Apache Oil Australia Pty Ltd v Santos Offshore Pty Ltd
[2015] WASC 318 (S)
•15 JANUARY 2016
APACHE OIL AUSTRALIA PTY LTD -v- SANTOS OFFSHORE PTY LTD [2015] WASC 318 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 318 (S) | |
| Case No: | CIV:2787/2013 | ON THE PAPERS | |
| Coram: | CHANEY J | 15/01/16 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Limits on some items removed | ||
| B | |||
| PDF Version |
| Parties: | APACHE OIL AUSTRALIA PTY LTD APACHE EAST SPAR PTY LTD APACHE KERSAIL PTY LTD SANTOS OFFSHORE PTY LTD |
Catchwords: | Costs Special costs orders Complexity Importance Whether limits under costs determinations should be removed |
Legislation: | Legal Profession Act 2008 (WA), s 280(1), s 280(2), s 280(2)(c) Rules of the Supreme Court 1971 (WA), O 66 r 3 |
Case References: | Apache Oil Australia Pty Ltd v Santos Offshore Pty Ltd [2015] WASC 318 Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) Electricity Generation and Retail Corporation Trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S) Electricity Generation Corporation T/As Verve Energy v Woodside Energy Ltd [2011] WASC 268 (S2) Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 Re Graham Anstee-Brook; Ex Parte Karara Mining Ltd [2012] WASC 129 (S) |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- First Plaintiff
APACHE EAST SPAR PTY LTD
APACHE KERSAIL PTY LTD
Second Plaintiffs
AND
SANTOS OFFSHORE PTY LTD
Defendant
Catchwords:
Costs - Special costs orders - Complexity - Importance - Whether limits under costs determinations should be removed
Legislation:
Legal Profession Act 2008 (WA), s 280(1), s 280(2), s 280(2)(c)
Rules of the Supreme Court 1971 (WA), O 66 r 3
Result:
Limits on some items removed
Category: B
Representation:
Counsel:
First Plaintiff : No appearance
Second Plaintiffs : No appearance
Defendant : No appearance
Solicitors:
First Plaintiff : Clifford Chance
Second Plaintiffs : Clifford Chance
Defendant : Herbert Smith Freehills
Case(s) referred to in judgment(s):
Apache Oil Australia Pty Ltd v Santos Offshore Pty Ltd [2015] WASC 318
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S)
Electricity Generation and Retail Corporation Trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S)
Electricity Generation Corporation T/As Verve Energy v Woodside Energy Ltd [2011] WASC 268 (S2)
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95
Re Graham Anstee-Brook; Ex Parte Karara Mining Ltd [2012] WASC 129 (S)
1 CHANEY J: On 27 August 2015, I delivered reasons for my decision dismissing the plaintiffs' claim and making declarations on the defendant's counterclaim: see Apache Oil Australia Pty Ltd v Santos Offshore Pty Ltd [2015] WASC 318. Orders to give effect to those reasons were subsequently made on 26 October 2015. Those orders provided that any application for special orders in relation to costs be made by 6 November 2015, and provided for the filing of submissions and affidavits in relation to any application for special orders for costs, and for any such application to be dealt with on the papers. Pursuant to those orders, the defendant filed an application for special costs orders in the following terms:
1. the defendant's costs of the action be taxed without limitations imposed:
(a) in respect of the Legal Practitioners (Supreme Court) Contentious Business Determination 2012 (WA):
1. by the maximum allowable hourly rates fixed under Table A; and
2. by the maximum allowances for time, number and experience of fee earners or total costs under items 3(b), 3(c), 4, 8, 10(a), 10(c) and 24 of Table B; and
(b) in respect of the Legal Profession (Supreme Court) Contentious Business Determination 2014 (WA):
1. by the maximum allowable hourly rates fixed under Table A; and
2 by the maximum allowances for time, number and experience of fee earners or total costs under items 3(b), 3(c), 4, 6(a), 6(b), 8, 10(a), 10(c), 17, 20(a), 20(b), 20(c), 20(d), 20(e), 20(h) and 24 of Table B.
3 The plaintiffs did not oppose the removal of scale items as to the number of hours only in relation to scale items 4, 17, 20(a) and 20(b). The plaintiffs also submitted that, apart from the question of hourly rates, there was no cause to lift any limit in relation to items 8, 20(e) and 24 since each of those items simply specifies an hourly rate without providing any maximum number of hours. The issue in relation to those items is, therefore, simply whether the maximum hourly rate should be removed, an issue which falls to be considered in relation to the more general question of an increase of the maximum allowable hourly rates fixed under Table A.
4 In its submissions in reply, the defendant stated that it did not press the application for special costs orders with respect to scale items 6(a), 6(b) and 10(c).
5 It follows that the issues for determination are whether the limit on the maximum hourly rates fixed under Table A, and the maximum allowances under items 3(b), 3(c), 10(a), 20(c), 20(d) and 20(h) of Table B, should be removed.
6 Section 280(1) of the Legal Profession Act 2008 (WA) (LP Act) provides that any aspect of costs charged by law practices is regulated by the applicable costs determination. Section 280(2) provides:
(2) Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a) order the payment of costs above those fixed by the determination;
(b) fix higher limits of costs than those fixed in the determination;
(c) remove limits on costs fixed in the determination;
(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.
The application is made pursuant to s 280(2)(c) of the Legal Profession Act 2008 (WA) (the Act). That section provides that a court may make an order of the kind sought by the respondents if it is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter. The section requires that before making an order pursuant to its terms the court must form an opinion which has two components. First, the court must determine that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate. Second, the court must conclude that the inadequacy arises because of the 'unusual difficulty, complexity or importance of the matter' (Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [11]). Having heard the matter and being familiar with the way in which the case was conducted and the issues which were litigated, the court is in a position to form the opinions required under the section as matters of impression rather than science or mathematics: EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) [7]; Verdell Pty Ltd v F & G Nominees Pty Ltd [2002] WASC 58 (S2) [14].
8 The court in Cape Lambert Resources also observed that the customary way of establishing that the costs allowable under the applicable determination is inadequate is by establishing that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit imposed by the determination [4].
9 The reference to 'matter' in s 280(2) is a reference to the whole of the matter in respect of which legal services were provided and which comes within the scope of a legal costs determination: Electricity Generation and Retail Corporation Trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S) [5] (Martin CJ). The requirements of unusual difficulty, complexity or importance are not to be applied in respect of each and every item within an applicable costs determination, although there must be a causal connection between the unusual difficulty, complexity or importance of the matter and the inadequacy of the costs allowable under the relevant determination. The question is whether the costs allowable in respect to the work done are inadequate because of the particular characteristics of the matter: Electricity Generation and Retail Corporation Trading as Synergy [12].
10 The word 'unusual' in s 280(2) qualifies 'difficulty', not 'complexity' or 'importance': Cape Lambert Resources [5].
Was the matter unusually difficult, complex or important?
11 The concession by the plaintiffs that the limits imposed by at least some items of the costs determination should be removed is, in effect, an acknowledgement that the prerequisites to the exercise of discretion under s 280(2) have been met. That concession is appropriately made. This action was of particular importance to the parties, involving as it did a question of the removal of an operator of a very substantial commercial joint venture involving expenditures of many millions of dollars. It was undoubtedly a matter of significant importance to the parties.
12 I also consider that the matter was one involving complexity. It involved an examination of conduct spanning a four year period reflected in a trial book comprising nine lever arch files and many thousands of pages. Examination of the conduct upon which the respective parties relied involved careful consideration of voluminous documents.
13 I am satisfied that the requirements of complexity and importance are established so as to enliven the discretion under s 280(2) of the LP Act.
14 It is necessary to turn to the individual items in respect of which the limits are sought to be removed to examine whether there is a causal connection between that complexity and importance and the work done in relation to those items.
Hourly rates in Table A
15 The application for special costs orders was supported by an affidavit of Shane Michael Murphy affirmed 5 November 2015. Mr Murphy is a solicitor employed as a senior associate with the defendant's solicitors. His affidavit deposes essentially to the costs actually charged to, and incurred by, the defendant for work carried out by the defendant's solicitors and counsel, insofar as those costs fall under the items of the relevant costs determination.
16 In relation to hourly rates, Mr Murphy's affidavit identified the following rates incurred by the defendant:
2012 Determination (for costs incurred in the period to 30 June 2014)
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$3,630 per day |
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$6,380 per day |
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2014 Determination (for costs incurred in the period from 1 July 2014)
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$3,850 per day |
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$6,710 per day |
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17 Beyond identifying the charges made, nothing in Mr Murphy's affidavit addresses the basis upon which the charges were made or any further justification for charges beyond the determination limits.
18 The plaintiffs contend that the court should not order that the hourly rates to apply in assessing costs should be in excess of the hourly rates allowed in the scale merely because a party's solicitor or counsel have charged at a higher rate. The decisions in Re Graham Anstee-Brook; Ex Parte Karara Mining Ltd [2012] WASC 129 (S) at [16] and Electricity Generation Corporation T/As Verve Energy v Woodside Energy Ltd [2011] WASC 268 (S2) at [7] and [8] are cited as authority for that proposition. In the latter case, Le Miere J referred to the observation of Pullin J in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 where his Honour said:
The whole point of the existing scale is that the rates are struck by reference to what is being charged within the profession. It is true that the hourly rates can only be an average or mean of the upper rates determined in the survey, and there will be some cases where the unusual complexity or importance of the case warrants the special expertise of the practitioner involved and warrants an increase in the hourly rate. In some cases not involving unusual complexity or importance, the higher rates paid will not be recoverable. A party is always entitled to the luxury of retaining the highest paid practitioners in the conduct of their case, but they cannot always expect to recover these costs from the other party [22].
19 It is important to note Pullin J's comment that higher rates will not be recoverable 'in some cases not involving unusual complexity or importance'. Justice Le Miere concluded in Electricity Generation Corporation T/As Verve Energy that the case was one of unusual difficulty and complexity and importance and that it was 'reasonable and proper for the defendants to retain a large legal team and to retain very senior practitioners and counsel'. He concluded that it was appropriate for the limits on the hourly rates to be raised. In Re Graham Anstee-Brook, Le Miere J declined to make a special order removing the limits on the hourly rates, but his Honour declined to do so on the basis that the requirements of s 280(2) of the LP Act, that there be unusual difficulty, complexity or importance in the matter, had not been met. He said that 'a court should not order that the hourly rates to apply in assessing costs should be in excess of the hourly rates allowed in the scale merely because a party's solicitor or counsel have charged at a higher rate' [16]. After then noting the basis upon which the items in the determination are established, his Honour continued:
In cases not involving unusual difficulty or complexity or importance, those rates are sufficient for assessing party and party costs [16].
20 The approach taken by Le Miere J in Electricity Generation Corporation T/As Verve Energy was also taken by Martin CJ in Electricity Generation and Retail Corporation Trading As Synergy where, having found that the prerequisites to the exercise of discretion under s 280 were met, his Honour removed the limitations on the maximum allowable hourly rates. At [18] Martin CJ recited the evidence before him as to hourly rates, which would appear to have been no more extensive than a statement as to the amount actually charged by the practitioners concerned.
21 The proposition advanced by the plaintiffs, that removing the limit on hourly rates should not be permitted simply by reason that charges have been made in excess of the maximum, is clearly applicable in a case not involving unusual difficulty, complexity or importance. It is, however, still a relevant consideration where one or more of those threshold factors are present.
22 Having regard to the complexity and importance of this matter, I consider that it was reasonable for the defendant to engage counsel and solicitors at a rate in excess of the maxima provided by Table A of the relevant determinations, and the limitations on those rates should be removed.
Scale items 3(b) and 3(c) (defence and counterclaim respectively)
23 The relevant scale items for each of the defence and counterclaim provide for a maximum of 10 hours work at the maximum hourly rate provided for a senior practitioner. Mr Murphy deposed to the fact that in the period covered by the 2012 Determination, the actual charges incurred by the defendant involved 138.6 hours work for a total amount of $71,521.56. After the 2014 Determination came into effect, a further 33.2 hours work was done giving rise to charges of $21,232.27. Mr Murphy's affidavit reveals that, during the course of the action, the defendant's solicitors filed and served a defence and counterclaim on 31 January 2014, an amended defence and counterclaim on 24 December 2014, a re-amended defence and counterclaim on 6 February 2015 and a third amended defence and counterclaim on 9 March 2015.
24 The plaintiffs submit that reference to the three amending pleadings is irrelevant, since the defendant is obliged to pay the costs of those amendments by reason of O 66 r 3 of the Rules of the Supreme Court 1971 (WA) and pursuant to an order to that effect in relation to the amended pleading dated 9 March 2015. There is force in that submission, but it is not a complete answer to the question as to whether the limits in items 3(b) and 3(c) should be removed in so far as the defendant is entitled to recover costs of its defence and counterclaim. The case substantially turned upon the defence and counterclaim, given that the proceedings were initiated by the plaintiffs in an attempt to pre-empt its removal as operator of the Spar Joint Venture. The defendant was thus required to pursue a positive case on questions of construction, breach and materiality. While it may well be that work involved in the various amendments to the pleadings by the defendant do not constitute recoverable costs, that is a matter which can be dealt with by the taxing officer. Having regard to the complexity and importance of the matter, the limits imposed by scale items 3(b) and 3(c) should be removed.
Scale item 8: inspection and giving inspection of discovered documents
25 As already noted, item 8 simply prescribes an hourly rate in respect to this category of work but does not prescribe a maximum. The limit on the hourly rate should be removed for reasons which I have already explained above. The parties' submissions did, however, extend to questions of whether or not the large volume of documents provided by the plaintiffs at the defendant's request were in fact relevant and whether it was necessary for them to be provided. That is a matter for the taxing officer and it is unnecessary for me to deal with those submissions further.
Scale item 10(a): proceedings in chambers
26 Mr Murphy's affidavit identifies one application to which this item applies. That is the defendant's application for further and better discovery which was filed and served on 22 October 2014.
27 On 21 November 2014, by consent, the court ordered that the hearing of that application be vacated, the application be dismissed, and that the costs of the application be costs in the cause. Mr Murphy deposes to the fact that four senior practitioners and three junior practitioners, with the assistance of junior counsel, were engaged in the preparation of the application for hearing. That preparation included the preparation of submissions and conferral with the solicitors for the plaintiffs towards narrowing and compromising the application. He says that 194.3 hours were spent under item 10(a) and total charges of $91,849.33 were incurred. Item 10(a) of the relevant determinations provides an allowance for two days' preparation and one day of hearing, being a total amount of $11,550 (under the 2014 Determination).
28 The plaintiffs contend that the documentation sought by the defendant was not relevant to the proceedings and that none, or at least a negligible amount, of the documents produced as a result of conferral in relation to the application were included in the final tender bundle at trial. The plaintiffs submit that, after provision of the documentation by the plaintiffs, the defendant acknowledged the application would have failed. That submission is not supported by the document upon which it relies, being an email of 20 November 2014 from Mr John of the defendant's solicitors to Mr Luscombe of the plaintiffs' solicitors. That email contained a recognition that to the extent that relevant documents were already in the discovered documents, the application would have failed, but otherwise maintained the assertion that the application for further and better discovery was justified. The email proposed that costs be in the cause. That proposal was accepted by the plaintiffs and orders were made in those terms.
29 The plaintiffs contend that, notwithstanding that it is liable for the costs of the application, the amount claimed is neither reasonable 'nor even arguably recoverable on a party/party basis'.
30 It is not appropriate in the context of the application for a special costs order for the court to embark upon a detailed analysis of the extent to which the work done in relation to this application was reasonable. Questions of the reasonableness of the costs claimed are matters which are for the consideration of the taxing officer.
31 Given the evidence as to the amount of work done in relation to the application, the defendant has established an arguable case that the bill to be presented to the taxing officer may tax at an amount greater than the limit imposed by the determination. The limit provided in item 10(a) should be removed.
Scale items 20(c) and 20(d) (counsel fees for second and successive days)
32 On the same basis that I have concluded that the limits on the hourly rates in Table A should be removed, the limits on counsel fees for second and successive days of hearings should also be removed.
Scale item 20(h) (attending on reserved judgment)
33 As with items 8, 20(e) and 24, item 20(h) specifies charges at the senior practitioner rate per hour, but does not impose a maximum number of hours. As I have accepted that limits on the hourly rates in Table A should be removed, it follows that the limit on the hourly rates prescribed in each of these items should also be removed.
Conclusion
34 For these reasons, there will be an order that:
1. The defendant's costs of the action be taxed without the limitations imposed:
a. in respect of the Legal Practitioners (Supreme Court) Contentious Business Determination 2012 (WA):
(1) by the maximum allowable hourly rates fixed under Table A; and
(2) by the maximum allowances under items 3(b), 3(c), 4, 8, 10(a) and 24 of Table B; and
b. in respect of the Legal Profession (Supreme Court) Contentious Business Determination 2014 (WA):
(1) by the maximum allowable hourly rates fixed under Table A; and
(2) by the maximum allowances under items 3(b), 3(c), 4, 8, 10(a), 17, 20(a), 20(b), 20(c), 20(d), 20(e), 20(h) and 24 of Table B.
2. The plaintiffs pay the defendant's costs of this application for special costs orders, to be taxed if not agreed.
0
10
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