Hypoct Pty Ltd v Mesh and Bar Pty Ltd
[2013] FCA 207
FEDERAL COURT OF AUSTRALIA
Hypoct Pty Ltd v Mesh & Bar Pty Ltd [2013] FCA 207
Citation: Hypoct Pty Ltd v Mesh & Bar Pty Ltd [2013] FCA 207 Parties: HYPOCT PTY LTD ACN 109 635 716 v MESH & BAR PTY LTD ACN 084 464 746 File number: NSD 30 of 2011 Judge: EDMONDS J Date of judgment: 12 March 2013 Catchwords: COSTS – order that costs be “assessed” in default of agreement – does that without more authorise determination of costs otherwise than by taxation under Pt 40 of the Federal Court Rules 2011, such as the costs assessment regime under the law of New South Wales Legislation: Federal Court Rules 2011, Pt 40 Date of hearing: Determined on the papers Date of last submissions: 26 February 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 18 Counsel for the Applicant: Mr J Levingston Solicitor for the Applicant: Christopher Levingston & Associates Solicitor for the Respondent: Kanji & Co
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 30 of 2011
BETWEEN: HYPOCT PTY LTD ACN 109 635 716
Applicant/Cross-RespondentAND: MESH & BAR PTY LTD ACN 084 464 746
Respondent/Cross-Claimant
JUDGE:
EDMONDS J
DATE OF ORDER:
12 MARCH 2013
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The application be dismissed.
2.The applicant pay the respondent’s costs of the application on an indemnity basis.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 30 of 2011
BETWEEN: HYPOCT PTY LTD ACN 109 635 716
Applicant/Cross-RespondentAND: MESH & BAR PTY LTD ACN 084 464 746
Respondent/Cross-Claimant
JUDGE:
EDMONDS J
DATE:
12 MARCH 2013
PLACE:
SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
This is an interlocutory application by the applicant to vary an order as to costs made by consent on 29 February 2012 and entered on 1 March 2012 (“the Costs Order”). The application is opposed by the respondent.
The Costs Order reads:
1.The Respondent/Cross-Claimant pay the costs of the Applicant/Cross-Respondent on the party/party basis as agreed or assessed.
The variation sought is the addition of the following words after the word “assessed”:
…by reference to the cost assessment scheme operating under the law of New South Wales.
The reason the variation is sought is because the Manager Costs Assessments within the Supreme Court of New South Wales has refused to assess the party party bill of costs lodged by the applicant for assessment unless a “more specific order” is provided. By letter dated 21 November 2012, the Manager Costs Assessments, wrote to the applicant’s solicitors in the following terms:
I refer the above party party bill of costs for a Federal Court matter that has been lodged for Costs Assessment. I note your correspondence to the Manager Costs Assessment setting out your reasons for lodging in this forum rather than having the party party costs quantified in accordance with Part 40 of the Federal Court Rules and our subsequent telephone conversation.
In particular you refer to Note 2 to Federal Court Rule 40.02:
“The Court may order that the costs be determined by reference to a cost assessment scheme operating under the law of a State or Territory.”
The Federal Court order you rely on is:
“The Respondent/Cross-Claimant pay the costs of the Applicant/Cross-Respondent on the party/party basis as agreed or assessed.”
Without an order that the costs be assessed under the NSW scheme or legislation there does not appear to be a sufficiently specific order to rely on Note 2 and invoke the NSW costs assessment regime, particularly as both parties themselves appear to be based in Queensland and this is a party party bill.
You may be able to provide a more specific order, otherwise I would propose to refund the filing fee pursuant to s354 of the Legal Profession Act 2004 and close this file.
Neither the applicant’s application, nor its evidence or written submissions filed in support of its application, specify the power of the Court relied on to make the variation sought. The general powers of the Court in Div 1.3 of the Federal Court Rules 2011 aside, the power to vary an order that has been entered is dealt with in Rule 39.05 in the following terms:
39.05Varying or setting aside judgment or order after it has been entered
The Court may vary or set aside a judgment or order after it has been entered if:
(a) it was made in the absence of a party; or
(b) it was obtained by fraud; or
(c)it is interlocutory; or
(d)it is an injunction or for the appointment of a receiver; or
(e)it does not reflect the intention of the Court; or
(f)the party in whose favour it was made consents; or
(g)there is a clerical mistake in a judgment or order; or
(h)there is an error arising in a judgment or order from an accidental slip or omission.
None of the heads of power under Rule 39.05 would seem to support the variation sought. I include in that para (f) which, in my view, is concerned with the variations of an order in favour of a party which results in the order being less favourable to that party. Hence the requirement for the party’s consent. But that is not this case. Arguably para (e) is relevant in that the Costs Order does not reflect the intention of the Court that, in default of agreement, the applicant’s costs be taxed on the party party basis in accordance with Pt 40 of the Federal Court Rules. But that is contrary to the variation sought by the applicant’s application.
FACTUAL CONTEXT
The factual context is not in dispute:
(1)The respondent served on the applicant a notice of offer of compromise (Form 45) dated 6 February 2012.
(2)The applicant served on the respondent a notice of acceptance of offer of compromise (Form 46) dated 20 February 2012.
(3)On 21 February 2012, the applicant’s solicitors wrote to the respondent’s solicitors relevantly as follows:
Thank you also for sending your email to us today specifying reasons for asserting that a notice of discontinuance and a deed of settlement are needed to end the proceedings.
We disagree. The appropriate way to end the proceedings is to deliver to the court an instrument signed by the parties for consent orders to be made by the court to give effect to the agreement of the parties formed by the acceptance of the offer to compromise.
Attached for your attention is such an instrument. Please let us know when we may collect the instrument signed by you on behalf of the Respondent / Cross claimant. We will sign the instrument on behalf of our client and arrange for it to be delivered immediately to the court.
Please let us know today if your client instructs you not to sign the instrument. If so, we may need to file a notice of motion seeking that such orders be made at a contested hearing.
Order 2 of the instrument attached to the applicant’s solicitors letter was identical to the Costs Order.
(4)On 28 February 2012, the respondent’s solicitors sent an email to the applicant’s solicitors which read:
Further to our conversation today, I confirm that our client has paid the $50,000 into your firm’s trust account.
Accordingly, we propose the following consent orders be made by the Court to finalise the proceeding:
1.That the Applicant’s costs be taxed on a party-party basis in accordance with Division 40.2 of the Federal Court Rules;
2.That the Respondent’s costs of the motion for discovery filed on 28 July 2011 be taxed on a party-party basis in accordance with Division 40.2 of the Federal Court Rules;
3.That the costs in respect of orders 1 and 2 be paid by the respective parties within 28 days of the costs assessor’s determination(s);
4.That the proceeding be discontinued (by filing a Notice of Discontinuance) upon payment of the Applicant’s party-party costs by the Respondent, and payment of the Respondent’s costs of the Motion for discovery by the Applicant;
5. Liberty to restore on 3 days’ notice.
Let me know your thoughts and how your client wishes to proceed.
(5)On or about 29 February 2012 when Mr Kanji of the respondent’s instructing solicitors was in Perth, he had a telephone conversation with Ms Salkavich, an employed solicitor in his firm, with words to the effect of:
Ms Salkavich: “CLA [the applicant’s solicitors] will not consent to our proposed orders.”
Mr Kanji: “Why?”
Ms Salkavich: “They have not provided any reason. They are insisting on their orders.”
Mr Kanji:“The most important thing is that they include an order discontinuing or dismissing the application and the cross claim so that judgment is not entered against Mesh & Bar. If they include that order then we can consent to their orders. Martin can sign the consent orders on my behalf.”
Ms Salkavich: “Okay.”
(6)On 29 February 2012, the respondent’s solicitors sent an email to my associate attaching the revised consent orders prepared by the applicant’s solicitors and signed by representatives of both parties.
(7)In an exchange of emails which took place on 13 March 2012, the respondent’s solicitors raised with the applicant’s solicitors the issue of agreement on costs in the following terms:
Where are you with costs? Are you in a position to furnish us with your untaxed bills for our review.
To which the applicant’s solicitors responded:
Thank you for your email.
We will let you know as soon as we receive instructions regarding our client’s costs claim.
(8)At no point up until this time did the applicant or its solicitors:
1.Refer to the New South Wales costs assessment scheme either explicitly or implicitly;
2.indicate to the respondent or Ms Salkavich that the latter’s proposed orders were unsuitable because they referred to the costs being “taxed…in accordance with Div 40.2 of the Federal Court Rules” as opposed to “costs…as assessed”; or
3.inform the respondent that the intention of the applicant’s proposed order was to invoke the Supreme Court costs assessment scheme noted in Note 2 to Rule 40.02 of the Federal Court Rules.
(9)The applicant was on notice from at least 28 February 2012 that the respondent believed that the matter had settled on the basis that the costs would be determined in accordance with the Federal Court’s taxation scheme and not by the NSW costs assessment scheme.
(10)On 5 April 2012, the applicant’s solicitors made an offer to the respondent’s solicitors to settle the claim of the applicant for costs.
(11)No response was received.
(12)On 25 June 2012, the applicant’s solicitors delivered to the respondent’s solicitors a copy of an application for costs assessment.
(13)On 26 July 2012, the applicant’s solicitors sent an email to the respondent’s solicitors requesting confirmation as to whether the respondent had any objection to the application for costs assessment.
(14)On 31 July 2012, the respondent’s solicitors sent the applicant’s solicitors an email in the following terms:
We have not received from you a draft application in a form expected for a Federal Court matter. In the circumstances we do not make any comment in respect of the proposed application.
(15)The respondent’s solicitors did not respond to the email but on 14 August 2012, unbeknown to the respondent, proceeded to file the application for costs assessment in the registry of the Supreme Court of New South Wales without informing the respondent.
FINDINGS
Having considered the evidence filed on behalf of each party, the affidavit of Mr Jeffrey Johnson sworn 4 February 2013 on behalf of the applicant and the affidavit of Mr Shan Shamsher Kanji sworn 26 February 2013 on behalf of the respondent, as well as the written submissions filed on behalf of each party, I have come to the conclusion that I must decline the application to vary the Costs Order in the terms sought. My reasons for coming to this conclusion are set out below but before I set out my analysis, I make the following findings of fact.
First, I find that prior to and at the time the Costs Order was made on 29 February 2012 the applicant, through its solicitors, intended to execute the Costs Order in the manner that it ultimately did, that is, in default of agreement as to costs, to lodge a party party bill of costs for assessment under the cost assessment scheme operating under the law of New South Wales.
Second, I find that prior to and at that same time the applicant, through its solicitors, had no intention, in default of agreement as to costs, of having a party party bill of costs taxed in accordance with Pt 40 of the Federal Court Rules.
Third, I find that neither the applicant’s intention as to the matter in [9] above, nor its intention as to the matter in [10] above were disclosed to the respondent, or its solicitors, prior to or at the time the Costs Order was made and, indeed, were not disclosed until 25 June 2012 when the applicant’s solicitors delivered to the respondent’s solicitors a copy of an application for costs assessment under the scheme operating under the law of New South Wales.
Fourth, I find that had the applicant, through its solicitors, disclosed the matters in [9] and [10] above prior to the time that the Costs Order was made, the respondent would not have consented to the Costs Order being made. Rather, the respondent would have allowed the applicant to pursue its foreshadowed notice of motion (see [7(3)] above). In those circumstances, it would have been incumbent on the applicant, and its solicitors, to disclose the applicant’s intentions as to the matters in [9] and [10] above to the Court. Upon such disclosure, the Court would not have made the Costs Order; indeed, it would not have made any order other than one which made it clear that, in default of agreement as to costs, the applicant’s costs be taxed in accordance with the Court’s scheme of taxation.
In the face of these findings, I also find that the conduct of the applicant, through its solicitors, while not misleading or deceptive, was devoid of the transparency that one should expect to be present in dealings and communications with the respondent and its solicitors, particularly where the Court was subsequently asked to make consensual orders to give effect to the parties agreement.
ANALYSIS
In my view, the use of the word “assessed” in a costs order of this Court without more, does not authorise or require, in default of agreement of the parties, that the costs of the party in whose favour the order is made, should be determined otherwise than by taxation in accordance with Div 40.2 of the Federal Court Rules. More is required than the mere use of the word “assessed” if the order is to mandate a determination of costs otherwise than by the system of taxation provided for under those Rules.
For example, one would expect recourse, in the text of the order, to the provisions of the Federal Court Rules, in particular Rule 40.02(c), such that the order read:
…as agreed or determined otherwise than by taxation namely, as assessed under the cost assessment scheme operating under the law of the State of New South Wales.
If the Costs Order had been so framed, not only would there be sufficient authority and direction for the award of costs to be determined otherwise than by the scheme of taxation under this Court’s rules, but there would have been sufficient specific authority and direction to enable the Manager of the costs assessment scheme in New South Wales to be satisfied that the NSW costs assessment regime had been invoked.
On the other hand, faced with the terms of such a proposed order, it is unlikely, in my view, that the Court could be persuaded to make such an order in this case, particularly as both parties are Queensland based.
For these reasons, as well as by reason of the findings I have made in [9] to [13] above and my doubt as to the power of the Court, outside its general powers, to make the variation sought, I decline to do so. The applicant remains free to have its costs taxed in accordance with the rules of this Court.
I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. Associate:
Dated: 12 March 2013
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