfell. Based on his review of the financial records of the clients it appears that neither Holihan nor ACB have claimed input tax credits in respect of GST for legal fees incurred in the proceedings. Achilla claimed input tax credits in respect of GST for legal fees in the amount of $9,197.19 for the period of 1 July 2007 to 30 June 2008. However, the clients later received advice that legal expenses incurred in the Amcor litigation were not trading expenses and were not tax deductible business/trading expenses. Despite this advice, Achilla made a further claim for an input tax credit of $3,213.44 in the financial year ended 30 June 2009.
Achilla has claimed a total of GST input tax credits for legal costs and disbursements in the proceedings of $12,410.63 of which $1,201.24 relate to disbursements billed in the period.[7]
[7]See exhibits to the affidavit of Stuart Alfred Edwards sworn 10 November 2015.
Based on these affidavits I conclude that none of the applicants are able to claim a GST tax input on the disbursements. The ruling of Master Wood, as he then was, in Merringtons Pty Ltd v Luxottica Retail Australia Pty Ltd[8] should be applied here. At paragraph 36 he states that:
36There is no doubt that if the party favoured by a costs order does not have the ability to claim an input tax credit, then the GST component in the disbursement should remain. For example, in an action for personal injuries, there ought to be no reduction of the amount referrable to GST from the disbursement. If however the litigation arises out of commercial dealings and the recipient is able to claim an input tax credit for the component then it ought to be deducted from the disbursement.
[8][2006] VSC 525.
Therefore in consideration of the issues arising from the reports and submissions I will allow the recovery of GST on the disbursements as paid.
General consideration of the method of calculation by Ms Young
Ms Young was engaged by Holihan to prepare reports on the various aspects of the costs claimed. Her approach to the assessment is outlined in her second report[9] as follows:
I have assessed the file as an expert and have only included items which in my opinion would be allowed by the Costs Court on a taxation on a party/party basis. If I was uncertain as to whether an item would be allowed (even though it was arguably party/party and properly claimable in a detailed bill of costs and then subject to argument at taxation), I have excluded that item.
[9]At paragraph 3.1.
As Amcor’s did not to provide an expert report in opposition to the applicant’s second and third reports, and instead cross-examined Ms Young on a number of areas of her report, the commencement point for various allowances is the applicant’s experts figures, except to the extent that any reasonable doubt is raised as to whether the allowance was ‘necessary or proper’. The onus rests with the applicant to demonstrate that the costs claimed are an appropriate allowance for the costs ordered to be paid.
The order made was for the payment of party party costs as defined in O 63.29:
On a taxation on a party and party basis all costs necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed shall be allowed.
Ex GST
With GST
Professional Costs (other)[10]
405,105.48
405,105.48
Disbursements (other)[11]
140,993.34
154,993.79
Professional Costs (experts)
34,538.11
34,538.11
Disbursements (expert)
19,708.41
21,679.25
Subtotal
600,345.34
616,316.52
Add disbursements claimed in the initial report[12]
265,139.04
291,738.50
TOTAL professional costs
865,484.38
908,055.02
Professional charges for application[13]
24,459.60
24,459.60
Disbursement for application
29,499.69
32,414.78
Assessment professional costs
22,489.62
22,489.62
Assessment disbursements
66,697.67
95,318.48
Additional costs claimed
12,000.00
12,000.00
Total of all claims
1,020,141.34
1,072,247.88
[10]At 75% of the total allowed.
[11]At 75% of the total allowed.
[12]As amended.
[13]Pages 5 and 6 of third report of J Young.
The assessment is calculated on a party party basis and on scale, therefore it will be necessary to descend to some extent into the minutia of the assessment of Ms Young to consider the allowances that are claimed and challenged by Amcor. I have focused on those areas the respondent disputed and made submissions on.
In preparing her reports Ms Young stated that she had adopted a careful and logical approach to the assessment, excluding any unrecoverable costs or solicitor client costs. For example, she approached perusal of documents,[14] including allowances for perusal of all court documents, ordinary and special letters and discovery in general, cautiously applying discounts she considered appropriate and seeking not to over claim allowances. She stated that she excluded allowances for perusal of short letters and email coversheets.
[14]Second report at page 9 paragraph 3.4
Claims for scanning of documents [15]were allowed for documents not requiring detailed reading on a per page basis. She included scanning for full pages only. She did not allow scanning of indexes, execution clauses and the like. All exhibits to affidavits were allowed at the scanning rate, however if a document was exhibited on multiple occasions (such as the Second Sale Agreement and Shareholders Agreements) no allowance for perusal or scanning was given after the first allowance.
[15]Second report at page 9 paragraph 3.5.
In addition Ms Young stated that she excluded work not covered by the costs order including the Holihan counter-claim, and discovery, and parts of witness statements relating to the counter-claim.
Professional costs of the proceeding as detailed in the second report
The total claim for professional costs of the proceeding without the 25% reduction is $540,140.74.[16] divided between items of work claimed individually totalling $292,318.90 and a lump sum amount for Instructions for Brief (‘IFB’) of $247,821.84. The IFB item is further broken down between the work calculated of $133,957.70 and then adding an 85% loading for skill, care and attention of $113,864.04.[17]
[16]Second report Annexure A1 page 18.
[17]Second report Annexure A1 page 18.
Items of work individually claimed of $292,318.90
Based on Annexure A1 some individual claims in the sum of $292,318.90 are:[18]
[18]These are my calculations and any small variation of the calculated sum is not relevant to the gross costs calculation.
(a) perusal of court and other documents at either the lump sum rate or on a folio basis - $42,381.70;
(b) scanning of documents at half the scale perusal rate per page - $3,607.10;
(c) copying at the scale rate - $140,757.40, this sum includes $109,969.20 for copying documents for counsels’ briefs as detailed in annexure A6;
(d) attendances to examine documents at an hourly rate - $3,128.00;
(e) solicitor’s attendances to instruct at the hearing - $40,654.50; and
(f) balance of items - $61,790.20.
The respondent raised the following issues and cross‑examined Ms Young in relation to them:
(a) That Ms Young relied on the letter of instructions from Holihan’s solicitors, particularly as to the page counts of allowances for perusals, scanning and copying documents discovered by the parties and any non-parties or subpoenaed documents. Ms Young stated that she did not verify the schedules supplied by the applicants’ solicitors and she did not look at time records, ‘including those time reports that were actually provided to her’. She approached the file in a broad-brush manner as required for a gross sum assessment. The respondent submitted that it is ‘inherent in such an approach that the scope for errors or over-claiming or an inadvertent inclusion of matters that should not be made is very real’;[19] No attempt was made to verify the time spent perusing and scanning documents discovered generally and particularly in the Hodgson proceeding by reference to time records that would have recorded the time spent on these perusals.
[19]Transcript 17/11/15 at page 144 lines 6-21.
(b) The claim for perusals included documents relating to issues that were not relevant to the Holihan parties. At the hearing before me the parties agreed that orders had been made for a joint trial and that of this proceeding and the Hodgson proceeding were jointly managed. The parties had exchanged all court documents, including discovery affidavits, witness statements and discovered documents. The costs claim included allowances for perusal of the discovery affidavits in the Hodgson proceeding and perusal of non-party affidavits by Roe and others. Amcor asserted that these non-party affidavits had no relevance to Holihan’s defence.
(c) That the pleadings in the Hodgson matter were not relevant to Holihan’s defence and any claim for scanning of Hodgson pleadings should be disallowed or significantly reduced.
(d) The claim for copying of the Court Books was allowed at the scale rate when, in fact, a substantial part of these were copied by a commercial copier and provided by Amcor to Holihan’s solicitor. These costs were paid as a disbursement by Holihan’s solicitor and should have been claimed as such.
(e) The clam for copying of the briefs to Counsel was made at a full scale rate. Ms Young stated that she did not make enquiries as to whether any of the copying was undertaken in house or could have been done commercially. She assumed that it was copied by the solicitors at their offices. Her view was that the applicant was entitled to apply the scale rate even if copied commercially.
(f) Where a solicitor attended to instruct the second report allowed one solicitor only to instruct for each day of the trial and on each interlocutory hearings if a file note revealed the attendance. However ,Amcor submitted that as only a few of the trial days were relevant to the Holihan claim, and as the attendance of two Counsel were claimed (and not objected to) that a solicitor’s attendance for the whole trial it was not necessary or proper except on those days where expert evidence or Holihan issues were dealt with.
(g) The assessment needed to exclude all work relating to the fourth defendant’s counterclaim from the date of filing in December 2007. Ms Young’s evidence was that she excluded the items based on her instructions and her examination of the files. She was instructed to exclude that any work relating to discovery of documents in the counterclaim and she had excluded the counterclaim work, including court documents, correspondence, discovery and subpoenas. For directions hearings she excluded any time related to the counterclaim. Any work for the witness statement of Mr Holihan that related to the counterclaim was excluded by counting the folios that related to the counterclaim. The same approach was applied to the expert report and the expert’s time and charges were reduced by 10% to reflect counterclaim work.
There can be little criticism of the cautious ‘when in doubt, leave it out’ approach to preparing the applicant’s report. However, failure to question the assumptions in the instructions particularly in relation to copying, perusals or to refer to the time recording to check assumptions as to the actual work undertaken has led to valid criticism by Amcor of some of the conclusions in the report. Enquiries about the copying undertaken would have revealed that the Court Books had been commercially copied and resulted in a considerably reduced claim for that copying. The applicants’ Counsel confirmed that an invoice of this copying had been given to Ms Young and overlooked in the reports preparation.
The report includes detailed analysis of all the interlocutory applications in the proceeding to identify the costs entitlement of the applicant and whether these costs had already been recovered. No work in relation to amended pleadings was included in the assessment pursuant to Rule 63.17. I accept this analysis unless it was challenged by Amcor.
From 11 December 2011 the Court had ordered that the trial of both proceedings be conducted jointly, including an exchange of pleadings and discovery. In relation to the Hodgson proceeding,[20] the report made allowances for perusal or scanning of Court documents, including the discovery affidavits. The second report states that the file did not disclose an excessive number of attendances on or correspondence with Hodgson’s solicitors and correspondence and attendances on Hodgson’s solicitors was included in the assessment if judged to be necessary or proper for the conduct of the joint proceedings.
[20]Second report at page 21 part 4.4.
Ms Young generally were allowed attendances if it was a file note recording the attendance. Where the file note did not include any time notation the minimum scale allowance of 15 minutes was made. For the purpose of preparing the second report time records were not examined to supplement the file notes. If Counsel’s fee slip recorded a conference with an instructing solicitor that recorded time spent then this was utilised to allow time spent if the file note did not record time. Where there was no other support for the time of the conference then a minimum half hour attendance was allowed as provided for by the scale. One solicitor, only, was allowed to instruct Counsel at hearings and conferences regardless of the number that attended.
The second report states that every attempt was made to exclude the costs of the counterclaim. The report applied the principles of Smith v Madden[21] to allow costs of the claim as if there was no counterclaim where appropriate. If an item of work was mixed in nature and capable of division, a lesser sum was applied accordingly. The report concluded that most of the work in relation to the counterclaim was undertaken after the judgment of 20 March 2012 and was therefore ‘stand-alone’ in nature. If there was any doubt as to whether the work was recoverable it was left out.
[21](1946) 73 CLR 129.
The applicant confirmed on the second day of the hearing that the claim for copying of the Court Books in the sum of $42,466.20 should be reduced to the actual amount paid for copying, being $4,956.80 excluding GST, and $5,452.48 including GST. Therefore the sum of $42,466.20 will be deducted from the costs claimed and $5,452.48 added to the disbursements.
After excluding this sum, the balance of the costs of copying the briefs for Counsel is $67,503.00. The contents of the briefs sent to counsel from 2007 to 2012 are listed in annexure A6 of the second report. This annexure includes all witness statements, Holihan’s discovered documents and the trial briefs. Amcor submitted that, on a party party basis, if a document was copied once and delivered to Counsel no additional copy of that document should be allowed if a later copy was made and included in the trial brief. Ms Young’s evidence was that the trial briefs were prepared afresh and delivered to Counsel in a timely manner before the trial commenced. Any previously copied documents were not returned from Counsel to be reutilised.
One volume of the brief included affidavits sworn by T Reid, which Amcor submitted, related to earlier Federal Court proceedings brought by Amcor and those documents were of no relevance in the Holihan proceeding. Amcor submitted that it was not necessary or proper to provide copies of these documents to Counsel. Further documents listed in A6, Amcor submitted, that did not relate to Holihan’s defence should not be allowed. These documents included witness statements and discovery by Amcor relating solely to its defence of the Hodgson proceeding. The general practice, on a party party taxation is that one claim only is allowed on taxation of any document provided to Counsel for the brief. I conclude that, on a party party basis, the provision to counsel of all court documents and witness statements, as well as large parts of the discovery in Hodgson’s proceeding, was not necessary or proper. In addition there should be a reduction to reflect that some documents were copies and delivered to counsel at least twice and as the basis of taxation is to allow costs on a necessary or proper basis there should be a further reduction to copying claimed to reflect this. As I am reluctant to count pages or the like I propose a reduction of 10% to the sum of $67,503.00 to reflect any unnecessary copying of material such as the affidavits of Reid, the discovery of Roe and those witness statements in the Hodgson proceedings, as well as any multiple copying of other documents, that are not relevant. This reduces the claim for copying of Counsel’s briefs to from $109,960.20 to $60,752.70.
The balance of the copying claimed in the second report is $30,788.20 for copying documents generally. This sum will not be reduced.
After deducting the amount claimed for copying from the figure of $292,318.90 for the costs of the proceedings the remaining sum is $182,349.70. Amcor submitted that some of the allowances for perusals and scanning were for some court and other documents that were not relevant to the Holihan proceeding and there should be a reduction of part of this claim. However, as there was an order requiring the parties to exchange all pleadings, allowing a brief scan of these documents, as they were delivered, is reasonable. However, any claim at the higher perusal rate would not be justified. The applicant’s solicitor was required to scan those documents, for example the pleadings in the Hodgson action for unpaid work entitlements and for unfair dismissal. I accept that in the second report the claims for scanning of these documents is at the lowest possible rates and the claim made is a conservative one.
In paragraph 28 I have detailed some of the larger items claimed. In my view making any further reduction would be unduly arbitrary and not in accordance with the principles outlined in paragraph 5. Therefore I would reduce the claim of $292,318.90 for the allowance for the costs of the proceeding, excluding the instructions for brief item, by $49,216.50 to allow $243,102.40.
Instructions for Brief item (‘IFB’) of $247,821.84
The IFB is calculated on a base figure of $133,957.70. Schedule A1 summarises the work undertaken by the solicitors to prepare the Holihan defence of the proceeding. Some of the larger amounts included in this claim are:
(a) Perusal of 1,869 folios Holihan’s discovery claimed at $4.10 per folio being $7,662.90;
(b) Scanning of 5,079 pages Holihan’s discovery at $2.05 per page being $10,405.80;
(c) Perusal of 2,505 folios of the Amcor discovery for the Holihan’s matter claimed at $4.40 per folio being $11,022.00;
(d) Scanning of 22,038 pages of the Amcor discovery for the Hodgson matter at $1.75 per page being $38,566.50;
(e) Scanning of 6,933 pages of the Amcor discovery for the Barnes and Holihan proceeding at $2.20 per page being $15,252.60;
(f) Scanning of 1,799 pages of Roe subpoenaed documents at $2.50 per page being $4,497.50;
(g) Scanning of 1,112 pages of Deloitte (Roe) subpoenaed documents at $2.50 per page being $2,780.00;
(h) Printing (copying) 6,053 pages Holihan’s discovery held electronically at $1.80 per page being $10,895.40; and
(i) Printing (copying) 2,385 pages Amcor’s discovery held electronically at $2.00 per page being $4,770.00.
Amcor submitted that the claims for perusal and scanning totalled $90,187.30 of the total base figure of $133,957.70. In allowing that figure Ms Young should have checked the time spent by referring to the solicitor’s time records to ascertain how much time was actually spent perusing and scanning the documents in the Hodgson proceeding or documents discovered by Barnes or produced by third parties. This would have shown if the scale rates allowed were reasonable in the circumstances. In reply Holihan’s counsel submitted that ‘what was assessed by Ms Young was a subset of the Amcor discovery as determined by Mr Holihan as being relevant only to those claims made by Amcor’.[22] This appears to be confirmed by Annexures A2-6 that list the discovery held by Holihan’s solicitors, including the Amcor discovery. The Amcor discovery held does not list consecutive numbers.
[22]Transcript p128 at line 14-17.
The report makes allowance in the IFB claim for attendances on and correspondence with Hodgson’s solicitors that were said to be evidence gathering in nature in the Hodgson action.[23]
[23]Second report at page 21, part 4.4.
Ms Young was instructed that Mr Holihan had inspected Amcor’s discovery[24] personally in January 2010 and had selected those documents he regarded as relevant to his defence of the claim. Ms Young was also provided with a list of the plaintiff’s discovery (held electronically, in hard copy or in both formats) with page counts recorded. She excluded perusal of the documents attached to the plaintiff’s witness statements, which was claimed in full separately and calculated the balance based on perusal and scanning rates.
[24]Second report at pages 24 and 25, part 4.7.
A similar approach was adopted in relation to the first defendant’s discovery[25] and allowance for scanning the first defendant’s folder of discovered documents included in the IFB claim.
[25]Second report at pages 21and 22, part 4.5.
A list of Holihan’s’ discovery[26] prepared by the applicant’s solicitors including the number of pages in each document and whether the document was held electronically or in hard copy or in both formats was provided to Ms Young. She was instructed these documents were reviewed many times and she concluded that it was necessary for the solicitor to peruse all the documents included in the applicant’s witness statement. She allowed for perusing these documents on a folio basis as provided for in the scale. She allowed all other discovered documents at a scanning rate per page. Ms Young stated that she counted the number of pages of documents, based on the solicitor’s lists, and concluded that it was ‘proper to allow the scanning of the discovered documents claimed’. She allowed scanning of 5,079 pages at a rate of $2.05 per page, being 50% of the perusal rate.[27]
[26]Second report at pages 22and 24, part 4.6.
[27]The perusal rate is allowed on a per folio basis therefore it can be concluded that an allowance of half that rate per page is a reasonable reduction for scanning.
For perusal of documents attached to all the witness statements and not claimed in the IFB the second report did not allow duplicate claims for documents exhibited more than once and excluded any documents relating to the counterclaim.
Whether reduction to the base figure for IFB should be made requires an acceptance that the solicitors did peruse or scan all of the documents held. The allowances for perusals of Holihan’s documents including those referred to in his witness statement is $18,684.90. Scanning of the remaining discovery made by Holihan is allowed at $10,405.80 Scanning of discovery made by Amcor in the Hodgson proceeding is allowed at $38,566.50. Scanning of discovery made by Amcor in this proceeding is allowed at $15,252.60. All these items make up $82,909.80 of the base figure. An additional $7.277.50 is claimed for scanning documents provided for or on behalf of David Roe.
The copying of all the parties discovered documents, including Holihan and Amcor, in this proceeding is claimed at $15,665.40 in IFB.
The claims for other work including attendances, letters and advices to Mr Holihan is allowed in the base figure at $30,885.00.
The respondent submitted that as Ms Young did not verify that time was spent perusing or scanning the documents by referring to time sheets, it was possible that the solicitor did not scan the Amcor discovery in the Hodgson matter in part or at all. If this was the case allowing for this perusing or scanning together with the added loading could reasonably result in an allowance for IFB that was too high.
The applicant’s counsel submitted that in Kuek v Devflan Pty Ltd[28] Justice Beach had considered whether the allowance of the scale rate for perusals should be made without additional material to verify the claim. He approved an unreported ruling of Master Wood (as he then was) made 8 February 2008 in that proceeding. Master Wood had ruled that the scale rate for perusals (and scanning[29]) should be applied and that it is not necessary to verify if the claimed work was undertaken by reviewing time records or by other means. In the second report Ms Young has made significant discounts to the rates of charge for perusals and scanning that were applied to the substantial allowance made to calculate a figure on the costs basis ordered. Ms Young considered that as the scale could be applied there was no need to enquire as to the actual work undertaken.
[28][2009] VSC 91 at para 21 and 22.
[29]There was no rate for scanning in the ‘old scale of costs’, however the practice had been developed of allowing scanning at a reduced rate. This was adopted by Ms Young in her assessment.
However, I consider that the failure to enquire about the actual work undertaken, and the acceptance of the instructions in respect of discovery generally, creates some apprehension that some of the work allowed for may been over-claimed. Whether the work was undertaken could have been easily verified by referring to the available time records. A blanket application of scale allowances for claimed work is no longer reasonable as the Civil Procedure Act2010 requires costs to be reasonable and proportionate[30] and that all claims must be made on the factual and legal material available at the time of making the claim and with a proper basis.[31]
[30]Section 24.
[31]Section 18(d).
In cross-examination Ms Young conceded that Holihan had little interest in the Hodgson proceeding despite the order that discovery in that proceeding was also discovery in the Holihan proceeding. I consider an allowance of $38,566.50 for scanning the Amcor discovery in Hodgson to be unwarranted without verification from the time sheets and required Ms Young to make further enquiries. On a party party basis I consider that this sum should be reduced by half as it is likely that had there been a taxation of costs a reduction would be made as the claim could be found to be unjustified bearing in mind the substantial loading allowed.
It is possible that the documents included in Counsel’s brief and other discovered documents that were held electronically and printed out could have been printed commercially. IFB includes claims for printing Holihan documents of $10,895 and Amcor’s Hodgson documents of $4,770. In my opinion, where a substantial number of documents are required to be printed, the solicitor is obliged to consider if they could be copied commercially and seek out the lowest cost of copying available. Commercial copiers are able to print documents more cheaply while maintaining confidentially. Any large scale copying is an unusual expense and the solicitor should seek authorisation from the client prior to incurring that expense.[32] Even prior to the commencement of the Civil Procedure Act 2010 the solicitor was obliged to ensure that the costs incurred were reasonable and proportionate.
[32]Re Blyth and Fanshawe (1882)10 QBD 207 at 210.
The loading allowed for IFB of 85% of the sum of allowances claimed in IFB to reflect the care, skill and attention of the solicitors in dealing with the complexity of the claim against the applicants. However, some amounts are claimed for work done in considering the proceedings against Hodgson and Barnes that involved Holihan minimally.
In addition it is clear that Counsel had a heavy and continuous involvement in the matter from its commencement and the assessment also includes claims for Counsel and instructing solicitor for attending at every hearing day of the trial. The loading allowed needs to reflect the involvement of Counsel in preparing the matter for trial and the issues referred to above. As a result of my conclusions I propose to adopt a base figure of $110,000 and apply a loading of 70% allowing a figure of $187,000 for the IFB claim for the solicitors professional costs.
The resulting allowance for the solicitors conduct of the matter on a party party basis as allowed in paragraphs 38 and 55 at $243,102.40 and $187,000.00, being $430,102.40.
Counsel fees
The total fees of Counsel as allowed by Ms Young for the proceeding was $421,253.01 exclusive of GST and $463,378.31 with GST added. The first report of the applicants deals with the claim for the trial fees for the non‑expert hearing days. The claim excluding the 25% reduction, is $247,754. Ms Paver’s report assesses this work at $220,760.
The Amcor parties accepted that the rates charged by Senior Counsel for 2007 and by Junior Counsel (Mr Maiden) for 2008, 2009 and 2010 were appropriate. Thereafter they submitted that lower rates should be applied. Ms McCudden submitted that ‘there were many issues in the trial not relevant to the Holihan parties, however it was conceded that the orders give the Holihan parties the costs of the entire 32 day trial.
During submissions the applicants sought to argue that the rates allowed to Amcor’s Counsel in earlier taxations of interlocutory orders in both proceedings should be used as a guide for the rates allowed for the allowances made o this assessment. Generally, the Court does not regard the rates allowed to one party as an indicator of the rates that will be allowed to another party. In this matter the rates allowed for Amcor’s counsel were for specific applications and were not the rates generally for the proceeding. The fees one party is willing and able to pay to Counsel are not considered by the Court as factors such as the seniority and specialisation of Counsel and the willingness of a party to engage a particular Counsel, despite that Counsel’s rate of charge, is not relevant when the Court is assessing another party’s cost of retaining Counsel on a party party taxation.
The rates allowed for Counsel by Ms Young and Amcor’s submitted were reasonable pursuant to the order for party party costs are as follows:[33]
[33]The table includes allowances at the daily rate. Hourly rates are assumed to be at one-tenth of this rate. The table does not include the charges of Mr Bell of $1,995.00 for work undertaken in drawing some of the witness statement of Mr Holihan. I accept that this amount should be allowed in addition to the charges of Mr Riordan SC and Mr Maiden.
Year
Ms Young allowance
Amcor Allowances
GST exclusive
GST included
GST exclusive
GST included
2007 Riordan SC *
5000
5500
5000
5500
2008
Maiden*
2500
2750
2500
2750
2009
Riordan SC
Maiden [34]*
6000
2750
6600
3025
5500
2750
6050
3025
2010
Riordan SC
Maiden*
6545
3000
7200
3300
6000
3000
6600
3300
2011
Riordan SC
Maiden
6818
3400
7500
3740
6300
3200
6930
3520
2012
Riordan SC
Maiden
7273
3600
8000
3960
6600
3400
7260
3740
[34]*These rates were agreed to be Amcor.
Ms Young allowed the rates that were charged by Mr Riordan SC for every year without discount. Junior Counsel’s rates for each of 2009, 2010 and 2011 were discounted from the charged rates.
Both experts accepted that it was reasonable to allow the charges of two counsel for the proceeding generally and for the entire 32 day trial. However, Amcor submitted that many issues in the Hodgson proceeding were not being relevant to the Holihan proceeding. Ms Paver proposed some reductions to the rates of charge for the trial to reflect, she said, that both counsel were engaged on many days when not required to respond to the evidence before the Court. The respondent submitted that there should also be a small reduction in hours allowed for counsel’s fees for drawing and settling the witness statement of Mr Holihan. The respondent accepted that three counsel were properly engaged for a short period and that there was no apparent cross‑over in the work undertaken by junior counsel. They did, seek a five hour reduction in Mr Maiden’s fees due to being required to undertake additional work to complete settling the witness statement drawn by Mr Bell as this additional work was solicitor client in nature due to the change of counsel.
The respondent submitted that junior counsel had claimed pre-trial preparation of 64 hours, in addition to claims for drawing and settling Holihan’s witness statement, interrogatories, conferences and other attendances. Further claims are made for preparation during the trial. Amcor submitted that, as the actual claim in relation to Holihan commenced on the second last day of the 32 day trial[35] and Holihan’s evidence was one and a quarter days in length, any allowance for preparation during the trial was not necessary or proper. The parties agreed that it was both necessary and proper for Counsels’ to draw the 170 page draft judgment. However the respondent submitted that as the Holihan draft judgment was smaller and in relation to less complex issues than the drafts prepared by Amcor and Hodgson (which were 400 and 330 pages respectively) that allowing 55 hours for Junior Counsel and 10 hours for senior counsel is excessive. Amcor proposed reductions of 10 hours for Junior Counsel and three hours for Senior Counsel (being an allowances of five and a half days for Junior Counsel and one day for Senior Counsel) should be made. The respondent did not seek any reduction to the claim for counsel’s fees for the supplementary judgments. No reduction was sought for the fees of the solicitors for this work also.
[35]This excludes the oral submissions days.
The applicant submitted that Ms Paver was less experienced than Ms Young and that the report of Ms Young should be preferred in all aspects if the reports differed. However, I am of the opinion that there is no ground to find that Ms Young’s first report should be preferred to that of Ms Paver. Ms Paver is properly qualified to give expert opinion in relation to costing matters. Her experience, as outlined in her report, is not inconsiderable and the opinions she expressed are valid.
Prior to 1 April 2013, the Supreme Court Scale of Costs did not include any allowances for Counsel’s fees. The amounts allowed on taxation were based on the rates marked by counsel, the known rates counsel charged at the time and the experience of the taxing officer. From 1 April 2013 the scale allowance for counsel’s fees were, on a standard (reasonable) basis, $7,500 excluding GST for Senior Counsel ($8,250 including GST), and $5,000 excluding GST for junior counsel ($5,500 including GST). The Court has at present fixed that rates of Junior counsel’s rate at two‑thirds of the rate for senior counsel. The amendments to the Rule 63 and scale both provide that the Cost Court can only allow counsel fees up to the maximum of the scale rate unless there is a specific order of the Court to allow a higher rates. The maximum fees of counsel from 1 April 2013 are an indication that the Supreme Court considers these to be reasonable rates to be allowed on the more generous Standard basis then adopted. The costs ordered in this matter are on a party party basis.
I consider that on a party party basis based on the reports of both experts, the evidence of Ms Young and the submissions of the parties, the appropriate allowances to be made on a gross sum basis are as follows:
Year
Allowance
GST exclusive
GST inclusive
2007
Riordan SC
5000
5500
2008
Maiden
2500
2750
2009
Riordan SC
Maiden
6000
2750
6600
3025
2010
Riordan SC
Maiden
6250
3000
6875
3300
2011
Riordan SC
Maiden
6500
3250
7150
3575
2012
Riordan SC
Maiden
7000
3500
7700
3850
This allows for a gradual increase in counsel’s fees for the years of the proceeding on the necessary and proper basis. I accept any reductions made by Ms Young to the days and hours for the hearing fees, the fees for reading, preparation, drawing and settling of documents and conferences based on her ‘when in doubt leave it out’ approach to the costs assessment. Applying the reduced rates for 2010, 2011 and 2012 the resulting allowances on a party party basis, excluding GST are:
· $144,625.00 for senior counsel for 22.25 hearing days as detailed on pages 3 and 4 of the first Young report as amended;
· $91,812.50 for junior counsel for 28.25 hearing days as detailed on pages 4 and 5 of the first Young report as amended;
· $83,662.50 for senior counsel as detailed in Appendix A7 of the second Young report;
· $81,795.00 for Mr Maiden of junior counsel as detailed in Appendix A8 of the second Young report; and
· $1,995 for Mr Bell of junior counsel as detailed in Appendix A9 of the second Young report.
These allowances total $403,890.00 for the fees to counsel for the proceeding.
Other disbursements allowed in the report are $13,797.29, to which as to be added the additional copying fee of $4,956.80, being $18,754.09.
Summary Add GST Professional costs $430,102.40. $430,102.40. Counsel’s fees $403,890.00 $444,279.00 Other disbursements $18,754.09 $20,629.50 Total $852,746.49 $895,010.90 With 25% reduction $639,559.87 $671,258.18 Costs of Claim – Experts
The reports of Ms Young allowed the costs of retaining the experts for the trial in the sum of $54,246.52, being professional costs of $34,538.11 divided between items of $13,620.90 and Instructions for brief of $20,917.21 and Counsel’s fees of $19,708.41, exclusive of GST. Ferrier Hodgson also invoiced $87,495.55, exclusive of GST. Of this sum Ms Young allowed $54,479.37 for the initial report and $26,843.68 for preparing and giving evidence, a total of $79,323.05, exclusive of GST.
Therefore the total claim for the costs relating to the experts report and evidence is $133,569.57. This claim is not subject to an reduction.
On cross examination Ms Young conceded that she was not instructed to consider any Ferrier Hodgson invoices sent to Hodgson’s lawyers to consider if there was any duplicated claims or any charges that were not payable by the Holihan parties. The expert report was utilised by the other parties in this proceeding and they made no contribution to its costs. Ms Young considered that the time charged was reasonable to prepare the report for this matter. She attempted to remove any charges that appeared to relate to Hodgson from the invoice and she stated that she did not allow any claims that could be regarded as solicitor client in nature. The charges were discounted to exclude any counter-claim related costs by applying a 10 % reduction to the discounted charges.
The evidence was that no enquiry was made as to whether Mills Oakley had copies and given the other parties copies of the reports, but it was assumed that this would have been done. Amcor submitted that the invoice clearly includes charges for 5 copies of the report.
The professional costs claimed are $34,538.11, again divided between items of $13,620.90 and the IFB of $20,917.21.
The respondent submitted that a reduction of the copying claimed should be made as Ferrier Hodgson’s accounts charge for the provision of 5 copies of their report. The applicants submitted that copies of the reports were provided by the applicants’ solicitors to the all parties in both proceedings, including Amcor, Hodgson, Barnes, Sangster and the Mihelic parties. Two copies were also provided to the Court and to the applicants’ own Counsel. I calculate that this is 9 copies of the report to accommodate this. Therefore, an additional 5 copies are claimable in the items allowances and without any loading for care and skill being added. Amcor submitted that a reduction of 15% to the total claim of $34,538.11 should be made to reflect the apparent letters and discussions between the solicitors for Holihan, Hodgson and Mihelic. In the narration in the Ferrier Hodgson accounts there are a number of references to letters and attendances on these solicitors. These attendances and letters are also identified in the Paver report at paragraph 20 c. and Annexure 6. Ms Young’s report at page 36 paragraph 1.3 states that she did not include any attendance and letters where Holihan’s solicitors obtained advice from Hodgson or Barnes solicitors as in her opinion this was solicitor client in nature. If this is accepted I am of the opinion that the reduction sought by Amcor is too great, however in my view a small additional reduction is warranted to allow for the issue of copying and the claim for copies in the IFB loading. It is reasonable to allow, based on the material available and the issues that were canvassed in the hearing, a reduction of 10% of the total claim, that is $3,453.81, resulting in a figure of $31,084.30 for the solicitors costs of the expert report.
Counsel’s fees claimed for the expert report are $19,708.41. I have applied the same rates as allowed above. These fees are included in annexures B2 and B3 to the second Young report. Ms McCudden submitted that she would accept the allowances of hours sought, but sought to have these reduced as detailed by the Paver report. Ms Young had accepted the Paver reductions and filed an amended report on this aspect of the claim. The 2011 rates allowed are as follows:
2011
Riordan SC
Maiden
GST exclusive
6500
3250
GST inclusive
7150
3575
The reduction in rates would allow Senior Counsel one and a half days at $6,500 being $9,750.00 and two hours at $650 being $1,300, a total of $11,050.00, a reduction of $540.91 from the sum claimed.
The reduction in rates would allow Junior Counsel one and a half days at $3,250 being $4,875.00 and 8.88 hours at $325 being $2,886, a total of $7,761, a reduction of $356.50. from the sum claimed.
The total allowance for Counsel is therefore $18,811.00.
Ms Young’s allowances for Ferrier Hodgson fees for the expert report, a joint report prepared with Mr Swain on behalf of Amcor and for Mr Meredith giving evidence are total of $79,323.05 exclusive of GST. This figure is made up of $52,479.37 for the initial report and $26,843.68 for preparing and giving evidence. Ms Paver’s report challenges a number of aspects of these fees including the possibility of duplicated entries between the invoices to Hodgson and Holihan, excessive time being spent by Ms Oliver in completion of the two reports for Holihan and Hodgson between 27 April 2011 and 2 May 2011, charges made for communications with solicitors and parties other than Holihan’s solicitor who were not providing instructions. She also considered some of the charges may have been unreasonably incurred or were of an unreasonable amount. The Paver report suggests a reduction of 20% to the initial invoice to $42,245.28 and 5% reduction to the subsequent invoice to reduce it to $25,733.45, a total allowance of $67,978.73 for the invoices.
A perusal of the narration in the invoices appears to justify the concerns of Ms Paver of communications with solicitors other than Holihan’s solicitor. The Young report addresses this issue by applying a reduction of $462.50 for identified attendances on AJ Macken. However, in the first invoice I can identify $1,919.00 of entries that relate to attendances on either AJ Macken[36] or D Macken and the other parties solicitors. This is an additional sum of $1,456.50. Ms Young has addressed the counter-claim costs by reducing the invoice dated 3 May 2011 by 10%.[37] This is a reasonable reduction and with the reduction I have identified the invoice will be allowed at $51,022.87.
[36]Also referred to as D. Maclean or Macleen
[37]Page 6 paragraph 8.2 of the second report.
The second invoice includes preparation of a joint report by Amcor’s expert and Mr Meredith as well as Mr Meredith’s appearance to give evidence. The invoice totals $28,671.25, but was reduced by Ms Young by 5% to allow for counter-claim costs and a further $394.00 to reflect the scale rate for experts giving evidence. This rate is less than Mr Meredith’s charge-out rate. The assessed sum is $26,843.68. The Paver report proposed a reduction to this invoice to $25,733.45 after adjusting the invoice for the reasons mentioned in paragraph 80 and 81 and includes a further reduction of 5% in additon. In my view no further reduction from the Young figure is warranted accepting her cautious approach to assessing party party costs in the report and I would allow the total sum of $77,866.55 for the invoices of Ferrier Hodgson.
I therefore conclude that the allowances for the experts fees to be allowed are:
Summary
GST exclusive
GST inclusive
Allowances for solicitors costs
$31,084.30
$31,084.30
Allowances for Counsel
$18,811.00
$20,692.10
Allowances for Ferrier Hodgson
$77,866.55
$85,653.20
Total
$127,761.85
$137,429.60
Costs of costs hearing
Prior to assessing the costs claimed for the gross costs exercise, the question of the basis on which these costs are recoverable was argued. The costs order allowed the applicants 75% of their costs of defending the proceeding and pay 100% of the costs of obtaining the expert evidence.
Associate Justice Wood in Giller v Procepts,[38] reviewing an order of a costs registrar, considered that the order of the Court of Appeal in that matter had ordered cost to be paid at 75% of scale. His Honour upheld the ruling that the applicant’s costs of the taxation should also be allowed at the 75% rate. He relied on Rule 63.36 which states that:
[38]S CI 2010 4742, 25 October 2012 at [40] – [51] unreported
63.36 Costs of taxation
(1) Costs to be taxed under these Rules shall include the costs of the taxation.
(2)Costs to be taxed under a judgment or order shall, unless the judgment or order otherwise provides, include the costs of the taxation.
(3) After service of a summons under Rule 63.38 for the taxation of costs—
(a)the party entitled to costs and the party liable for them may serve on one another an offer of compromise in respect of the amount of the costs to be taxed; and
(b)Order 26, with any necessary modification, shall apply as if in Rule 26.03(3) and (4) "seven days" were substituted for "14 days" and as if the order of the Costs Court on the taxation were a verdict or judgment at trial.
(4)Subject to this Rule and to any order of the Court, the Costs Court may make orders for the costs of a taxation.
(5) Paragraphs (1) to (4) apply subject to any Act and to Rule 63.85.
His Honour stated at paragraphs 42 - 49 of his decision said:
42. In my view, the starting point arising from the order of the Court of Appeal is that the Applicant is entitled to 75% costs of the taxation, unless there is conduct in the taxation that would alter that position.
43. The wording of sub-paragraph (2) of Rule 63.36 means that any costs must be taxed on the same basis as the order in relation to the costs of the proceeding. Therefore, a 25% reduction in costs as a result of the conduct of the substantive litigation automatically flows through to the costs of the taxation when costs are sought to be quantified and recovered. The bill of costs that was prepared and filed included the 25% reduction on all items (including the costs of the taxation), consistent with the provisions in Rule 63.36(2). It was only in oral argument before the Costs Registrar that the Applicant sought to resile from that position and sought leave to amend the bill of costs.
44. Bearing in mind that the Costs Court taxes costs arising from the orders of Victorian Civil and Administrative Tribunal, Magistrates’, County and Supreme Court proceedings, there is another interpretation of sub-paragraph (2) that is open, and that is that the costs of the taxation arising from say, a Magistrates’ Court matter, ought to be assessed on Magistrates’ Court scale. In other words, just because the taxation occurs in the Costs Court (a division of the Supreme Court) this does not justify the costs of taxation being on Supreme Court scale. It would be inconsistent with the object of establishing the Costs Court if this meant that irrespective of which Court or Tribunal the entitlement originated from, Supreme Court costs were justified. Sub-paragraph (2) of Rule 63.36 can also be interpreted in a manner consistent with that object.
45. However, sub-paragraph (4) of Rule 63.36 is consistent with preserving, to a limited extent, a discretion in the Costs Court to make orders for the costs of the taxation “subject to this rule and to any order of the court”. In other words, making an order that alters the effect of sub-rule (2) so that, for example the 25% discount does not flow through to the taxation costs of the Applicant.
46. The phrase “subject to this rule “ is a reference to sub-paragraph (3), which incorporates by reference the Offer of Compromise provisions and therefore, provides a discretion to make an order for costs in the taxation that potentially alters the burden of costs in the judgment or any percentage reduction in entitlement to costs arising from the judgment. For example, if the party who had the obligation to pay costs made an effective Offer of Compromise so that the party with the entitlement to costs failed to obtain a taxation figure more favourable than the offer, then the paying party would be entitled to the costs of the taxation despite the fact that the party seeking taxation had an entitlement to 75% costs of the trial and by operation of the sub-paragraph (2), 75% of the costs of the taxation.
47. The inclusion of sub rule (3) in Rule 63.36 incorporates the Offer of Compromise rule provisions into the taxation of costs. The impact of this inclusion therefore, is to treat the taxation of costs as a separate proceeding in the event that a party successfully seeks to utilise the provisions. The incorporation of Rule 26 into the taxation process has this effect. The operation of Rule 26, if utilised by parties, can entirely shift the costs burden in relation to the costs of the taxation and the basis under which they are to be quantified. This clearly must be intended to take precedence over an order giving a party 75% of costs of the proceeding for unrelated conduct and have this flow through to the taxation. Commentary in Quick on Costs (Volume 2 at [5.5910]) supports this view where it states that “Order 26 (Vic) then applies to determine the costs of the taxation as if the Taxing Master’s order on the taxation were a verdict or judgment at trial : O 63.36(Vic)”.
48. If the intention of the Court of Appeal was to restrict the recovery of costs of the taxation to 75% irrespective of any conduct in the taxation, or utilisation of Offers of Compromise, and fetter any discretion in relation to costs of proceedings in the Costs Court, then clear language in the order would be required.
49. Here, there was no Offer of Compromise and so the Costs Registrar was entitled to make a ruling that the 75% entitlement flowed through to the costs of the taxation consistent with the wording in Rule 63.36(2).”
The applicant submitted that the costs of the gross costs application and assessment should be allowed at 100% and not reduced to 75% of the allowances made are calculated on two different basis. The order was for payment of 100% of the expert’s costs and 75% of the costs of the proceeding, both calculated on a party party basis. As the gross costs application and assessment is for both costs allowances, the applicant argued that any reduction would fail to give a full allowance for the part of the costs that was for the experts costs. The applicant submitted that the Holihan parties had been entirely successful in defending the claim made against them and that the reduction made by Justice Vickery was based on his perception of the evidence given by Mr Holihan only. Giller’s case was able to be distinguished from this case as it had been held that the application of the reduced costs basis was the starting point only. The 75 % allowance should not flow through to these costs and the Court should exercise its discretion to allow these costs at the full rate. The applicant conduct of the costs application was undertaken without significant delay. Ms Young made substantial and appropriate concessions both in her report and her evidence. Further any delay was due to the respondent’s conduct of the gross costs application and assessment. Any delays in the costs application and assessment arose from the conduct of Amcor in failing to comply with timetables and failing to utilise an expert to contradict the second Young report.
In response Amcor submitted that Giller should be applied and that the order reducing the costs of the proceeding should flow to the gross costs application and assessment. Amcor submitted that its actions in not providing expert’s report answering the second and third reports was entirely appropriate and resulted in savings of time in the gross costs assessment hearing. Any delay in listing the hearing was due to the applicants’ experts being unavailable to attend to give evidence until November 2015.
As Associate Justice Wood stated in Giller the starting point in assessing the costs of the gross costs application and assessment is the order of the Court awarding the costs. Here the costs of the proceeding were ordered to be reduced to 75% of scale costs. The order in relation to the expert’s evidence does not alter the basic order for costs of the proceeding. The conduct of both parties has been appropriate and there is no conduct by either party that, in my view, would warrant the primary costs order for the proceeding not to apply. I am unaware if any offers of compromise were made that would affect the application of Order 63.36(2) and I see no reason not to apply Order 63.36(2) to the costs of the gross costs application and assessment.
The third Young report addresses the costs of the gross costs application and assessment. A summary handed to me at the hearing claims by the applicant includes a claim for $53,959.29 for the costs of the applications heard by Justice Vickery and Associate Justice Wood. The costs of the costs assessment are claimed at $88,697.67 up to the date of the third report, 11 August 2015, and a further fixed sum of $12,000 is claimed to reflect the costs from that date including the costs assessment hearing. This totals $154,638.96. In the initial report of Ms Young annexed to the Affidavit of Roger Alexander Jepson sworn on 17 February 2014 in support of an order for a gross costs assessment an estimated figure of $46,250 was made for the entire gross costs exercise with a time frame of 6 months to complete the gross costs review.
Clearly this assessment has proved, as in many other gross costs cases, to be inaccurate. As was the case in Sunland and other gross costs application that have come before the Court. Ms Young’s third report follows the same conservative mode of assessment basis as her other reports and utilises the ‘when in doubt, leave it out’ methodology. She states that she excluded attendances on and correspondence with the solicitors for Hodgson, Bayley and Mihelic. In addition, she details her approach to assessing Counsel’s fees, solicitors appearances, the claim for loading for care skill and attention and other matters.
Amcor submitted that while it did not quibble with the rate of charge made by Counsel, however, a claim of 22 hours for preparation for the hearing before Justice Vickery was excessive, even on a standard cost basis. The professional costs claimed by the solicitors it was submitted was excessive due to the communication between the parties and that there were a number of parties participating in the application together. Ms Young states that she has disallowed or reduced the solicitor’s attendances and correspondence on other parties. I note that the calculations allow for 61 folios of letters in 2013, 27 folios of letters in 2014, as well as 27 messages and 34 short letters in 2014 and the receiving and filing 78 letters in 2014. This high amount of correspondence is unexplained if all correspondence with all other parties is excluded. The respondent sought a reduction of 10% to the professional cost claimed. I am of the opinion that a modest reduction to the claim of $24,459.60 should be made and will allow the sum of $21,000 for the solicitor’s costs.
With Counsel’s fees a claim of $14,437.50 is made. The claim includes 7.75 hours totalling $3,037.50 for the initial work for considering the instructions to commence the gross sum application, consider the recent authorities, conference with instructing solicitor, settling affidavits and general preparation work. A further 8 hours totalling $3,200 to prepare an outline of submission. A claim of 3 hours totalling $1,200 for a conference and 5 hours preparation totalling $2,000 for the hearing before Justice Vickery. For the hearing before Associate Justice Wood 2.5 hour of preparation totalling $1,000 and a further two half day fees for the applications.
As with the other considerations of Counsel’s fees Amcor did not challenge the rate of charge of Counsel. However, they did submit that the claim of 22 hours[39] in addition to allowances for daily hearing fees is excessive even on a standard costs basis. The narration in respect of the initial 7.75 hours includes Counsel educating himself on gross costs matters, which I regard as a solicitor client costs and not recoverable, as well as settling the supporting affidavit and the summons. Any earlier research would have been applied to drawing submissions and flowed through to the 7.5 hours of a preparation marked in addition to the hearing fees. I regard this as unreasonable on a standard costs basis and apply a reduction to the fees of 3 hours or $1,200. This reduction would allow fees of Counsel at $13,237.50, exclusive of GST.
[39]I calculate this as 26.25 hours including the 3 hour conference
Ms Young’s own fees in her the first invoice claim a number of different rates. I am unable to understand the application of these rates which range from $260 per hour to $375 per hour. I will allow all the fees, being 51.50 hour at a rate of $275.00. This will result in a modest reduction of $337.50 to $14,162.50.
I note that there are additional disbursements of $562.19 which will be allowed.
In summary the costs of the costs applications before Justice Vickery and Associate Justice Wood are allowed as follows:
Summary GST exclusive GST inclusive Solicitors costs $21,000.00 $21,000.00 Counsel’s fees $13,237.50 $14,561.25 Ms Young’s fees $14,162.50 $15,578.75 Additional disbursements $562.19 $618.09 Total $48,962.19 $51,758.09 Allow at 75% $36,721.64 $38,818.57
Neither party made any substantive submissions in relation to the costs of the costs assessment and I will allow the costs as claimed, however, as stated in paragraphs 84 to 89 above I will apply the 25% reduction to the costs of the costs. The reminder of the claim for the costs of the assessment are as follows:
Summary GST exclusive GST inclusive Solicitors costs $22,489.62 $22,489.62 Counsel’s fees $1,033.05 $1,136.36 Ms Young’s fees $65,175.00 $71,692.50 Plus additional claim for hearing $12,000.00 $12,000.00 Total $100,687.67 $107,318.48 Allow at 75% $75,515.75 $80,488.86
Conclusion
The total of the allowances will be made as follows:
Summary GST exclusive GST inclusive Costs of the proceeding $639,559.87 $671,258.18 Costs of the expert $127,761.85 $137,429.60 Costs of costs application $36,721.64 $38,818.57 Costs of costs assessment $75,515.75 $80,488.86 Total $879,559.11 $927,995.21
The costs of the second to fourth defendants pursuant to the order of Justice Vickery made on 30 January 2014 are assessed in the sum of $927,995.21 on a gross costs basis including the costs of the proceeding, the costs of expert evidence and the costs of the gross costs application and assessment. On 7 March 2015 I ordered the payment of an interim sum of $400,000 by the respondent to the applicants. Therefore the amount payable to the applicants is the sum of $527,995.21.
Subject to hearing further from the parties the Orders I propose to make are:
1. The costs of the applicant, including the costs of the gross costs application and assessment, are allowed in the sum of $927,995.21.
2. The respondent pay the applicant the sum of $527,995.21.
3. Liberty to apply.
SCHEDULE OF PARTIES
AMCOR LIMITED (ACN 000 017 372) First Plaintiff ACN002693843 BOX PTY LTD (formerly Australian Corrugated Box Co Pty Ltd) (ACN 002 693 843) Second Plaintiff ORORA LIMITED (formerly Amcor Packaging (Australia) Pty Ltd) (ACN 004 275 165) Third Plaintiff SPECIALTY PACKAGING GROUP PTY LTD (formerly Service Containers Pty Ltd) Fourth Plaintiff - and - TREVOR MARK BARNES First Defendant CRAIG ANTHONY HOLIHAN Second Defendant ACB AUSTRALIA PTY LTD (ACN 104 489 670) Third Defendant AUSTRALIAN CORRUGATED BOX CO PTY LTD (formerly Achilla Pty Ltd) (ACN 104 489 581) Fourth Defendant IAN RUSSELL SANGSTER Fifth Defendant CHRISTOPHER IAN ROGER BAYLEY Sixth Defendant ALBERT WILLIAM MIHELIC Seventh Defendant - and - AUSTRALIAN CORRUGATED BOX CO PTY LTD (formerly Achilla Pty Ltd) (ACN 104489 581) First Plaintiff by First Counterclaim ACB AUSTRALIA PTY LTD (ACN 104 489 670) Second Plaintiff by First Counterclaim ACN002693843 BOX PTY LTD (formerly Australian Corrugated Box Co Pty Ltd) (ACN 002 693 843) First Defendant by First Counterclaim ORORA LIMITED (formerly Amcor Packaging (Australia) Pty Ltd) (ACN 004 275 165) Second Defendant by First Counterclaim
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