Hudson v Sigalla (No.3)
[2016] FCCA 2140
•5 September 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HUDSON v SIGALLA (No.3) | [2016] FCCA 2140 |
| Catchwords: LEGAL PRACTITIONERS – Liens – costs – lien over costs order. COSTS – Order for taxation – variation of costs order to substitute a lump sum order. PRACTICE AND PROCEDURE – Consideration of the legislative provisions bearing upon the power of the Court to vary a costs order previously made. |
| Legislation: Bankruptcy Act 1966 (Cth), s.58 Federal Circuit Court of Australia Act 1999 (Cth), ss.14, 15, 16, 18, 79 |
| Cases cited: Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470 Ho v Grigor (2006) 151 FCR 236 Short v Crawley (No 45) [2013] NSWSC 1541 Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 Trukulja v Efron [2014] VSCA 76 |
| Applicant: | FRANK HUDSON |
| Respondent: | ANDREW JOHN SIGALLA |
| File Number: | SYG 793 of 2014 |
| Judgment of: | Judge Driver |
| Hearing date: | 10 August 2016 |
| Date of final submission: | 19 August 2016 |
| Delivered at: | Sydney |
| Delivered on: | 5 September 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr C Wood |
| Solicitors for the Applicant: | Marque Lawyers |
| Counsel for Mr Reynolds and Mr Botsman: | Mr C Botsman |
| Solicitors for Kemp Strang: | Mr P Harrison of Kemp Strang |
| The Respondent appeared in person |
ORDERS
Order 4 made on 30 March 2015 is varied as follows:
(4)The applicant (Mr Hudson) is to pay the respondent’s practitioners (Kemp Strang, Mr Guy Reynolds and Mr Christopher Botsman) their costs and disbursements of and incidental to the entire proceedings, including the re-opened proceedings, fixed in the lump sum of $317,106.
For the purposes of order 1, Mr Hudson is to pay the lump sum of $317,106 to Kemp Strang Lawyers within 28 days.
Upon receipt of the lump sum, Kemp Strang are to pay Mr Reynolds the sum of $66,000 and Mr Botsman the sum of $75,000 in respect of their fees, and are to pay to Mr Sigalla any disbursements paid by him.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 793 of 2014
| FRANK HUDSON |
Applicant
And
| ANDREW SIGALLA |
Respondent
| CHRISTOPHER BOTSMAN |
Applicant in an Application in a Case
And
| FRANK HUDSON, ANDREW SIGALLA, LISA ANNE BERTON, PETER LEIGH HARRISON, MICHAEL WILLIAM JOSEPH, PETER HENRY KERR, DAVID RUSSELL MURRAY-NOBBS, RORY MICHAEL NOTT, MARK RAYMOND PROCAJLO, ROSARIA SARINA ROPPOLO, BRENDAN PIGGOT, NIGEL DOUBLE |
Respondents in an Application in a Case
| GUY REYNOLDS |
Applicant in an Application in a Case
| FRANK HUDSON, ANDREW SIGALLA, LISA ANNE BERTON, PETER LEIGH HARRISON, MICHAEL WILLIAM JOSEPH, PETER HENRY KERR, DAVID RUSSELL MURRAY-NOBBS, RORY MICHAEL NOTT, MARK RAYMOND PROCAJLO, ROSARIA SARINA ROPPOLO, BRENDAN PIGGOT, NIGEL DOUBLE |
Respondents in an Application in a Case
| LISA ANNE BERTON, PETER LEIGH HARRISON, MICHAEL WILLIAM JOSEPH, PETER HENRY KERR, DAVID RUSSELL MURRAY-NOBBS, RORY MICHAEL NOTT, MARK RAYMOND PROCAJLO, ROSARIA SARINA ROPPOLO (KEMP STRANG) |
Applicants in an Application in a Case
| FRANK HUDSON, ANDREW SIGALLA, GUY REYNOLDS, CHRISTOPHER BOTSMAN, BRENDAN PIGGOT, NIGEL DOUBLE |
Respondents in an Application in a Case
REASONS FOR JUDGMENT
Introduction and background
Andrew Sigalla was the successful respondent in hard fought and protracted bankruptcy proceedings in this Court[1]. After handing down my judgment in that matter, I made the following costs order:
[1] Hudson v Sigalla (No 2) [2015] FCCA 542.
4.The applicant is to pay the respondent’s costs and disbursements of and incidental to the entire proceedings, including the re-opened proceedings, to be taxed and paid in accordance with the Federal Court Rules, in the absence of agreement.
The unsuccessful applicant in that proceeding (Mr Hudson) appealed unsuccessfully to the Full Federal Court[2]. Mr Sigalla pursued a notice of alternative contentions which also failed. The Full Federal Court refused to make any costs order in respect of the appeal and alternative contentions and left this Court’s costs order undisturbed and unremarked.
[2] Hudson v Sigalla [2015] FCAFC 140.
Mr Sigalla has not paid his solicitors or his counsel for their fees incurred in acting for him in the proceedings before this Court[3]. Because of that failure to pay, senior counsel who acted for Mr Sigalla (Mr Guy Reynolds), junior counsel (Mr Christopher Botsman) and the solicitors (Kemp Strang Lawyers) separately applied by Applications in a Case filed on 30 and 31 May and 24 June 2016 for declarations that they each hold a particular lien over the fund constituted by my costs order, as well as other relief including an order that Mr Hudson pay the sums due to the practitioners. The three Applications in a Case were consolidated and heard together on 10 August 2016. At the conclusion of that hearing I made the following declarations:
[3] Although Mr Sigalla claims that he paid certain disbursements.
1. Kemp Strang Lawyers, Mr Guy Reynolds and Mr Christopher Botsman of Counsel (the Practitioners) each hold a particular lien over the fund constituted by “… the costs and disbursements of and incidental to the entire proceedings, including the re-opened proceedings…” in Order 4 of the orders made in these proceedings on 30 March 2015 to the extent of their unpaid fees, plus any interest and the costs of enforcing these particular liens.
2.Mr Sigalla and his assigns have no legal title to that portion of the Costs Order that corresponds to the unpaid fees of the Practitioners.
I reserved judgment on the question of whether the costs order I made should be varied to substitute a lump sum costs order and, if so, what the lump sum order should be. I ordered that no further steps be taken in pursuance of the existing costs order pending further order of the Court.
I have decided that, in view of the existence of the liens, the slow progress on the pursuit of the costs order I made, and the cost and delay that would be occasioned by a taxation of costs, different costs orders should be made in substitution for the costs order I made on 30 March 2015[4].
[4] The parties had not reached any agreement as to costs prior to the present proceeding. Mr Sigalla had submitted evidence of costs to a registrar who had made an initial assessment but Mr Hudson was dissatisfied and had requested a taxation. The registrar ordered a mediation which has not yet occurred.
The following are my reasons for the orders that I now make.
Jurisdiction and power
It is not disputed that the Court has jurisdiction to deal with the Applications in a Case. The earlier bankruptcy proceeding clearly fell within the Court’s jurisdiction under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and the Court’s associated or accrued jurisdiction can be called in aid, to the extent necessary, in order to deal with the entire dispute.
There was argument at the hearing on 10 August 2016 concerning the Court’s power. The practitioners submitted that the Court had power to vary or substitute its existing costs order under rule 16.05(2)(f) of the Federal Circuit Court Rules 2001 (Cth) (Federal Circuit Court Rules) because Mr Sigalla consented to the relief sought by the practitioners[5]. That was properly disputed by Mr Hudson. I found that order 4 made on 30 March 2015 contained two elements. The first element was an unquantified order for costs in favour of Mr Sigalla. Rule 16.05(2)(f) would support an order substituting the practitioners for Mr Sigalla as the beneficiaries of the cost order, given Mr Sigalla’s consent. However, the second element in the order was the establishment of a mechanism for the ascertainment of the costs due and payable (agreement or in lieu thereof, taxation). The mechanism put in place was not an order for the benefit of either party, or if it was, it was for the benefit of both of them. It follows, and I found, that rule 16.05(2)(f) would not confer power on the Court to substitute a different mechanism for the ascertainment of the quantum of costs, based simply on the consent of Mr Sigalla.
[5] see Exhibit 1.
The practitioners then submitted, and I accepted, that a combination of rule 16.05(3), rule 1.05, rule 40.02 of the Federal Court Rules (Federal Court Rules) and ss.14, 15 and 16 of the Federal Circuit Court of Australia Act 1999 (Cth) (Federal Circuit Court Act) confer power on the Court to substitute a different costs order for the order previously made. In making that finding, I rejected an argument by counsel for Mr Hudson that rule 21.02 of the Federal Circuit Court Rules presented an obstacle in that no application for variation of the costs order was made within 28 days of the orders made on 30 March 2015. I found that that limitation applies to an initial costs order rather than a variation of it.
It follows that the Court has both jurisdiction and power to make a lump sum costs order in favour of the practitioners in lieu of the existing costs order in favour of Mr Sigalla.
The liens
Mr Hudson did not oppose the declarations made in relation to the practitioners’ liens. The law in respect of practitioners’ liens is complex but sufficiently clear. While the legal principles concerning practitioners’ liens are not central to these reasons (except, perhaps, in relation to the quantification of costs) I have included as an attachment to these reasons the principles as put by counsel for the parties which I have acted upon.
Should a lump sum order in favour of the practitioners be substituted for the existing costs order?
As noted above, the parties have been unable to reach any agreement as to costs. No taxation has been commenced, although Registrar Ng provided an estimate pursuant to rule 40.20(3) of the Federal Court Rules to Mr Hudson and Mr Sigalla on 2 May 2016 in the sum of $241,767.35[6]. A registrar has also ordered a mediation prior to any taxation but that has not yet occurred. The conduct of a mediation would involved further time and expense and, given the acrimonious relations between Mr Hudson and Mr Sigalla, and the way in which all issues in the proceedings have been hotly contested, a productive outcome of a mediation is, in my view, unlikely.
[6] Annexure G to the affidavit of Christopher Botsman made on 12 July 2016.
A taxation would resolve the issue of quantification but would put the parties to further trouble and significant additional expense. The estimate provided by Registrar Ng was based on different material to that presented to me by the practitioners. I heard argument over a full day in relation to the issues on 10 August 2016. Except for one directions hearing in June this year before Judge Barnes, I have had the sole conduct of the entire proceedings in this Court over several years and am intimately familiar with the work done on behalf of Mr Hudson and Mr Sigalla. Further, the practitioners were not parties to the assessment process before the registrar. In addition, the establishment of their particular liens over the fruits of the costs order arguably alters in a subtle but important way the manner in which costs should be assessed. There is a risk that that subtlety may be lost in the taxation process.
All of these considerations, and the discretionary considerations dealt with below, in my view, compel a conclusion that the Court should intervene to substitute a lump sum costs order for the existing costs order and make any necessary ancillary orders.
Quantification of costs
I have before me the following evidence:
a)affidavits of Christopher Anthony Botsman, affirmed on 30 May 2016, 12 July 2016 and 8 August 2016;
b)affidavits of Peter Leigh Harrison, sworn on 24 June 2016 and 10 August 2016;
c)affidavit of Damian Bruce Sturzaker, affirmed on 26 July 2016;
d)Exhibit 1 – proposed short minutes of order;
e)MFI 2 – orders sought by Mr Botsman.
I have also had the benefit of helpful pre-trial written submissions by counsel for Mr Hudson, Mr Botsman (on behalf of himself and Mr Reynolds) and Mr Harrison of Kemp Strang. Mr Hudson, Mr Reynolds and Mr Botsman also made post hearing submissions, for which I granted leave.
The parties differ as to the principles bearing upon an assessment of costs in relation to a practitioner’s particular lien. While Mr Botsman and Mr Reynolds (with the support of Kemp Strang) assert that the Court should award the full amount of costs claimed by the practitioners, they concede that a reduction may be necessary to arrive at a lump sum which is logical, fair and reasonable. Mr Botsman further submits that in terms of the sufficiency of the evidence necessary to arrive at a lump sum that is logical, fair and reasonable, the Court has invoices from each of the practitioners recording the time spent on the matter. In Mr Botsman’s case the invoices contain a narrative that describes the work done and which is annotated to exclude work performed in connection with Supreme Court proceedings between Mr Hudson and Mr Sigalla which also involved some of the practitioners. The invoiced amounts correspond to the amount of unpaid fees the subject of the liens. Mr Hudson asserted that the practitioners have not put on any evidence of what they are owed but that was asserted by correspondence between their invoices and the amounts agreed to be unpaid by Mr Sigalla in Exhibit 1. I accept that the Court has the “evidence of the actual costs and disbursements charged to a successful party” which is the starting point of any estimation of a lump sum award[7].
[7] Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051.
Discretionary considerations
The forms of relief sought by the practitioners involve the exercise of an equitable or statutory discretion. In exercising my discretion I have had regard to the following facts:
a)no stakeholder interpleader was filed by Mr Hudson although there were adverse claims, at least as between Mr Botsman and Mr Sigalla;
b)Mr Hudson waited until the last available day to object to Registrar Ng’s estimate[8];
[8] Affidavit of Mr Botsman made on 12 July 2016 at [15].
c)Mr Hudson did not respond to a request for a mediation date for three weeks[9];
[9] Affidavit of Mr Botsman made on 12 July 2016 at [16],[17].
d)when Mr Hudson did respond with nominations for a mediation, Mr Hudson used the limited availability of the solicitor with carriage of the matter as a reason for excluding the months of August and September[10].
[10] Affidavit of Mr Botsman made on 12 July 2016 at [17].
Mr Hudson has not put on any evidence, expert or otherwise, challenging the reasonableness of the practitioners’ costs, although the affidavit of Mr Sturzaker supports the existing process for the assessment of costs.
A court will commonly take as its starting point the evidence of the charges for costs and disbursements made by the lawyers of the successful party and then adjust the figure to take account of:
a)the acceptability of the charges made;
b)the conduct of the proceeding; and
c)the measure of success on issues
to produce a sum which as a matter of judgement is neither overcompensatory nor prejudicial to the successful party[11].
[11] Ginos Engineers at [24], Finn J.
It would be particularly inconsistent with the economical resolution of this costs dispute to abstain from fixing a lump sum because of the existing taxation process in circumstances where:
a)a taxation pre-supposes that a party has an interest in a costs order whereas in this case the dispute between Mr Sigalla and his former lawyers has been resolved in favour of the practitioners;
b)taxation involves a mode of quantification appropriate to recovery by a party;
c)the practitioners are not (at least at this stage) parties to the taxation;
d)the taxation estimate is a global sum that does not differentiate between the costs of the respective practitioners; and
e)the taxation process is protracted.
Moreover, where the recipient of a lump sum is a practitioner, different considerations should apply than in the ordinary case, where the recipient of a lump sum is a party. Specifically, a court would be less concerned about a lump sum being “overcompensatory” to a practitioner where the practitioner’s invoices are reasonable and payment pursuant to a lump sum order represents the only potential source of payment.
As for the reasonableness of their fees, Mr Botsman and Kemp Strang submit that:
a)the amount of time charged is reasonable having regard to the number of issues raised by the proceedings, the complexity of some of those issues in terms of the their novelty, and the difficulties associated with the forensic task of identifying errors in Mr Hudson’s handwritten ledger, when compared to official betting records; and
b)their hourly rates are well within the acceptable range for counsel and solicitors[12].
[12] See in particular, the affidavit of Christopher Botsman dated 12 July 2016 at [18]-[20].
Mr Botsman and Kemp Strang also submit that, in terms of the other factors outlined by Finn J in Ginos Engineers, there is nothing in their conduct of the proceedings, or the measure of success on issues that would reduce their entitlement to costs.
For his part, Mr Hudson submits that he should not have to pay any more than he would be required to pay on a party and party assessment. He is particularly concerned to ensure that the establishment of the practitioners’ liens and the quantification of the value of them should not impose on him, as the unsuccessful party in litigation, a costs burden approaching indemnity costs in circumstances where indemnity costs have not been found to be payable. Indeed, Mr Hudson opposes any change to the mechanism put in place by the existing costs order. Nevertheless, he concedes that there would be benefit in bringing all elements of the disputes in these proceedings to a conclusion promptly and firmly. Mr Hudson also submits that the Court should not exercise its discretion to impose on him the burden of paying interest on the amounts due to the practitioners or their costs of enforcing their liens.
The amount due to Mr Reynolds
Mr Reynolds’ standard charges are an hourly rate of $1,200 and a daily rate of $12,000.
The rates that Mr Reynolds charges reflects his standing as an experienced senior counsel who specialises in appeals in the High Court and other appellate courts in Australia and Hong Kong. It was Mr Reynolds’ familiarity with the jurisdiction to reopen proceedings that paved the way for the Court to dismiss Mr Hudson’s application and make the costs order on 30 March 2015 in favour of Mr Sigalla.
The memorandum of fees that Mr Reynolds rendered on Mr Sigalla in respect of the professional services covered by the costs order is in evidence. A copy of the same memorandum of fees was included in the bill of costs filed by Mr Sigalla on about 9 March 2016.
The time that Mr Reynolds devoted to preparing for and appearing in the hearing before me on 10 March 2015 included a review of the numerous issues raised in my first judgment in Hudson v Sigalla[13] and, ultimately, extended to consideration of s.58(3) of the Bankruptcy Act and related provisions concerned with annulment of a bankruptcy.
[13] [2014] FCCA 1652.
Mr Reynolds adopts the submissions relied on by Mr Botsman in support of an application for:
a)enforcement of his particular lien in respect of that portion of the costs order that corresponds to his unpaid fees; alternatively
b)an award of costs in a lump sum.
Regarding the enforcement of his particular lien, Mr Reynolds seeks an order requiring Mr Hudson to pay him the amount of $97,363.20 comprising Mr Reynolds’ unpaid fees of $88,000 together with interest of $9,363.20[14]. Mr Reynolds does not make any claim in respect of his costs of enforcing his lien.
[14] Interest is calculated in accordance with the approach taken at [25] of the affidavit of Christopher Botsman dated 12 July 2016.
Regarding the alternative relief sought of an award of costs in a lump sum, Mr Reynolds acknowledges that his fee rates are higher than those charged by most senior counsel and submits that for that reason, it is appropriate to discount his fees and the interest to which he is entitled by 10 per cent. Applying a 10 per cent discount to $88,000 would result in a lump sum award of $79,200. He submits that adding 16 months of interest at the rate of 8 per cent to the sum of $79,200 would add interest of $8,426.88 and result in a lump sum award of $87,626.40.
I am not persuaded that Mr Reynolds should receive any amount in respect of interest up to this judgment. First, it was not the fault of Mr Hudson that Mr Sigalla did not pay those who formerly represented him. Secondly, Mr Sigalla consented to an order denying him any entitlement to the fruits of the existing costs order and consented to the declaration establishing the practitioners’ liens. Mr Hudson likewise did not oppose those declarations at the hearing of the Applications in a Case.
Further, I have concluded that a higher discount on Mr Reynolds’ fees should be imposed than that suggested by him. As he concedes, his fee rates are high compared to those of senior counsel generally and substantially exceed the upper limit of the range for senior counsel in the Federal Court National Guide to Counsel Fees[15]. Mr Reynolds’ involvement, while critical to the re-opening of the proceedings early in 2015, was otherwise limited. I have applied a 25 per cent discount to arrive at a lump sum of $66,000.
[15] The National Guide was last published in July 2013 and I have made allowance for that.
The fees due to Mr Botsman
Mr Botsman’s fees were invoiced in the sum of $93,911.40. He was engaged throughout the bankruptcy proceedings and played a leading role on behalf of Mr Sigalla for a significant part of those proceedings. His fee rate is fair and reasonable as compared with amounts charged by other experienced junior counsel. He concedes that a discount of 10 per cent might appropriately be applied to the sum due to him on account of his fees although he does seek interest in the same amount as the discount.
Consistently with my finding in relation to the amount due to Mr Reynolds, I will not allow any amount in respect of interest[16]. Further, I have decided to apply a further 10 per cent discount by reason of the fact that the proceedings would not have needed to have been re-opened if the issues clearly articulated by Mr Reynolds had been dealt with in the initial proceedings. This produces a rounded down lump sum of $75,000.
[16] Interest will of course be payable after judgment in accordance with the Rules of this Court and the Federal Court.
The fees and disbursements due to Kemp Strang
Kemp Strang acted for Mr Sigalla throughout the bankruptcy proceedings. Kemp Strang claims a security interest in the costs order for outstanding fees and disbursements in the sum of $251,579.99. There are some difficulties with the solicitors’ claim. First, although he was presented with material less comprehensive than that available to me, Registrar Ng’s estimate represented a discount of around 40 per cent on the claim. Secondly, Kemp Strang used a single file for both the bankruptcy proceedings in this Court and other proceedings between Mr Hudson and Mr Sigalla in the Supreme Court of NSW. The material exhibited to the affidavit of Mr Harrison is put forward to establish that Mr Harrison has managed to isolate the costs incurred in respect of the proceedings in this Court by reference to that file. Mr Hudson has made submissions that that proposition is unreliable. I accept that there is some risk that the costs claimed by Kemp Strang may include costs actually incurred in relation to the Supreme Court proceedings. Thirdly, in his post hearing submissions at [5], Mr Hudson raises some additional objections of detail.
Finally, Mr Sigalla has asserted from the bar table that he paid some of the disbursements claimed by Kemp Strang. Mr Harrison conceded from the bar table that Mr Sigalla did pay for transcript. I have not found any claim for the cost of transcript in Kemp Strang’s accounts although they do charge for time spent obtaining transcript. Page 142 of the exhibit to Mr Harrison’s affidavit establishes that Kemp Strang obtained transcript using Mr Sigalla’s credit card. There may have been other disbursements claimed by Kemp Strang which were in fact paid by Mr Sigalla. It would, however, be unfair to deny the solicitors any recompense for disbursements paid by Mr Sigalla in circumstances where Mr Sigalla has surrendered any claim to costs in favour of the practitioners. Rather, the solicitors should recover their reasonable costs (including disbursements) but should account to Mr Sigalla for any disbursements paid by him.
Taking all of these factors into consideration, I have concluded that a discount of 30 per cent should be applied to the claim by Kemp Strang. This produces a lump sum award in their favour of $176,106. Again, I will not award any amount in respect of interest up to this judgment for the same reasons as I have declined to do so in relation to the claims by Mr Reynolds and Mr Botsman.
Costs
I have decided that there should be no order as to costs of the Applications in a Case. While I accept that the Court has a discretion to award costs in favour of a practitioner enforcing a particular lien, the Court’s power to grant or withhold a costs order is in general terms very wide. The Applications in a Case were resisted by Mr Hudson not on any point of principle in relation to the liens asserted by the practitioners, but, rather, out of an apprehension that this was a device being employed in order to impose an indemnity costs burden on him when he was entitled to the protection of a taxation. That fear was, at least in his mind, substantiated by what was contained in Exhibit 1. That represented an agreement between Mr Sigalla and the practitioners that they should recover essentially all of the value of their respective liens against Mr Hudson.
The outcome is that Mr Hudson will be required to pay more in relation to costs than was represented by the estimate by Registrar Ng. However, the practitioners will recover less than they sought. Ultimately, all Mr Hudson sought out of these applications was a clear statement from the Court of what he has to pay and who he has to pay it to. The outcome gives Mr Hudson what he requires for the purposes of certainty and a substantial part of what the practitioners have sought. In these circumstances, I have concluded that the practitioners (who acted on their own behalf in the Applications in a Case) and Mr Hudson should each bear their own costs of those applications.
I will make the orders set out above these reasons for the reasons given.
I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of Judge Driver
Date: 5 September 2016
ATTACHMENT
Jurisdiction
The jurisdiction to adjudicate the assertion by practitioners of a particular lien after final costs orders have been made is established by Roam Australia Pty Ltd v Telstra Corporation (Roam)[17]. In Roam, Lehane J cited (at 2-3) Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd (Caboolture)[18] for the proposition that a “Court has power to make, after the entry of final orders, further orders which do not alter them but may be described as supplemental to them”.
[17] [1997] FCA 980 at 2-3, per Lehane J.
[18] (1993) 45 FCR 224 at 234-236.
In Ashby v Slipper (No 2)[19] Flick J cited Caboolture in the following passage[20]:
Notwithstanding the fact that the substantive proceeding between Messrs Ashby and Slipper has concluded, the Court nevertheless retains jurisdiction to make the orders sought: Camp Curlewis Resorts Pty Ltd v Hamersley Iron Pty Ltd (Unreported, Federal Court of Australia, Branson J, 20 December 1994). Even after a judgment has been passed and entered, the Court retains a power to make what are sometimes referred to as “supplemental orders” which do not vary or alter orders previously made: Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd (in liq) (1993) 45 FCR 224 at 234 to 235 per Lee, Hill and Cooper JJ. And it is appropriate to make the application for such an order in the proceeding in which the evidence or other material was first filed: Holpitt Pty Ltd v Varimu Pty Ltd (1991) 29 FCR 576 at 577.
[19] [2016] FCA 550.
[20] at [9].
In addition to supplementing costs orders by enforcing a particular lien, courts have supplemented costs orders by fixing costs in a gross sum. In Short v Crawley (No 45)[21], White J cited Caboolture after making the following statement:
Further, in my view, a gross sum costs order is a supplemental order that makes more specific provision for the implementation of the earlier costs order by providing an alternative mode of enforcing it, that does not alter the substantive relief given by the previous costs order, and falls within the narrow class of exceptions to the principle that when proceedings have been disposed of by a final order they are at an end (Phillips v Walsh at 209-210).
[21] [2013] NSWSC 1541.
The second basis is the Court’s associated jurisdiction. Since it is conceded that the controversy involves a federal matter[22], the assertion of the federal issue attracts the jurisdiction of the Court to the relevant matter, of which the federal issue may form only part[23]. Once federal jurisdiction is attracted to the Court, the jurisdiction which is exercised throughout the case will be federal, even in respect of non-federal claims, provided:
a)such claims arise out of the same substratum of facts; or
b)are so related that the determination of one claim renders the other claim oitiose[24].
[22] Section 79 of the Federal Circuit Court of Australia Act relevantly provides that the Court “has jurisdiction to award costs in all proceedings before the Federal Circuit Court of Australia … other than proceedings in respect of which any other Act provides that costs must not be awarded” and that the “award of costs is in the discretion of the [Court]”.
[23] see e.g., Moorgate Tobacco v Phillip Morris (1980) 145 CLR 457 at 472, 476.
[24] See e.g., Fencott v Muller 152 CLR 570 at 606-8; Re Wakim (1999) 198 CLR 511 at [135].
Since the general law claim for the declaration and enforcement of a particular lien satisfies both provisos, the general law claim falls within the Court’s associated jurisdiction[25]. In addressing its associated jurisdiction this Court[26], has applied the same or similar principles.
[25] Section 18 of the Federal Circuit Court Act relevantly provides that: “… jurisdiction is conferred on the [Court] in respect of matters not otherwise within its jurisdiction that are associated with matters in which the jurisdiction of the [Court] is invoked”.
[26] See e.g., Fox v Robinson [2003] FMCA 107 per McInnis FM.
Power to declare a particular lien
Section 14 of the Federal Circuit Court Act relevantly provides that in every matter the Court must grant either absolutely or on such terms and conditions as it thinks just “… all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her … so that, as far as possible all matters in controversy between the parties may be completely and finally determined and all multiplicity concerning an of the those matters be avoided”. A similarly worded provision is contained in s.22 of the Federal Court Act 1976 (Cth) (Federal Court Act).
Secondly, s.15 of the Federal Circuit Court Act relevantly provides that the Court “… has power in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, as the [Court] thinks appropriate[.]”. A similarly worded power is contained in s.23 of the Federal Court Act. In Ho v Grigor[27] it was held[28] that the scope of an “order” under s.23 of the Federal Court Act will include a final judgment by way of a declaration if it determines in a binding way, rights and/or liabilities of one or more of the parties.
[27] (2006) 151 FCR 236.
[28] at [54].
In an extra judicial article concerning declarations, French J observed of ss.22 and 23 of the Federal Court Act that[29]:
There is little room for debate that the Court would be empowered under those provisions to grant declaratory orders.
[29] French J, “Declarations – Home Simpsons’ remedy – is there anything they cannot do?” [2007] FedJSchol 24.
Thirdly, s.16 of the Federal Circuit Court Act relevantly provides that the Court:
... may, in relation to any matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is sought or could be claimed.
The analogue of s.16 in the Federal Court Act is s.21. In Orison Pty Ltd v Strategic Minerals Corp NL[30] French J considered s.21 and held that the Court did not lack power to grant the declaratory relief sought by reason of any distinction to be drawn between accrued and original jurisdiction. In Orison, the applicant asserted a federal claim under the Trade Practices Act 1975 (Cth) and also sought a declaration that the second respondents were in breach of a provision of the Companies Code (WA). The second respondent contended that the Court lacked power to make the declaration because the power derived from s.21 related only to a matter in which the Court has “original jurisdiction”. It was further contended that “original jurisdiction” denoted the jurisdiction to deal with federal claims only and not claims arising under the accrued jurisdiction. Rejecting the contention, French J held that:
It is quite clear in my opinion, that the accrued jurisdiction comes to this court as part of the jurisdiction to deal with the matters upon which the court is authorised by the Parliament to adjudicate. Where that authority relates to original jurisdiction, it extends to the common law claims forming part of the controversy. The jurisdiction to resolve those claims that accrues when a federal claim is brought in the original jurisdiction of the court, is also part of that original jurisdiction. The court does not lack power to grant the declaratory relief sought by reason of any distinction to be drawn between accrued and original jurisdiction.
[30] (1988) 13 ACLR 637.
The particular liens in issue
As noted above, the jurisdiction of a court to entertain an application by a practitioner seeking to enforce a lien is well established. Specifically, Roam recognises that a practitioner may seek to supplement a final costs order, though the practitioner is not a party to the proceeding, on the well-established principle that third parties have standing where the order sought by the third party would merely supplement the final orders. This is such a case. The applications do not affect the substance of the costs orders, but merely change the mode of quantification and the recipient of the costs order. By conceding that he is really only interested in who he has to pay (so that he only pays once), Mr Hudson has already conceded that he is not interested in the second variation.
In accepting the practitioners’ entitlement to a costs order in pursuance of their particular liens, I accept the following propositions.
First, a practitioner whose exertions are instrumental in securing a fund for a client (a judgment, settlement or costs order)[31] is entitled to a lien that secures his or her interest in the fund and his or her eventual payment out of the fund. The classic statement of a practitioner’s rights to have her or his costs paid out of the fruits of litigation is the following excerpt from the judgment of Jordan CJ in Ex parte Patience; Makinson v The Minister[32]:
If … as the result of legal proceedings in which the solicitor has acted for the client, the client obtains a judgment or award or compromise for the payment of money, although the solicitor acquires no common law title to his client’s right to receive the money or to any part of that right, he acquires a right to have his costs paid out of the money, which is analogous to the right which would be created by an equitable assignment of a corresponding part of the money by the client to the solicitor.
[31] The fund includes an order for costs: see e.g., Worrell v Power (1993) 46 FCR 214.
[32] (1940) 40 SR (NSW) 96 (at 99-100).
I accept that, as with solicitors, a barrister whose exertions have contributed to a fund has a lien in respect of his/her unpaid fees[33].
[33] Simpson v Rowe; Trukulja v Efron [2014] VSCA 76 at [100].
Secondly, the role of practitioner in bringing the fund into existence is of such importance that equity recognises proprietary rights which enable the solicitor to be paid out of the fund[34]. The rationale for this recognition is that if the solicitor had not done the work, there would be no fund in existence.
[34] Firth v Centrelink (2002) 55 NSWLR 451 at [48] per Campbell J.
Thirdly, the first precondition for payment to the practitioner out of the fund is notice to the debtor. Justice Campbell (as his Honour then was) addressed this requirement in Firth v Centrelink[35]:
In the situation where the property which has been recovered by the solicitor's exertions, takes the form of a debt which is owed to the client …If the debtor, having received notice of the solicitor's security, chooses to pay the debt, equity will regard the debtor as having the same obligation to the solicitor as he would have had if payment had not been made. ….If the debt continues to be unpaid, notice to the debtor is needed before the court will actually order the debtor to pay the amount of costs to the solicitor, and not to the client, but that does not mean that such notice is necessary for the existence of the lien.
[35] at [54].
In this case, Mr Hudson was notified of at least Mr Botsman’s lien by letter dated 9 February 2016 addressed to his solicitors and more recently by the Applications in a Case.
Fourthly, the second precondition for payment to the practitioner is to ascertain the quantum of the practitioner’s interest. The Full Court of the South Australian Supreme Court addressed this requirement in Scammell & Co v WorkCover Corporation[36] in the following terms[37]:
As the particular lien extends to property not in the solicitors’ possession, the order is generally directed at the judgment debtor to pay the solicitor the amount of his or her costs when ascertained (whether by agreement or by assessment) and, in the meantime, to restrain the judgment debtor from paying, and the client from receiving, the money without first accounting to the solicitor for the costs. Ex parte Patience (1940) 40 SR (NSW) 96 at 102 per Jordan CJ. The fact that there has been no specific court order for the amount of the costs presently sought and no taxation or assessment of those costs is not by itself a basis for refusing the protection of a particular lien by, for example, a restraining order. However, its enforcement by a court is dependent on either: (a) an agreement by the client as to the amount owing; (b) a court fixing that amount; or (c) a taxation/assessment of costs.
[36] (2006) 95 SASR 278.
[37] at [58] per Layton J, with whom Nyland and Sulan JJ concurred.
As Campbell J observed in Firth[38]:
Once the amount of the practitioner’s entitlement has been ascertained, the practitioner is entitled to an order that the amount of his entitlement be paid to him from the fund, notwithstanding opposition from the client.
[38] at [35h].
In this case, the practitioners considered that ascertainment had taken the form of an agreement with Mr Sigalla[39].
[39] In Exhibit 1, Mr Sigalla agrees that he has not paid invoices rendered by the practitioners.
It was submitted that in the case of a costs order it is not necessary to quantify the fund because the costs order defines the fund in terms of payment of the successful party’s “costs and disbursements”. I found that it was necessary to quantify the fund by the existing taxation mechanism or by a lump sum costs order.
The practitioners also contended that, it would frustrate the rationale for a lien, which is “to prevent the client from deflecting the moneys away from the solicitor,”[40] to require the fund to be quantified by a taxation because:
c)taxation is only appropriate to quantification of a party’s costs; and
d)the practitioners are not parties to the taxation and the party no longer has any incentive to prosecute the taxation[41].
[40] Akki Pty Ltd v Martin Hall Pty Ltd (1994) 35 NSWLR 470 at 483 per Windeyer J.
[41] Save for any disbursements that the party may have paid for.
While that objection could in my view have been overcome, I ultimately preferred the option of a lump sum costs order.
In addition to payment of the practitioners’ unpaid fees, they also claimed interest on the unpaid fees together with the costs of enforcement (which would include the costs of this application to establish the quantum of the cost owed)[42]. I accept the principle but did not apply it for the reasons given.
[42] see e.g., Simpson v Rowe [2011] VSC 149 at [25],[26] per Habersberger J; Firth, at [113] – [117] (enforcement costs), [118] (interest).
Enforcing the practitioners’ particular liens
The notion that there is no fund until the client has quantified the fund by agreement or taxation was rejected in In the Estate of Fuld (No 4)[43]. After noting that it was immaterial that the costs were ordered to be paid personally to the client[44], Scarman LJ addressed the question of whether there could be a fund in sight before taxation had determined the amount of the fund. His Lordship answered the question in the following terms[45]:
As a matter of common sense, the fund has been in sight, at least since the court’s order for payment of these costs became final by dismissal of the appeal proceedings. Is it to be suggested, merely because the client has not ascertained the amount of the fund by agreement or taxation, that there is no fund? If this were the law, the client would indeed be able to deprive the solicitor of his lien, which, as was emphasised in Ex parte Bryant, it is the policy of the law to protect. The cases stress that the solicitor’s right is to the exercise by the court of an equitable jurisdiction. It would be an absurdity if such a jurisdiction could be stultified by the failure of the client to take the steps necessary to realise the solicitor’s security. Equity looks on as done what ought to be done – the old maxim has validity in such circumstances.
[43] [1968] P. 727.
[44] This observation resolves Mr Hudson’s contention that the rights of set off that he hopes to deploy against Mr Sigalla are somehow relevant to the practitioner’s beneficial entitlement to the costs order: see HS[5],[3].
[45] at 736.
Even though I found that it was necessary in this case to quantify the fund for the purpose of enforcing payment to the practitioners, the use of a party and party taxation was said to be unsuited to such a task. First, there is the prejudice occasioned by the fact, recognised by Scarman LJ, that the client has no incentive to progress the taxation and the practitioners are not parties to the taxation. Secondly, there is the related problem, apparent in this case, of the judgment debtor delaying the taxation process and deploying obstacles to the practitioners recovering their costs, such as contending that it has a right of “set-off” against Mr Sigalla. Thirdly, there is practical difficulty that taxation produces a single amount that is not broken down into the costs of the various practitioners whereas the concern of the particular lien is to protect individual practitioners to ensure payment of their unpaid costs[46]. Fourthly, where (uniquely in the case of a costs order) the fund is defined in terms of the practitioner’s costs and disbursements there is said to be no need for a party and party taxation when the law requires the practitioner’s costs to be ascertained by agreement, assessment or taxation – with the client. Fifthly, where, as in this case, the practitioner’s entitlement to a particular lien is established, it subverts the policy of the law to use a method of quantification (party and party taxation) that significantly decreases the costs protection afforded to the practitioners.
[46] Mr Hudson requested a breakdown of the Registrar’s estimate and the request for a breakdown was denied: 26 July 2016 affidavit of D. Sturzaker at [20],[21].
Accepting that in this case, for the purposes of the costs order, it is necessary to separately quantify the fund, the Court has ample jurisdiction and power to quantify the fund in an amount that reflects the respective entitlements of the practitioners without having to rely on a protracted party and party taxation whose objects are inimical to the particular lien. That is precisely what occurred in Leamey v Heath & Anor[47]. Mr Leamey, a solicitor, was retained by a defendant in criminal proceedings in the Local Court and Mr Leamey in turn retained senior counsel and junior counsel. When the information was dismissed the Magistrate made an order for costs in favour of the defendant that allotted specific sums of money for payment of the expenses of the practitioners as well as witnesses. The moneys were duly paid by the Commissioner of Police. In the case of counsel, the Magistrate assessed their costs after memorandums of fees from the barristers had been tendered. In making the costs order, the Magistrate relied on provision in the Justices Act 1902 (NSW) empowering the Magistrate to order the prosecutor to pay the defendant such professional costs as the Court considered just and reasonable in an amount that the Court considered just and reasonable in the circumstances of the case. Campbell J held that Mr Leamey was entitled to a lien over the moneys paid into Court and noted the undertaking of Mr Leamey to allot the money paid into court to counsel and witnesses in accordance with the amounts assessed by the Magistrate.
[47] [2001] NSWSC 1095. In Firth v Centrelink (2002) 55 NSWLR 451, [35(h)], Campbell J (as his Honour then was) cites Leamey as authority for the proposition that: “If the quantum of the solicitor’s entitlement has been ascertained, the solicitor is entitled to an order that the amount of his entitlement be paid to him from the fund, notwithstanding opposition from the client”.
In this case, the Court has ample jurisdiction and power to quantify the fund by having regard to fee memoranda and invoices, just as the Magistrate did in Leamey. Jurisdiction is conferred by ss.79 (costs) and 18 (associated jurisdiction) of the Federal Circuit Court Act and power is conferred by rule 21.02 of the Federal Circuit Court Rules and rules 39.05 and 40.02 of the Federal Court Rules.
Lump sum costs orders
The power to fix costs in a lump sum is not confined to protracted and complicated legislation but extends to simple cases[48].
[48] Playcorp Group of Companies Pty Ltd v Peter Bodum A/S (No 2) [2010] FCA 455 at [3],[4].
Such an order can be made notwithstanding that an earlier costs order contemplated taxation in the ordinary way[49] or notwithstanding that the normal process of taxation has already commenced[50].
[49] Salfinger v Ningini Mining (Aust) Pty Ltd (No 5) [2008] FCA 1119.
[50] Dunstan v Seymour [2006] FCA 917.
It would be inconsistent with the objects of the Federal Circuit Court Rules[51] and the terms of rules 21.02(2)(a)-(b) that the costs in issue be subjected to the detailed scrutiny often applied in taxations[52]. In fixing a lump sum it is well established that it is appropriate to apply a “much broader brush” than would be applied on a taxation[53]. Nonetheless, the discretion to make a lump sum order, no less than the general discretion to order costs must be exercised judicially and in accordance with principle. In particular, in making a lump sum estimate the approach of the Court should be “logical, fair and reasonable”[54].
[51] According to rule 1.03 of the Federal Circuit Court Rules, the object of the rules is to assist the “just, efficient and economical resolution of proceedings” and to that end the rules aim to help the Court to “operate as informally as possible, to use streamlined processes and to encourage the use of appropriate dispute resolution procedures”.
[52] Leary v Leary [1987] 1 All ER 261 at 265.
[53] Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 at [196]-[200].
[54] Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123; Nine Films & Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046 at [8].
A court will commonly take as its starting point the evidence of the charges for costs and disbursements made by the lawyers of the successful party and then adjust the figure to take account of:
a)the acceptability of the charges made;
b)the conduct of the proceeding; and
c)the measure of success on issues, to produce a sum which as a matter of judgment is neither overcompensatory nor prejudicial to the successful party[55].
[55] Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051 at [24], Finn J.
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