Duro Felguera Australia Pty Ltd v Samsung C&T Corporation (ABN 49 160 079 470) with Republic of Korea registration number 110111-0015762
[2015] WASC 484 (S)
•3 MAY 2016
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CIVIL |
| CITATION | : | DURO FELGUERA AUSTRALIA PTY LTD -v- SAMSUNG C&T CORPORATION (ABN 49 160 079 470) with Republic of Korea registration number 110111-0015762 [2015] WASC 484 (S) |
| CORAM | : | LE MIERE J |
| HEARD | : | ON THE PAPERS |
| DELIVERED | : | 3 MAY 2016 |
| FILE NO/S | : | CIV 2753 of 2015 |
| BETWEEN | : | DURO FELGUERA AUSTRALIA PTY LTD Plaintiff |
| AND | ||
| SAMSUNG C&T CORPORATION (ABN 49 160 079 470) with Republic of Korea registration number 110111-0015762 First Defendant | ||
| CGU INSURANCE LTD Second Defendant | ||
| AIG AUSTRALIA LTD Third Defendant | ||
| Catchwords: |
Costs - Special costs order - Unusual difficulty, complexity and importance -
Limits of costs - Turns on own facts
[2015] WASC 484 (S)
Legislation:
Legal Profession (Supreme Court) (Contentious Business) Determination 2014
Legal Profession Act 2008 (WA), s 280
Rules of the Supreme Court 1971 (WA), O 1 r 4B, O 26 r 8
Result:
Special costs order given
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Jones Day |
| First Defendant | : | Herbert Smith Freehills |
| Second Defendant | : | Henry Davis York |
| Third Defendant | : | Polczynski Lawyers |
Case(s) referred to in judgment(s):
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013]
WASCA 66(S)
Duro Felguera Australia Pty Ltd v Samsung C & T Corporation [2015] WASC
484
Electricity Generation and Retail Corporation t/as Synergy v Woodside Energy
Ltd [2014] WASC 469(S)
Heartlink Ltd v Jones [2007] WASC 254(S)
Home Office v Lownds [2002] EWCA CIV 365; [2002] 4 All ER 775
[2015] WASC 484 (S)
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LE MIERE J:
Judgment dismissing plaintiff's claim for injunction
1 The plaintiff (Duro) applied for an injunction to restrain the first
defendant (Samsung) from taking any step to enforce its demands on the second and third defendants, CGU and AIG, to pay to Samsung amounts which they undertook to pay under performance bonds issued by them and to restrain CGU and AIG from paying any amounts to Samsung in respect of the bonds until judgment in this action. I heard Duro's interlocutory injunction applications on 19 November 2015 and reserved my decision. Duro subsequently applied for leave to reopen its case on the ground that there had been a significant development which raised questions of Samsung's entitlement to the proceeds of the bonds. I heard the application to reopen on 10 December 2015. On 16 December 2015, I refused Duro's application for leave to reopen and dismissed its application for an interlocutory injunction: Duro Felguera Australia Pty Ltd v Samsung C & T Corporation [2015] WASC 484. I ordered that Duro pay Samsung's costs of the application, including all reserved costs.
Costs order sought by Samsung
Samsung now applies for the following costs orders:
(1) The costs payable by the plaintiff to the first defendant are to
include:
(a) the costs of the plaintiff's application to reopen its case; (b)
the costs of the plaintiff's notices to produce dated 11 November 2015 and 18 November 2015;
(c)
the costs of the plaintiff's subpoena dated 12 November 2015 addressed to 'The Proper Officer, Roy Hill Holdings Pty Ltd';
(d)
the costs of the confidentiality orders made 18 November 2015 in relation to the documents produced in response to the plaintiff's notice to produce;
(e)
the costs of the consent confidentiality orders dated 18 November 2015 in relation to documents provided by Roy Hill Holdings Pty Ltd in compliance with the plaintiff's subpoena;
[2015] WASC 484 (S)
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(f) the costs of the plaintiff's application to examine Mr J Son. and to be taxed without regard to the limits imposed by the following limits of the Legal Profession (Supreme Court)
(Contentious Business) Determination 2014 (Determination):
(i) Table A to par 8: maximum hourly and daily rates; (ii) items 10 (proceedings in chambers) and 24 (conferral)
in Table B, par 9.
(2) The first defendant's costs are to include allowance for:
(a) the costs of the transcript of the hearing on 19 November 2015; (b) the costs of instructing legal practitioner at the hearing; (c) the costs of Yulchon Attorneys at Law. (3) The plaintiff pay the first defendant's costs of this application for
special costs orders, to be taxed if not agreed.3 Duro opposes the special costs order sought by Samsung. If,
contrary to its primary submission, the court determines that a special costs order should be made then Duro says that the costs of the proceedings should be taxed with the following limits substituted for the limits of costs fixed in the Scale of Costs which is Table B (the Scale) to the Determination:
(a)
the maximum hourly and daily rates allowed in respect of each fee earner shall be increased by 25%; and
(b)
the costs, inclusive of GST and counsel fees but exclusive of other disbursements, shall not exceed $75,000.
Duro does not separately object to the proposed orders in subpars 2(a) to 2(c) above. Duro does not oppose an order that the costs payable by the plaintiff to the first defendant are to include the items set out at subpars 1(a), (d) and (e) but opposes orders that the costs payable by the plaintiff to the first defendant are to include the items set out at subpars 1(b), (c) and (f) above.
[2015] WASC 484 (S)
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I will first deal with Samsung's application for a special costs order under s 280(2) of the Legal Profession Act 2008 (WA).
Special costs order under Legal Profession Act s 280
5 Samsung seeks a special costs order under s 280(2) of the Legal Profession Act removing the limits on the maximum allowances under Item 10 (proceedings in chambers) and Item 24 (conferral) in the Scale and the limits on the maximum allowable hourly and daily rates in Table A to the Determination to be used to calculate the amounts in the Scale.
6 Section 280(2) of the Legal Profession Act confers on the court a discretion to order that any particular allowance in the Scale be raised or a limit removed. Section 280(2) requires that before making an order 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.
7 The 'matter' which must be unusually difficult, complex or important
in order to enliven the power conferred by s 280(2) is the whole of the 'matter' in respect of which legal services were provided and which comes within the scope of the legal costs determination: Electricity Generation and Retail Corporation t/as Synergy v Woodside Energy Ltd [2014] WASC 469(S) (Electricity Generation) [5] (Martin CJ).
8 The reference to 'importance' in s 280(2) directs the court's attention
to the question of whether the work done was appropriate to the significance of the issues in the litigation. That may stem from the significance of the issues to the parties, or the significance of the issues to other prospective parties or to the public or to the community generally: Heartlink Ltd v Jones [2007] WASC 254(S) [19] (Martin CJ).
9 The function of the court in making a special costs order under
s 280(2) is limited to setting the parameters within which the taxing officer will tax the relevant bill, and providing any specific directions which will assist the taxing officer to assess the quantum of the costs to be allowed on taxation. The quantum of costs to be allowed is to be determined by taxation. Therefore, the powers conferred upon the court by s 280(2) are to be exercised as a matter of impression rather than science, taking into account the greater expertise of taxing officers in fixing the amount of costs properly and reasonably allowed: Electricity
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Generation [4] (Martin CJ). I case managed the action, heard the application and am familiar with the way in which the case was conducted and the issues which were argued. I am in a position to form the opinions required under s 280(2) as matters of impression rather than science or mathematics: see Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66(S) [3].
Evidence
10 Ante Golem, a partner of Herbert Smith Freehills, the solicitors for
Samsung, has sworn an affidavit in which he identifies the team of lawyers engaged by Samsung, the costs charged to (or to be charged to) and incurred by Samsung in relation to the application for work carried out by Herbert Smith Freehills and senior and junior counsel in accordance with costs agreements made in accordance with s 282 of the Legal Profession Act. Mr Golem annexes to his affidavit a draft party and party bill of costs prepared on behalf of Samsung by an independent costs lawyer, Mr S V Forbes. The draft bill of costs includes $364,437 for work done under Scale Item 10(a) (proceedings in chambers other than proceedings to which Item 11 applies), $8,940 for work under Scale Item 10(b) (attending on a reserved judgment in chambers), $1,787 for work under Scale Item 10(c) (consent orders including conferring but excluding extraction) and $19,103 for work under Scale Items 24(a), (b) and(c) (conferrals, informal conferences including attendances by counsel and instructing legal practitioners at the conferrals and conferences). Those amounts substantially exceed the maximum allowances under Items 10(a), (b) and (c) of the Scale. Item 10(a) (proceedings in chambers) has a maximum allowance of $11,550. Item 10(b) (attending on a reserved judgment in chambers) has a maximum allowance of $473 and Item 10(c) (consent orders) has a maximum allowance of $495. Item 24 (conferrals) has no maximum amount. Item 24 provides that the allowance is to be the appropriate hourly allowance for a senior practitioner, senior counsel or counsel. The hourly rates charged by counsel and solicitors for Samsung exceed the hourly rates prescribed in the Scale.
Special costs order should be made
11 I am satisfied from my knowledge of the case as case manager and
from hearing the application and by the affidavit of Mr Golem that the amount of costs available in respect of this matter under the Determination is inadequate. It is apparent to me that Samsung applied substantial legal resources to the litigation, it was reasonably necessary to
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do so and the costs incurred in doing so substantially exceed the
allowances under Items 10(a), (b), (c) and Item 24 of the Scale.12 I am of the opinion that the matter was one of unusual difficulty,
complexity and importance and that the amount allowable under the Scale is inadequate because of the unusual difficulty, complexity and importance of the matter. I have formed that opinion having regard to the following matters. First, the matter is significant to the parties. The subject matter of the application was to restrain Samsung from demanding payment of $64,154,700 under unconditional, irrevocable, pay on demand bonds. The importance of the matter to the parties is reflected by the fact that each party was represented by senior and junior counsel. Secondly, the decision to grant or refuse the interlocutory injunction was likely in a practical sense to determine the substance of the matter in issue. Thirdly, the matter involved questions of construction of the contract and whether the court should determine the construction issues raised in the case or only whether the plaintiff had made out a prima facie case in relation to the construction questions. Fourthly, the matter involved questions of disputed fact and voluminous affidavit evidence. Fifthly, the matter involved a conflict of laws question. Sixthly, the matter involved evidence of, and the determination of, questions of foreign law. Seventhly, the hearings occupied two days and three short hearings on other days. Eighthly, the matter was dealt with on an urgent basis.
Removal of limits on hourly rates
13 The rates charged by the solicitors and counsel for Samsung, and
incurred by Samsung, exceed the hourly rates allowed under the Scale. 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 has charged at a higher rate but I am satisfied that it is appropriate to do so in this case.
14 The rates in the Scale are struck by reference to what has been
charged within the profession. Those hourly rates can only be an average or median of the upper rates determined in the surveys conducted by the Legal Costs Committee in drawing the Scales and there will be some cases where the unusual difficulty, complexity or importance of the case warrants the special expertise of the practitioners involved and warrants an increase in the hourly rate. Having regard to the nature and urgency of the litigation it was reasonably necessary for Samsung to engage the services of a large commercial law firm. Hourly rates charged by large commercial law firms to undertake substantial commercial litigation in
[2015] WASC 484 (S)
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which tens of millions of dollars are in issue usually exceed the Scale allowances. In this case, the work was undertaken urgently. Law firms often, and reasonably, charge above Scale for urgent work. I have found that the matter is one of unusual difficulty, complexity and importance. In the circumstances it was reasonable for Samsung to engage solicitors and counsel who charge rates higher than those allowed in the Scales.
15 It is appropriate to raise the allowable hourly rate rather than to
remove any limit on those rates. Whilst it is for the taxing officer to assess the quantum of costs to be allowed on taxation, the task of the court includes setting the parameters within which the taxing officer will tax the bill where the evidence before the court permits it and it is appropriate to do so.
16 The rates charged by Samsung's solicitors range from amounts
within the Scale allowance to amounts which exceed the Scale amount by approximately 110%. The amounts charged by senior counsel exceed the Scale allowance by about 80%. It is reasonable for Samsung to engage senior practitioners and senior counsel with relevant experience and expertise and that senior practitioners and senior counsel may reasonably charge in excess of the Scale allowance. High rates charged by senior practitioners is justified in litigation requiring their expertise and experience and where they assume the responsibility of having the conduct of such litigation. High rates charged by leading Silk are accepted by clients on the basis that special skills as an advocate can justify high charges. However, there is no evidence that the senior practitioners and senior counsel engaged possess unique skills, experience or expertise such that it was reasonably necessary to engage practitioners and counsel at charge out rates in the order of 100% above the Scale. It is not reasonable that the unsuccessful party should bear the costs of the successful party who elects to engage practitioners and counsel at such hourly rates.
17 The evidence of Mr Golem concerning the practitioners and counsel
engaged in the matter on behalf of Samsung and my knowledge of the way in which the case was conducted and the issues which were argued enable me to form an opinion of the appropriate uplift in hourly rates for practitioners and counsel. It is appropriate that the maximum hourly rate allowable for solicitors and counsel be raised by 50%.
Should the item limits be removed or raised?
18 The costs incurred by Herbert Smith Freehills and counsel in relation
to the application under Item 10 of the Scale in isolation are in the order
[2015] WASC 484 (S)
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of $375,000, that is more than 32 times the amount allowed for by the Scale. Duro submits that notwithstanding that the time allowed for the performance of the work in the Scale may be inadequate having regard to the complexity and importance of the matter, costs in the order of $375,000 in respect of Item 10 of the Scale are entirely disproportionate to the nature and subject matter of the application. Therefore, Duro submits, it would not be appropriate for the court to make orders allowing that amount or an amount approaching that amount for the costs of the application. Duro submits that where, as in this case, the costs incurred by the successful party are disproportionate to the nature and subject matter of the application the court should impose a higher limit on costs than those fixed in the Scale rather than removing the limit.
19 Where a court 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, s 280(2) of the Legal Profession Act confers on the court a discretion to do all or any of the things specified in the subsection. The court may fix higher limits of costs than those fixed in the Determination or remove limits on costs fixed in the Determination. The statute does not contain any requirement that the court should set higher limits so that the costs are not disproportionate to the nature and subject matter of the application or the matter. Order 1 r 4B(1)(e) of the Rules of the Supreme Court 1971 provide that the court should manage and supervise matters with a system of positive case flow management with the object of ensuring the procedure applicable, and the costs of the procedure to the parties and the State, are proportionate to the value, importance and complexity of the subject matter in dispute. The focus of O 1 r 4B is not costs but the practice and procedure of the court. The object is to implement practices and procedures with the object of resolving issues in such a way that the cost to the parties is proportionate to the value, importance and complexity of the subject matter in dispute. Nevertheless, that a successful party has incurred costs which are disproportionate to the value, importance and complexity of the subject matter in dispute may be relevant to the exercise of the court's discretion whether to raise or remove limits on costs fixed in the Determination.
20 The court would need to be satisfied that the costs incurred by the
successful party were disproportionate to the value, importance and complexity of the subject matter in dispute. Two things are said to be proportionate if there is an appropriate relationship between them. A proportionate step is one that is no more than is necessary. The notion of proportionality is concerned with the relationship between the costs
[2015] WASC 484 (S)
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incurred by a party and the value, importance and complexity of the subject matter in dispute not the relationship between the costs incurred by a party and the costs allowed under the Scale.
21 The value of the subject matter in dispute in this matter is in excess
of $64,000,000. Samsung's draft bill of costs is in the amount of $424,359, that is the costs incurred are less than 1% of the value of the subject matter in dispute. Even if the value of the subject matter in dispute is considered to be the use of the $64,154,700 pending the resolution by arbitration or litigation of the substantive dispute between the parties, the value of the subject matter in dispute is still very substantial and the costs incurred by Samsung are only a relatively small fraction of the value of the subject matter in dispute. I have found that the matter is one of importance and complexity and that the amount of costs allowable under the Scale is inadequate because of the unusual difficulty, complexity and importance of the matter. In those circumstances, I am not satisfied that the costs incurred by Samsung are disproportionate to the value, importance and complexity of the subject matter in dispute.
22 In any event, if I was satisfied that the costs incurred by Samsung are
disproportionate, having regard to the nature of the application, the procedural steps taken and the duration of the hearing, there is no evidentiary basis upon which I could fix a limit for costs. The power to raise or remove limits on costs fixed in the Determination must be exercised judicially; the exercise of the power must have a proper factual foundation. The evidence before the court is not sufficient to enable the court to make any logical, fair and reasonable estimate of what would be an appropriate higher limit of costs than what is fixed in the Determination. In Home Office v Lownds [2002] EWCA CIV 365; [2002] 4 All ER 775 Lord Woolf CJ said at [31] that if the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. Reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner. The evidence before me does not enable me to assess which items of work undertaken by Samsung's solicitors and counsel were necessary and, if necessary, that the cost of the item is reasonable. Those are matters which should be left to the taxing officer.
23 The appropriate order is to remove limits on costs fixed in the
Determination for Items 10 and 24. It will be for the taxing officer to determine in relation to each item of work undertaken by Samsung's solicitors and counsel whether the work was necessary if the litigation had
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been conducted in a proportionate manner and whether the cost of each
item is reasonable.
Specific items claimed by Samsung
24 Samsung seeks orders that the costs payable by the plaintiff to the
first defendant are to include the items in subpars 1(a) to (f) above and that its costs are to include allowance for the items set out in subpars 2(a) to (c) above. As I have said, Duro does not oppose the orders in relation to Items 1(a), (d) and (e) and Items 2(a) to (c). I will consider the contentious items.
Costs of plaintiff's notices to produce dated 11 November 2015 and
18 November 2015
25 Duro makes the following submissions. Under O 26A r 8(2) of the
Rules of the Supreme Court Samsung has an obligation to produce documents referred to in its affidavits. It does not entitle a party to refuse inspection, whether in whole or in part by redaction, of any document referred to in an affidavit for reasons of confidentiality. Such steps were not an integral part of these proceedings. Duro should not be obliged to pay for the unnecessary costs of Samsung choosing to take such steps. Samsung says that it was both necessary and reasonable for it to spend time reviewing and redacting for confidentiality numerous documents in order to produce the 98 documents that responded to the notice to produce on 13 November 2015.
26 In my view it was reasonably necessary for Samsung to take the
steps it did. The costs payable by Duro to Samsung should include the costs of Duro's notices to produce dated 11 November 2015 and 18 November 2015.
Costs of the plaintiff's subpoena to Roy Hill Holdings
27 Duro says that the documents which were produced on subpoena
were all documents produced or received by Samsung. No substantial costs should have been incurred by Samsung in respect of its inspection of documents already in its possession.
28 Samsung says it was necessary for it to inspect the documents which
were produced. I accept that submission. Samsung's costs should include the costs of inspecting the documents produced by Roy Hill Holdings Pty Ltd in answer to the plaintiff's subpoena.
[2015] WASC 484 (S)
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Costs of plaintiff's application to examine Mr Jeleul Son
29 Duro says that its application to examine Mr Son was opposed by
Samsung. Duro was successful in its application. Accordingly, Duro says that Samsung is not entitled to costs in respect of its unsuccessful opposition of Duro's application. I accept that submission.
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