FEDERAL COURT OF AUSTRALIA
Hudson v Sigalla (No 2) [2017] FCA 339
Appeal from: Hudson v Sigalla (No.3) [2016] FCCA 2140 File number: NSD 1605 of 2016 Judge: KATZMANN J Date of judgment: 3 April 2017 Catchwords: COSTS — application for variation of costs order by the payment of a specified sum — whether a substantial portion of the amount claimed should be paid on an indemnity basis — limited extent of compromise — whether amount sought was fair and reasonable or excessive — dangers of time-costing — barrister litigant — scope of Chorley exception — where barrister party briefed for other barrister party — where other barristers also briefed Legislation: Federal Court of Australia Act 1976 (Cth) ss 43(2), 43(3)(d), 37M, 37N
Federal Court Rules 2011 (Cth) r 40.02(b), Sch 3
Cases cited: Ada Evans Chambers P/L v Santisi [2014] NSWSC 538
Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119
Bechara t/as Bechara and Co v Bates [2016] NSWCA 294
Bechara v Bates (No 4) [2015] NSWSC 1722
Cachia v Hanes (1994) 179 CLR 403
Calderbank v Calderbank [1975] 3 All ER 333
Council of the Queensland Law Society Inc v Roche [2004] 2 Qd R 574
Donohoe v Britz (No 2) (1904) 1 CLR 662
EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59
Hadid v Lenfest Communications Inc [2000] FCA 628
Harrison v Schipp (2002) 54 NSWLR 738
Jones v Bradley (No 2) [2003] NSWCA 258
Law Society of New South Wales v Foreman (No 2) (1994) 34 NSWLR 408
Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261
London Scottish Benefit Society v Chorley, Crawford, and Chester (1884) 13 QBD 872
Murphy v Legal Services Commissioner (No 2) [2013] QSC 253
New South Wales Crime Commission v Fleming and Heal (1991) 24 NSWLR 116
Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53
Seven Network Ltd v News Ltd [2007] FCA 2059
SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323
Taylor v Pace Developments Ltd [1991] BCC 406
The Uniting Church v Takacs (No 2) [2008] NSWCA 172
Visscher v Teekay Shipping (Australia) Pty Ltd (No 3) [2012] FCA 212
Winn v Garland Hawthorn Brahe(No 1) [2007] VSC 360
Legal Services Commission, Regulatory Guide 8, Billing Practices — Some Key Principles (Version 2, 21 November 2013)
National Guide to Counsel Fees published 28 June 2013
Date of hearing: Heard on the papers Date of last submissions: 9 December 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 59 Counsel for the Appellant: Mr C D Wood Solicitor for the Appellant: Marquee Lawyers Counsel for the First Respondent: The First Respondent did not appear Counsel for the Second and Third Respondents: Mr B Katekar with Mr C Botsman Solicitor for the Second and Third Respondents: IHS Law Counsel for the Fourth to Fourteenth Respondents: The…
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- AGLC
- Hudson v Sigalla (No 2) [2017] FCA 339
- Case
- [2017] FCA 339
- Decision Date
CaseChat Overview and Summary
The matter of Hudson v Sigalla (No 2) involves a dispute concerning costs arising from an appeal that was deemed incompetent by the Federal Court of Australia. Frank Hudson appealed against orders made in the Federal Circuit Court, which required him to pay a lump sum of $317,106 in costs to Andrew Sigalla. The lump sum was set following an application by Sigalla’s lawyers, who sought to have the costs taxed. The respondents' legal team included Kemp Strang Lawyers, Guy Reynolds SC, and Christopher Botsman. Hudson's appeal raised preliminary questions about whether he needed leave to appeal and whether a partial stay of the primary judge's orders should be granted. The appeal was dismissed, and Hudson was ordered to pay the respondents' costs. The respondents then applied for a fixed costs order, seeking at least $49,709.78, which they argued represented 85% of their total costs of $58,481.50.
The primary legal issues before the court were whether a substantial portion of the costs claimed should be paid on an indemnity basis, and if the amount sought was fair and reasonable or excessive. The respondents argued that the costs were appropriate due to a lean mix of costs, with the person who did most of the work charging the lowest hourly rate, and no duplication or unreasonable fees. They also contended that the court was not required to discount fees when fixing a lump sum and that, where counsel’s fees are reasonable, they only need to be reduced by 5%. Hudson, on the other hand, argued that the amount claimed was manifestly unreasonable.
The court found that the claim for fees charged by Mr Jolly and Mr Botsman lacked discretion and conservative moderation. The application for indemnity costs was refused, and it was determined that Hudson should pay the respondents' costs in the sum of $28,300. The breakdown of this amount includes $10,450 for Mr Katekar’s fees, $11,950 for Mr Botsman’s fees, and $5,900 for Mr Jolly’s costs and other disbursements. Each party was ordered to pay their own costs of the present application.
The final orders of the court were to vary Order 3 made on 28 November 2016 by adding the specified sum for the respondents' costs and for each party to bear their own costs of the present application.
The primary legal issues before the court were whether a substantial portion of the costs claimed should be paid on an indemnity basis, and if the amount sought was fair and reasonable or excessive. The respondents argued that the costs were appropriate due to a lean mix of costs, with the person who did most of the work charging the lowest hourly rate, and no duplication or unreasonable fees. They also contended that the court was not required to discount fees when fixing a lump sum and that, where counsel’s fees are reasonable, they only need to be reduced by 5%. Hudson, on the other hand, argued that the amount claimed was manifestly unreasonable.
The court found that the claim for fees charged by Mr Jolly and Mr Botsman lacked discretion and conservative moderation. The application for indemnity costs was refused, and it was determined that Hudson should pay the respondents' costs in the sum of $28,300. The breakdown of this amount includes $10,450 for Mr Katekar’s fees, $11,950 for Mr Botsman’s fees, and $5,900 for Mr Jolly’s costs and other disbursements. Each party was ordered to pay their own costs of the present application.
The final orders of the court were to vary Order 3 made on 28 November 2016 by adding the specified sum for the respondents' costs and for each party to bear their own costs of the present application.
Orders
Orders of the court
1. Order 3 made on 28 November 2016 be varied by the addition of the following:
“in the sum of $28,300, made up as follows:
(a) $10,450 in respect of Mr Katekar’s fees;
(b) $11,950 in respect of Mr Botsman’s fees; and
(c) $5,900 in respect of Mr Jolly’s costs and other disbursements”.
2. Each party pay his own costs of the present application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
This is a dispute about costs arising out of an incompetent appeal concerning another dispute about costs. It is a melancholy tale.Background Frank Hudson purported to appeal from orders made in the Federal Circuit Court that the costs he was adjudged liable to pay be fixed in a lump sum of $317,106, in circumstances in which the primary judge had earlier ordered that the costs be taxed. The lump sum costs order was made following an interlocutory application by the lawyers for the successful party (Andrew Sigalla) in which they sought a variation of the earlier order to enable the costs to be paid directly to them: Hudson v Sigalla (No.3) [2016] FCCA 2140. The lawyers in question included a firm of solicitors, Kemp Strang Lawyers, and the barristers they had briefed to represent Mr Sigalla: Guy Reynolds SC and Christopher Botsman. Three preliminary questions were raised by the notice of appeal and it is from the determination of two of those questions that the present application arises. The first two questions were whether Mr Hudson needed leave to appeal and, if so, whether leave to appeal should be granted. The third question was whether a partial stay of the primary judge’s orders should be granted. On 17 October 2016 I listed the three preliminary questions for hearing. The hearing took place on 25 November 2016. During the course of it the third issue fell away when Mr Hudson abandoned his application for a partial stay. Three days later I delivered judgment, making orders dismissing the notice of appeal as incompetent, refusing Mr Hudson leave to appeal, and requiring him to pay the respondents’ costs: Hudson v Sigalla [2016] FCA 1204. When these orders were pronounced, Mr Katekar, counsel for Mr Reynolds and Mr Botsman, applied for an order that costs be paid in a specified sum. That sum was “at least” $49,709.78, being 85% of what they asserted were their total costs of $58,481.50. The latter figure comprised $11,687.50 (the subject of an invoice issued by Sean Jolly, the principal solicitor of the firm IHS Law, who had only been instructed on 28 October 2016); $12,650 (the subject of an invoice from Mr Katekar, who had come into the matter only two days before the hearing); and the somewhat astonishing sum of $34,144 (the subject of an invoice apparently issued by Mr Botsman to Mr Reynolds). Mr Hudson did not oppose the making of a fixed costs order but balked at paying the amount sought. The competing arguments and evidence On the face of things, as Mr Hudson submitted, the amount of costs claimed is manifestly unreasonable. Still, the respondents maintained that it was “appropriate” for the following reasons. First, they contended, the “mix of costs” was “lean” because the person who had done most of the work (Mr Botsman) had charged the lowest hourly rate; there was no duplication; none of the counsel who was involved in the matter before Mr Katekar had charged for his work and neither had Mr Reynolds. Secondly, they contended that the Court was not obliged to discount fees when fixing a lump sum and, where counsel’s fees are reasonable, they need only be reduced by 5%.
Evidence
Evidence Before The Court
Mr Hudson did not oppose the making of a fixed costs order but balked at paying the amount sought. The competing arguments and evidence On the face of things, as Mr Hudson submitted, the amount of costs claimed is manifestly unreasonable. Still, the respondents maintained that it was “appropriate” for the following reasons. First, they contended, the “mix of costs” was “lean” because the person who had done most of the work (Mr Botsman) had charged the lowest hourly rate; there was no duplication; none of the counsel who was involved in the matter before Mr Katekar had charged for his work and neither had Mr Reynolds. Secondly, they contended that the Court was not obliged to discount fees when fixing a lump sum and, where counsel’s fees are reasonable, they need only be reduced by 5%. Thirdly, they contended that Mr Hudson’s failure to accept the respondents’ offers of settlement was imprudent and unreasonable, the stay was hopeless, and the appeal was without merit. The application was supported by an affidavit from Mr Jolly sworn the same day. Annexed to that affidavit were three tax invoices, and a one-page outline of submissions attaching the same three tax invoices and two letters. The first letter, apparently sent on 7 October 2016, urged Mr Hudson to abandon his start application. The second, dated 19 October 2016, urged the abandonment of the appeal. In the second letter, upon which the respondents relied, they asserted that the appeal had “no or negligible prospects of success”. They added:It is also clear that, by pressing the appeal your client will be exposed to the costs of briefing at least two and possibly three sets of lawyers to represent the practitioners. These costs could add between $50,000 and $100,000 to your client’s costs, if, as we expect, the appeal is dismissed.(Emphasis added.) Both letters made offers of settlement and foreshadowed applications for indemnity costs in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 in the event that the offers were not accepted within the times specified in the letters — 10 am on 11 October 2016 with respect to the stay application and 5 pm on 21 October 2016 with respect to the appeal. The offers were not accepted within the specified times and, accordingly, lapsed. As Mr Hudson had only received notice of the respondents’ application earlier in the afternoon, I made orders enabling him to consider and respond to the material proffered on behalf of the respondents and for the respondents to file any submissions and evidence in reply. On 5 December 2015 Mr Hudson’s lawyers, Marque Lawyers, filed a 20-page affidavit affirmed the same day by Damian Bruce Sturzaker, a partner of the firm and the solicitor on the record for Mr Hudson, and a five-page submission from Christopher Wood, Mr Hudson’s barrister. In his affidavit Mr Sturzaker took issue with the costs purportedly incurred by Mr Botsman in representing Mr Reynolds and the reasonableness of the total amount claimed.
Decision
Reasons for decision
The claim made for the fees charged by both Mr Jolly and Mr Botsman discloses a lack of “discretion and conservative moderation”. Conclusion The application for indemnity costs is refused. Mr Hudson should pay the respondents’ costs in the sum of $28,300, made up as follows:(1)$10,450 including GST in respect of Mr Katekar’s fees; (2)$11,950 including GST in respect of Mr Botsman’s fees; and(3)$5,900 inclusive of GST in respect of Mr Jolly’s costs and other disbursements. As the respondents have recovered about half of what they originally sought, each party should pay his own costs of this application.
Ratio Decidendi
Legal Principle Established
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