Draper and Anor v Official Trustee In Bankruptcy and Anor (No.2)
[2008] FMCA 701
•2 June 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DRAPER & ANOR v OFFICIAL TRUSTEE IN BANKRUPTCY & ANOR (No.2) | [2008] FMCA 701 |
| BANKRUPTCY – Costs – gross sum costs – fixing of gross sum. |
| Bankruptcy Act 1966 (Cth) ss.3(2), 79(2) and (3) Federal Magistrates Court Rules rr.1.03(1), 21.02(2)(a) |
| Keen v Telstra Corp Limited (No 2) (2006) FCA 930 Ualesi (Trading as Australian Empire Imports) v Expeditals International Pty Ltd (2006) FCA 26 |
| First Applicant: | KEITH LAWRENCE DRAPER |
| Second Applicant: | BARBARA OLIVE DRAPER |
| First Respondent: | OFFICIAL TRUSTEE IN BANKRUPTCY FOR THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER |
| Second Respondent: | BRUCE JAMES CARTER (TRUSTEE IN BANKRUPTCY) |
| File Number: | ADG 260 of 2003 |
| Judgment of: | Simpson FM |
| Hearing date: | 14 May 2008 |
| Date of Last Submission: | 14 May 2008 |
| Delivered at: | Adelaide |
| Delivered on: | 2 June 2008 |
REPRESENTATION
| First Applicant: | Appears in person |
| Second Applicant: | No Appearance |
| Counsel for the First Respondent: | Mr G Gretsas |
| Solicitors for the First Respondent: | Gretsas & Associates |
| Counsel for the Second Respondent: | No Appearance |
ORDERS
The applicants shall pay the costs of the first respondent fixed at $5,500 pursuant to rule 21.02(2)(a) of the Federal Magistrates Court Rules 2001.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG 260 of 2003
| KEITH LAWRENCE DRAPER |
First Applicant
And
| BARBARA OLIVE DRAPER |
Second Applicant
And
| OFFICIAL TRUSTEE IN BANKRUPTCY FOR THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER |
First Respondent
| BRUCE JAMES CARTER (TRUSTEE IN BANKRUPTCY) |
Second Respondent
REASONS FOR JUDGMENT
In Draper & Anor v Official Trustee in Bankruptcy & Anor [2008] FMCA 557 I ordered that the applicants’ application for an order that the first respondent pay the applicants the other half of the costs referred to in certain orders made by the Full Court of the Federal Court of Australia of 22 December 2006 be dismissed. At that stage I also ordered that the applicants pay the first respondent’s costs on an indemnity basis for which the applicants would be jointly and severally liable. I reserved the question of whether the first respondent’s costs should be fixed as a gross sum or to be taxed.
Counsel for the first respondent submitted that I should make an order for a gross sum and that the appropriate sum would be $6,000 inclusive of GST. The first respondent relies upon an affidavit of its solicitor, George Gretsas, filed on 22 April 2008. That affidavit discloses that the agreement between solicitor and client concerning fees is that the solicitor would charge on a time basis to be calculated at the rate of $300 per hour plus GST divided into six minutes units. That hourly rate was inclusive of all reasonable photocopying, postage, facsimile and telephone charges. It also seems to have been agreed that the initial $2,750 of the solicitor’s charges would be charged at the full rate with the balance subject to a 20% discount. On this basis the solicitor charged $6,545 inclusive of GST for his time spent. Surprisingly, he also charged a further $467.15 for photocopying and postal costs. Arguably these additional disbursements were not chargeable as the change for time costs included these items.
The first applicant (“Mr Draper”) relied upon a document filed on 12 May 2008 titled “Additional Submission to be heard on 14 May 2008”. That written submissions were unhelpful in that they dealt with the question of whether the decision that I made on 13 March 2008 was correctly decided. I invited Mr Draper to address me on the questions of whether I should order a gross sum or costs to be taxed and, if I were to order a gross sum, what that gross sum should be. Mr Draper put no submissions on the question of whether or not I should order a gross sum but did put submissions in relation to quantum. He submitted that the costs that were claimed in the affidavit of Mr Gretsas filed on 22 April 2008 were excessive and would not be allowed on a taxation. He submitted that on a taxation the first respondent would be awarded no more than $4,000 costs. He did not elaborate further.
The Court’s power to award costs in General Federal matters is given by s.79(2) and (3) of the Federal Magistrates Act 1999 (Cth) (“the Act”). Those subsections are as follows:
79(2)The Federal Magistrates Court or a Federal Magistrate has jurisdiction to award costs in all proceedings before the Federal Magistrates Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
79(3)Except as provided by the Rules of Court or any other Act the award of costs is in the discretion of the Federal Magistrates Court or Federal Magistrate.
Part 21 of the Federal Magistrates Court Rules (“FMC r”) is concerned with costs. Federal Magistrates Court r.21.02(2) provides as follows:
In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b)set the method by which the costs are to be calculated; or
(c)refer the costs for taxation under Order 62 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d)set a time for payment of the costs, which may be before the proceeding is concluded.
I consider FMC r.21.02(2)(a) allows the Court to fix the amount of the costs as a gross sum.
In deciding whether or not to order a gross sum for costs I take particular note of the objects to be found in s.3(2) of the Act. That subsection states:
The … objects of this Act are:
(a)to enable the Federal Magistrates Court to operate as informally as possible in the exercise of judicial power; and
(b)to enable the Federal Magistrates Court to use streamlined procedures; and
(c)to encourage the use of a range of appropriate dispute resolution processes.
The objects to be found in FMCr.1.03 contain the same objects as stated in the Act as above referred to and in addition, in FMC r.1.03(1) the further object that the rules are “to assist the just, efficient and economical resolution of proceedings”. The orders that I propose to make will be aimed at achieving these objects.
It has been said that the purpose of making an order for gross sum costs is to “save the parties the time, trouble, delay, expense and aggravation in having a taxation proceed on a matter”[1]. Whilst it has also been said that the power to award gross sum costs is appropriate to be used in complex cases[2] it has also been said that there is nonetheless “… no particular characteristic of a case which must exist before a gross sum costs order can be made”[3]. I note also the statement by Conti J that the power to award gross sum costs can be used “to avoid an ongoing counter productive dispute (as to costs), in the interests of achieving finality, subject always to the need to ensure that unreasonable amounts of costs are not pursued and awarded”[4]. These comments have particular application in this case.
[1] Keen v Telstra Corp Limited (No 2) (2006) FCA 930; Nine Films & Television Pty Ltd v Ninox Television Limited (2006) FCA 1046.
[2] Beach Petroleum NL v Johnson (1995) 57 FCR 119 per von Doussa J.
[3] Dunston v Human Rights & Equal Opportunities Commission(No 3) (2006) FCA 916 per Mansfield J.
[4] Ualesi (Trading as Australian Empire Imports) v Expeditals International Pty Ltd (2006) FCA 26.
After careful consideration of the history of this action I have decided that I should order lump sum costs. These proceedings have been unnecessarily protracted. It appears that at each step of the action the applicants have filed unnecessarily long affidavits and submissions. Further, the points that the applicants have taken have often been without any merit. The Court file and my involvement to date suggest that, were I to award costs to be taxed, the taxation process too would become weighed down in protracted and unnecessary argument. I incorporate by reference my reasons for judgment delivered on 13 March 2008.
An award of indemnity costs entitles a party to all costs he or she has incurred except those costs that are unreasonable in amount or have been unreasonably incurred[5]. The Court fixing a lump sum for costs needs to be confident that the approach taken to estimate costs is logical, fair and reasonable. It is a matter of balancing the potential prejudice of overestimating the costs against the injustice of arbitrarily over discounting the successful party’s costs. The starting point where indemnity costs are ordered is the amount that the solicitors have charged their client.
[5] Beach Petroleum NL v Johnson (1995) 57 FCR 119 at p 121 and the cases referred to therein.
I have also decided that I should fix the first respondent’s costs in relation to the application that we are concerned with here in the sum of $5,500 inclusive of GST. I have earlier mentioned that the first respondent’s solicitors have charged their client the sum of $6,545 inclusive of GST for their services. The sum that I am allowing takes into account what appears to me to be an over charging of disbursements (as explained earlier in these reasons) and the suggested reduction by Counsel for the first respondent. I do not consider that any of the costs are unreasonable in amount or unreasonably incurred.
I therefore make the orders to be found at the beginning of these reasons and trust that it brings these proceedings to finality.
I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Simpson FM
Associate: Julie Davey
Date: 2 June 2008
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