Doyle v Lewis (No 2)
[2023] FedCFamC2G 488
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Doyle v Lewis (No 2) [2023] FedCFamC2G 488
File number(s): SYG 957 of 2022 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 2 June 2023 Catchwords: BANKRUPTCY – Costs – application for lump sum costs order – lump sum costs order made. Legislation: Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 13.01
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 17.05
Cases cited: Harrison v Schipp [2002] NSWCA 213 Division: General Number of paragraphs: 16 Date of hearing: 2 June 2023 Place: Sydney The Applicant: No appearance by, or on behalf of, the applicant Counsel for the Respondent: Mr A Bailey Solicitor for the Respondent: Carroll & O’Dea Lawyers ORDERS
SYG 957 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: PHILLIP WILLIAM DOYLE
Applicant
AND: DARREN JOHN LEWIS
Respondent
order made by:
JUDGE MANOUSARIDIS
DATE OF ORDER:
2 june 2023
THE COURT ORDERS THAT:
1.The applicant pay the respondent’s costs set in the amount of $102,321.25.
2.The respondent is to cause a sealed copy of these orders, together with r 17.05 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), to be served on the applicant by sending those documents to the applicant’s address for service.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
On 17 March 2023, on the basis of reasons for judgment I published on that day, I made an order dismissing an application to set aside a bankruptcy notice that was issued on the application of the respondent.[1] I also ordered on that day that the applicant pay the respondent’s costs. By an email sent to my Associate on 31 March 2023, the respondent requested that the proceeding be listed for the purpose of hearing an application for a lump sum costs order that the respondent wished to make. In response to that request, I caused to be listed for hearing before me on 21 April 2023 an application by the respondent for a lump sum costs order.
[1] Doyle v Lewis [2023] FedCFamC2G 205
The matter came before me on 21 April 2023. On that day counsel for the respondent, Mr Bailey, appeared. Mr Barbeliuk, with leave, appeared by telephone for the applicant. Mr Barbeliuk applied for an adjournment. The basis of that application was a foreshadowed application in the Court of Appeal of the Supreme Court of New South Wales for the appointment of a tutor for the applicant in connection with an application by the applicant for leave to appeal against a number of judgments, including the judgment on the basis of which the bankruptcy notice in the proceeding before me was issued. I was informed that directions had been made by the Registrar of the Court of Appeal for the filing of evidence in support of the application for the appointment of a tutor.
After hearing further submissions from Mr Bailey, I decided to adjourn the matter to 2 June 2023, and I made the following orders:
1.The respondent’s application for a lump sum costs order is adjourned for hearing at 9:30 am on 2 June 2023.
2.By 17 May 2023, the applicant file and serve:
(a)an application in a proceeding for an order that a litigation guardian of the applicant be appointed; and
(b)all evidence on which the applicant relies in support of his application for the appointment of a litigation guardian.
3.The application in a proceeding that is filed pursuant to order 2 shall be made returnable for directions at 9:30 am on 2 June 2023.
4.If an application in a proceeding is filed pursuant to order 2 the application for a lump sum costs order referred to in order 1 shall be listed for directions rather than for hearing.
5.Costs of today are reserved.
The applicant has not filed any material pursuant to order 2 of the orders I made on 21 April 2023. Instead, at 2:00 pm on 1 June 2023, Mr Barbeliuk sent an email to my Associate which he copied to the respondent’s lawyers. With that email, Mr Barbeliuk annexed an affidavit he made on 19 May 2023 which he filed with the Court of Appeal, and a medical report. I will mark the affidavit as “MFI1” in the application for a lump sum costs order. In that affidavit Mr Barbeliuk deposes to matters in support of an application to vacate a directions hearing that had been fixed before the Court of Appeal on 24 May 2023. Mr Bailey informed me that on 24 May 2023 directions were made by the Registrar of the Court of Appeal for the filing of further material; and the matter was listed to come back before the Court of Appeal on 20 June 2023.
The consequence of the applicant not filing the material he was ordered to file by 17 May 2023 is that the matter remains listed today for the purpose of hearing the respondent’s application for a lump sum costs order, and that is what occurred before me this morning. The respondent applied for a lump sum costs order, and in support of that application the respondent read an affidavit made by Mr Daniel O’Brien on 31 March 2023, and counsel for the respondent relied on written submissions.
The first question I need to address is whether I should proceed with the application for a lump sum costs order. That question arises because, throughout the extended history of this matter, suggestions are apparent in the evidence that the applicant may not have sufficient capacity to prosecute the proceeding without a litigation guardian. Mr Bailey submitted that there is insufficient evidence that the applicant does not have that capacity. I accept that submission. Even though I might accept that submission, there might nevertheless be a case for adjourning the matter to permit further time for the adducing of evidence that the applicant does not have capacity. In my opinion, however, that would not be an appropriate exercise of discretion. To so proceed would invite the potentially indefinite continuation of this proceeding, with all the attendant costs that such prolongation will visit on the respondent.
There was no appearance by the applicant, and my proceeding to hear the matter renders it a hearing that has been conducted in the absence of a party. If I were to make orders today, it would be open for the party not present at the hearing, that is to say, the applicant, to apply, pursuant to r 17.05 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (GFL Rules), to set aside any orders I may make. Given the availability of that power, my proceeding with the hearing today will not shut out the applicant from applying to set aside any orders I might make today. That is a risk the respondent takes; but, in my view, the interests of justice are better served by my hearing the application today and making orders one way or the other.
That then brings me to the application for a lump sum costs order. I first refer to the affidavit of Mr O’Brien. Mr O’Brien there sets out information concerning the charge-out rates that have been applied by his law firm in acting for the respondent. He also sets out in some detail the procedural history of this matter. (I have set out in some detail that procedural history in my reasons for judgment I published on 17 March 2023.) Mr O’Brien also annexes costs agreements between his firm and the respondent, and invoices issued pursuant to those costs agreements. Mr O’Brien then proffered what I consider to be expert opinion evidence that, based on his experience, around 70% of actual professional costs are allowed on taxation; and, in relation to disbursements, excluding counsel’s fees, the percentage allowed may be up to 80%. On that basis, the amounts the respondent claims are $109,821.25 for the lawyer’s costs and disbursements, excluding counsel, and $19,820.03, being 100% of counsel’s fees. (These amounts are inclusive of GST.)
Mr Bailey took me to various items which he submitted might need to be scrutinised. One significant item is what is referred to as an “uplift fee” of 25%. Mr Bailey could not point to any authority where an uplift fee has been allowed on taxation. An uplift fee, as I understand it, is an amount expressed as a percentage of the actual fees charged that a lawyer and client agree the client should pay in conditional retainers, and the amount is calculated to take into account the risk to the lawyer of undertaking a conditional retainer. Mr Bailey also took me to particular items, relatively minor in nature, that may be disallowed on taxation.
I next consider the power and principles that govern the determination of applications for lump sum costs orders. First, in terms of jurisdiction, counsel for the respondent has correctly identified r 13.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth), which provides:
1)Subject to Division 13.2, a person who is entitled to costs in a proceeding to which the Bankruptcy Act applies is entitled to costs in accordance with Part 40 of the Federal Court Rules 2011 unless the Court otherwise orders.
2)In making an order for costs, the Court may fix the amount of the costs.
Mr Bailey, in his helpful and detailed written submissions, set out the relevant principles, and I need only refer to paragraphs 56 to 63 of his written submissions without setting them out. Mr Bailey has also referred to principles I should apply in assessing the lump sum costs, assuming I am otherwise minded to make a lump sum costs order.
The next question is whether it is appropriate to make a lump sum costs order. In my opinion it is. First, by making a lump sum costs order, the respondent will not be met with the additional costs associated with the taxation of costs. That is a benefit not only to the respondent, but potentially also to the applicant, because, depending on the outcome of such application, the costs of an assessment may ultimately have to be borne by the person who is otherwise liable to pay the costs. Second, it will put an end to the proceeding, rather than prolonging it for the purpose of having costs assessed. Third, this is a matter in which it is appropriate to make a lump sum costs order. Although the proceeding has been complicated, the actual application itself is relatively straightforward. It is an application to set aside a bankruptcy notice, and the principles that apply to such applications are well established.
That then leads me to assessing a lump sum for the respondent’s costs. Giles JA stated the relevant principles in Harrison v Schipp:[2]
Of its nature, specification of a gross sum is not the result of a process of taxation or assessment of costs. As was said in Beach Petroleum NL v Johnson at 124, the gross sum “can only be fixed broadly having regard to the information before the Court”; in Hadid v Lenfest Communications Inc at [35] it was said that the evidence enabled fixing a gross sum “only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates”. The approach taken to estimate costs must be logical, fair and reasonable (Beach Petroleum NL v Johnson at 123; Hadid v Lenfest Communications Inc at [27]). The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA).
[2] Harrison v Schipp [2002] NSWCA 213, at [22]
I propose to follow these principles.
I accept Mr O’Brien’s evidence that around 70% of actual lawyer’s costs are allowed on taxation. I am not satisfied, however, that a component for uplift is a matter that would be allowed on taxation. Although there does not appear to be any authority about it, it seems to me that an uplift fee is an arrangement that is made between a lawyer and his or her client in relation to a risk that the lawyer undertakes by accepting a conditional brief; and that is not a matter that ought to be paid by an unsuccessful party who has been ordered to pay costs. At the very least I propose to disallow all of the uplift fee claimed by the respondent, which I have calculated to be $19,820. I also am satisfied there are some amounts that would not be allowed under taxation. Using a broad-brush approach, a further amount of $7,500 should be disallowed.
The end result is that I propose to make a lump sum costs order in the amount of $102,321.25 (inclusive of GST). I will also make an order that the respondent cause a sealed copy of the orders I am going to make, together with a copy of r 17.05 of the GFL Rules, to be served on the applicant by sending those documents to the applicant’s email address.
I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 8 June 2023
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