Lawrence v Sammut (No 2)
[2023] FedCFamC2G 980
•1 November 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Lawrence v Sammut (No 2) [2023] FedCFamC2G 980
File number(s): SYG 346 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 1 November 2023 Catchwords: BANKRUPTCY – Costs – application for review of Registrar’s order dismissing an application for costs by a party seeking taxation of costs following the objector’s electing at the time the matter had been set down for taxation to withdraw objections – whether the Registrar has delegated power to order costs in those circumstances – Registrar had such power – whether on review the Court was in a position to exercise discretion to order costs – Court not in a position to exercise discretion because Court not satisfied the objector would have elected to withdraw objections had he known that he would or may be liable for costs – matter listed for further directions. Legislation: Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 7, 174(2)(b), 192, 214, 254, 256
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 13.01
Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) r 13.01
Federal Court Rules 2011 (Cth) Pt 40, rr 40.17, 40.18, 40.19, 40.20, 40.21, 40.23, 40.24, 40.25, 40.26, 40.27, 40.28, 40.29, 40.31, 40.32, 40.33, 40.34
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 1.07, 21.01
Cases cited: Buckland v Watts [1970] 1 QB 27
Burrell v Reavill Farm Pty Ltd & Ors [2014] FCCA 1449
Conlan v Mladenis [2007] FCA 1129
Elders Trustee and Executor Company Ltd; Estate of Howard v Estate of Herbert (1996) 132 FLR 24
Lawrence v Sammut [2021] FCCA 1929
Lawrence v Sammut [2021] FedCFamC2G 84
Re Grant, Bulcraig & Co [1906] 1 Ch 124
Division: General Number of paragraphs: 43 Date of hearing: 19 October 2023 Place: Sydney The Applicant: Appeared in person Counsel for the Respondents: Mr A Spencer Solicitor for the Respondents: McLean & Associates Solicitors ORDERS
SYG 346 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF WAYNE JAMES LAWRENCE
BETWEEN: WAYNE JAMES LAWRENCE
Applicant
AND: ALICE ALEXANDRIA SAMMUT
First Respondent
PAUL WILLIAM CIANTAR
Second Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
1 NOVEMBER 2023
THE COURT ORDERS THAT:
1.The matter be listed for a directions hearing at 9:30 am on 22 November 2023.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
The respondents apply for the review of a Registrar’s order made on 26 April 2023 dismissing an application the respondents made that the applicant, Mr Lawrence, pay their costs from 27 May 2022. The Registrar made that order in the course of an application the respondents made for the taxation of their costs; and the costs the respondents seek relate to costs they incurred in connection with their applying to have costs taxed pursuant to Part 40 of the Federal Court Rules 2011 (Cth) (FC Rules).
BACKGROUND
Costs orders
On 20 August 2021 I published reasons for judgment on the basis of which I dismissed an application Mr Lawrence made to set aside a bankruptcy notice that had been issued against him on the application of the respondents, and ordered that Mr Lawrence pay the respondents’ costs of that application.[1] I granted the parties liberty to apply to vary or discharge the order for costs. Mr Lawrence applied to discharge the order for costs, and also to reopen his case, but on 3 September 2021 I dismissed his application.[2]
[1] Lawrence v Sammut [2021] FCCA 1929
[2] Lawrence v Sammut [2021] FedCFamC2G 84
Part 40 of the FC Rules
Having made an order for costs, the respondents under r 13.01 of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) and, after 31 August 2021, under r 13.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth), were “entitled to costs in accordance with” Part 40 of the FC Rules, unless the Court otherwise orders.
Part 40 of the FC Rules deals with the “taxation of costs”. “Costs”, in this context, denotes two things. The first is the “remuneration of a [lawyer] for professional services rendered to a client”.[3] The second is “disbursements”, being money the client or the client’s lawyer “has actually had to pay out to other people, such as witnesses, counsel, professional advisers and so forth”.[4] The expression “taxation of costs” presupposes a document, which is often referred to as a “bill of costs”, that lists items of work performed by a lawyer and, usually, goods or services acquired by the lawyer or the client, to each of which there is allocated an amount, which represents the claimed value of the work performed, or the amount expended in acquiring the relevant good or service. The “taxation of costs” denotes the process by which a person, often referred to as a “taxing officer”, “deal[s] seriatim with each item by way of allowance or disallowance”.[5] Part 40 of the FC Rules regulates the preparation and taxation of bills of costs.
[3] Elders Trustee and Executor Company Ltd; Estate of Howard v Estate of Herbert (1996) 132 FLR 24, at page 29 (NTCA, Gallop J)
[4] Buckland v Watts [1970] 1 QB 27, at page 37 (Sir Gordon Willmer)
[5] Re Grant, Bulcraig & Co [1906] 1 Ch 124, at page 128 (Farwell J)
The procedure for the taxation of costs is initiated by the person who wants his or her costs taxed filing a “bill for taxation”.[6] “Bill” is defined in the Dictionary to the FC Rules to mean a “bill of costs”. The bill for taxation, which must be served on each party interested in the bill,[7] must contain particulars of the work done by the lawyer, their staff and agents; the “costs” claimed for their work; and the disbursements incurred.[8]
[6] FC Rules, r 40.17
[7] FC Rules, r 40.19. The expression “party interested in the bill” is defined in the Dictionary to mean “a party or a person in whose favour or against whom an order for costs has been made”.
[8] FC Rules, r 40.18
After a bill for taxation is filed, a taxing officer must estimate the approximate total for which, if the bill were taxed, the certificate of taxation would be likely to issue.[9] The taxing officer makes this estimate in the absence of the parties; and, after he or she makes the estimate, the taxing officer must give notice in writing to each party interested in the bill, of the estimate.[10] Unless, within 21 days after the issue of the notice of estimate, a party interested in the bill files a notice of objection pursuant to r 40.21 of the FC Rules, and pays into the “Litigants’ Fund” an amount of $2,000 as security for the costs of any taxation of the bill, the amount of the estimate is the amount for which the certificate of taxation will be issued.[11]
[9] FC Rules, r 40.20(1)
[10] FC Rules, r 40.20(2), r 40.20(3)
[11] FC Rules, r 40.20(4)
If a party interested in the bill files a notice of objection to the estimate within the time provided by r 40.21 of the FC Rules and, within such time, also pays the $2,000 security into the “Litigants’ Fund”, a Registrar, on receipt of the objection, may direct:
(a)the parties attend before a designated Registrar for a confidential conference to identify the real issues in dispute, and reach a resolution of the dispute; or
(b)a provisional taxation, being the taxing of a bill of costs pursuant to r 40.23 of the FC Rules; or
(c)that the taxation of the bill proceed.
Rule 40.22 of the FC Rules provides for what will occur if the parties resolve their differences at a confidential conference:
If the parties achieve a resolution of the dispute at a confidential conference, a Registrar will:
(a) issue a sealed certificate of taxation for the amount agreed by the parties; and
(b) pay the monies paid into the Litigants' Fund in accordance with paragraph 40.21(1)(b) to:
(i) a party, in accordance with any agreement between the parties; or
(ii) if there is no agreement between the parties--to the party who objected to the estimate.
A bill will proceed to taxation only if a Registrar gives a notice under r 40.24 of the FC Rules that a bill is to be taxed; and the Registrar may give such notice only if a Registrar has directed, under r 40.21(2)(c) of the FC Rules, that the taxation of the bill proceed, or a resolution has not been achieved at a confidential conference, or a party has given a notice, pursuant to r 40.23(4), requesting a full taxation.[12] If a Registrar has notified the parties interested in the bill that a taxing officer is to tax the bill, a party on whom the bill of costs has been served, and who wants to object to any item of the bill, must file and serve on the parties interested in the bill a notice of objection that identifies each item or part of an item to which objection is taken, and states briefly, but specifically, why the item or part of the item should be disallowed, the amount by which it is contended the item should be reduced, and any authority on which the party relies. The party must file such objection not later than 14 days before the date appointed for taxing the bill.[13]
[12] FC Rules, r 40.24
[13] FC Rules, r 40.25
The FC Rules contain provisions that deal with the conduct of a taxation,[14] the powers a taxing officer may exercise in connection with a taxation,[15] the costs a taxing officer may allow and not allow on a taxation,[16] and the matters the taxing officer may have regard to when determining whether to allow a fee, allowance, or disbursement it is in the taxing officer’s discretion to allow.[17] On completion of a taxation, a taxing officer must issue a certificate of taxation.[18] A certificate of taxation has the force and effect of an order of the Court.[19]
[14] FC Rules, r 40.27
[15] FC Rules, r 40.28
[16] FC Rules, r 40.29, r 40.30
[17] FC Rules, r 40.31
[18] FC Rules, r 40.27(6)
[19] FC Rules, r 40.32(2)
There are two rules that are potentially important to the application before me. The first is r 40.33 of the FC Rules, which deals with the costs of taxation:
(1) A party who files an objection under rule 40.21 must pay the costs of taxation of all parties from the date on which the taxing officer notified the parties of the estimate unless:
(a) if the party is the party who filed the bill--the costs are taxed at more than 115% of the taxing officer's estimate; or
(b) in any other case--the costs are taxed at less than 85% of the taxing officer's estimate.
(2) A party may apply to the taxing officer to be relieved of the consequences of subrule (1) if:
(a) the party had offered to compromise the costs on terms more favourable than the costs were taxed; or
(b) the conduct of any other party at the taxation added significantly to the duration or cost of the taxation.
Second, there is r 40.34 of the FC Rules, which deals with review by the Court. That rule relevantly provides:
(1) A party who attended a taxation may apply to the Court for a review of the taxation and any consequential orders.
(2) The application must be in accordance with Form 133 and state, briefly but specifically:
(a) the items in the bill that are subject to challenge; and
(b) whether the party wants the item included, deleted or varied and, if varied, the amount of the variation.
(3) A party must not, on an application for review, raise any ground of objection, or response to an objection, not taken in the party's notice under rules 40.25(1) or 40.26(1).
Course of taxation
On 11 March 2022 the respondents filed and served on Mr Lawrence a Long Form Bill of Costs for taxation seeking costs in the amount of $64,984.10 (Bill). By letter dated 27 May 2022 a Registrar stated, pursuant to r 40.20(3) of the FC Rules, that $49,100 is the approximate total for which, if the Bill were to be taxed, the certificate of taxation would be likely to issue. Mr Lawrence responded by email sent on 6 June 2022 that he intended to object to the estimate; and on 17 June 2022 he filed a Notice of Objection to Estimate of Costs.
On 16 September 2022 the parties attended a confidential costs conference, but the parties did not resolve their differences. On 24 November 2022 the parties participated in a mediation in relation to the costs dispute, and in relation to other matters it is not necessary to set out here; but, again, the parties did not resolve their differences. On 16 December 2022 the Court notified the parties that the matter was listed “for a Full Taxation” on 3 March 2023 (Taxation Hearing).
On 1 March 2023 Mr Lawrence filed, pursuant to r 40.25 of the FC Rules, a “Notice of objection to bill of costs” dated 16 February 2023. I infer that this was served on the respondents before 27 February 2023 because, on that day, the respondents filed, pursuant to r 40.26 of the FC Rules, a “Notice of response to notice of objection”. In his notice of objection, Mr Lawrence made eight “general objections”, and he made specific objections to what appear to be most of the items and amounts the respondents claim in the Bill.
Near the commencement of the Taxation Hearing, the Registrar asked whether it would assist the parties if he expressed his views about Mr Lawrence’s general objections. Ms McLean, who appeared for the respondents, and Mr Lawrence both said that would assist. The Registrar then expressed his views. Potentially relevant to the application before me is what the Registrar said about the seventh general objection, which relates to the Bill and the claim for the costs of preparing the Bill. The Registrar said:[20]
The position in relation to costs changed in 2011 when the new scale commenced and under rule 40.33 there is a limited ability to award costs for taxation. Costs can only – the way it works in practice is this: that . . . unless there was offers of compromise the objector – in this case it’s the applicant, the objector to the estimate – can never get costs of a taxation except where . . . there has been conduct at the taxation that, basically, has been the cause of delay. So just to repeat, whatever happens – even if I – the result of today’s taxation is that costs are reduced exactly as sought by the applicant. That is reduced down to $18,091. Even though there’s a 45,000 reduction in costs the applicant will not get costs under rule 40.33, as I say, except in two situations.
One where there has been an offer of compromise. And, . . . secondly, subject to the rule about conduct at the taxation. And this is the essential point – or this is the important point I want to make at this stage: that where the applicant says here in the objection that there has been conduct by the respondents that form the basis of some ruling under . . . rule 40.33(2)(b) – and it’s said here in the notice of objection – that is the conduct in response and having the deficient bill prepared and filing the bill to commence the estimate and taxation process. The point here is that if you look carefully at that rule 40.33(2)(b) it only refers to conduct – and this is the important word – “at” the taxation.
So it can only be conduct right now at this hearing that can warrant some ruling under rule 40.33(2)(b). If it is conduct prior to today, prior to this hearing, that’s not relevant. So the key word in that rule is “at” – at the taxation. The taxation is what is about to occur when I go through the items of the bill and the objections. So what you’re left with is – as I say, leaving aside any offers of compromise, which I don’t want to be told about at this stage, and in the absence of some misconduct, if I can put it that way, at this hearing, which seems extremely unlikely by either party, the position is there’s no allowance under rule 40.33 for an objector to get costs. As I say, even if $45,000 is knocked off the bill. Because 44.33 is the exclusive code as to when costs can be allowed. That is costs of a taxation. I’m happy to be referred to any authority that may tell me I’m wrong, but that’s the position as I understand it.
[20] T7.20
The Registrar then noted there is “no express rule . . . about what happens if an objector wishes to withdraw the objection”.[21] The Registrar said that the practice is to allow an objector to withdraw the objection “in the same way as a party who initiates a case in the court can withdraw the claim”.[22] The Registrar suggested that this “happens frequently” in the Federal Court because an applicant (in the Federal Court) faces a “taxing fee of $5,000 approximately”; and the objector often does not know he or she has to pay that fee. The Registrar offered Mr Lawrence a short adjournment to allow him to consider his position. After Mr Lawrence asked some questions, the hearing was adjourned for three minutes; and, on the resumption of the hearing, Mr Lawrence said:[23]
We’ve had a discussion. I made an offer. Her clients are not willing to negotiate other than the 49,000. So with your consent I would like to withdraw the objection and close the matter down now.
[21] T9.10
[22] T9.15
[23] T14.20
Ms McLean said she accepted what the ordinary course was for the withdrawal of objections; but she said that she wanted to make submissions in relation to costs. The Registrar responded as follows:[24]
[T[he reason why in these circumstances costs aren’t ordered is because there’s no power. You see, 40.33 is, in my view, a code as to when costs can be ordered in the taxation process. And costs under rule 40.33 are dependent on an outcome – a taxation outcome, because otherwise you can’t assess costs, you see. I mean, there has got to be an outcome of a taxation before you can say whether there has been – I realise you will say, “Well, why can’t it be a condition of withdrawal of the objection?” In theory you’re entitled to raise that, but it seems to me that that goes against the policy of rule 40.33, which sets out really – I hate to use the word “code” – but it sets out, it seems to me, exhaustively the circumstances in which costs can be ordered. . . . So my point really is what I really need to hear from you on is, if you like, power. The question of discretion, you see, doesn’t really arise. It’s not a question of saying, “Well, it’s late in the process. A lot of costs have been incurred. It’s only just that my client gets some of those costs or get all those costs”. It’s a question of power. The way I understand – and subject to any authority you can cite on that rule, it just seems to me there’s simply no power.
[24] T14.35
Ms McLean later said that it is likely she would be instructed to ask that the taxation proceed; but the Registrar said it is “unlikely that I will force on a taxation when the objector is withdrawing his objection”; and that “taxation can’t proceed if the objection is withdrawn”.[25]
[25] T15.30
The hearing concluded by the Registrar making an order granting Mr Lawrence leave to withdraw his notice of objection filed on 17 June 2022, and noting that, as a result of that withdrawal, a certificate of taxation may now issue for the estimated amount of $49,100. The Registrar also ordered the matter be listed for argument on costs on 12 April 2023, and that the parties file written submissions before that date.
The parties filed written submissions, and these were supplemented by oral submissions made before the Registrar on 12 April 2023. The Registrar reserved his decision and, on 26 April 2023, delivered reasons for judgment on the basis of which he made the following orders:
1.The Respondents’ application to vacate the grant of leave given to the Applicant on 3 March 2023 to withdraw his Notice of objection to estimate of costs filed on 15 June 2022 (Estimate Objection) be dismissed.
2.Pursuant to s 192(1) of the Federal Circuit and Family Court of Australia Act 2021, the Respondents’ Bill of costs filed on 11 March 2022 (Bill) not be taxed and, if requested by the Respondents, a certificate of taxation be issued for the amount of $49,100.00.
3. The Respondents’ application for the taxing officer to proceed to tax the Bill be dismissed.
4.The Respondents’ application that the Applicant pay the Respondents’ costs from 27 May 2022 be dismissed.
5. If no application for review is made with[in] 28 days after today, the security for the costs of any taxation of $2,000.00, paid into Court by the Applicant in connection with the Estimate Objection, be refunded to the Applicant.
JURISDICTION TO REVIEW REGISTRAR’S ORDER
The respondents application for review relates only to order 4 of the orders the Registrar made on 26 April 2023; and the respondents make their application pursuant to s 256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFC Act) which, together with s 256(2), provide as follows:
(1) A party to proceedings in which a delegate has exercised any of the powers of the Federal Circuit and Family Court of Australia (Division 2) under section 254 may:
(a) within the time prescribed by the Rules of Court; or
(b) within any further time allowed in accordance with the Rules of Court;
apply to the Court for review of that exercise of power.
(2) The Federal Circuit and Family Court of Australia (Division 2) may, on application under subsection (1) or on its own initiative, review an exercise of power by a delegate under section 254, and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised.
A review under s 256(2) of the FCFC Act is a “hearing de novo”. That means that an:[26]
applicant for review under [s 256(2)] is under no obligation to demonstrate error on the part of the Registrar, and does not need to establish that the Registrar’s exercise of discretion miscarried in the sense described in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505: Pattison v Hadjimouratis [2006] FCAFC 153 at [153]- [154].
[26] Conlan v Mladenis [2007] FCA 1129, at [5] (Sundberg J)
The respondents’ application for review, therefore, is premised on the fourth of the orders the Registrar made on 26 April 2023 having been made pursuant to a power that has been delegated to the Registrar under s 254 of the FCFC Act. Subsection 254(1) provides that the Judges or a majority of the Judges of the Federal Circuit and Family Court of Australia (Division 2) (Court) may make Rules of Court delegating any of the powers of the Court to a “delegate” or a prescribed class of delegates. “Delegate”, as used in Chapter 3 of the FCFC Act, is defined in s 7 of the FCFC Act to include a Senior Registrar or Registrar of the Court.
Subsection 254(2) of the FCFC Act identifies the “kinds of powers of the” Court “the Rules of Court may delegate”. These include:
(b)the power, under subsection 192(1), to give directions about the practice and procedure to be followed in relation to a proceeding or part of a proceeding;
. . . .
(i) the power to make an order as to costs . . . .
The directions the Court may give under s 192(1) of the FCFC Act include the directions listed in s 192(2), one of which is to waive or vary any provision of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (GFL Rules) in their application to the proceeding.
Subrule 21.01 of the GFL Rules identifies particular powers that are delegated to a Registrar. These include the power under s 174(2)(b) of the FCFC Act to “give directions about the practice and procedure to be followed in relation to a proceeding or a part of a proceeding”;[27] and they include the powers identified in s 254(2) of the FCFC Act,[28] including the power “to make orders about the conduct of a proceeding”, the power to “make an order as to costs”, the power to “make an order exempting a party to proceedings from compliance with a provision of these Rules”, and to “exercise a power of the Court prescribed by these Rules”.
[27] GFL Rules, r 21.01(1), item 1
[28] GFL Rules, r 21.01(1), item 13, paragraphs (b), (i), (k), (l)
The respondents submit that in allowing Mr Lawrence to withdraw his notice of objection to the Bill, the Registrar was exercising the power under s 192(1) of the FCFC Act, and in particular the power to waive or vary any provision of the GFL Rules in their application to the proceeding; and that, by applying for an order for costs, the respondents had engaged the power to order costs delegated by paragraph (i) of item 13 to r 21.01 of the GFL Rules. Two sets of questions arise. First, what was the nature of the order or purported order the Registrar made in permitting Mr Lawrence to withdraw the notice of objection; and did the Registrar have the power to make such decision? Second, assuming the Registrar did have the power to make the order, did the Registrar have the power to make an order for costs in connection with the exercise of such power; and, if so, what is the source of that power?
Part 40 of the FC Rules contains no provision that empowers a Registrar to permit an objector to withdraw his or her objection to a bill of costs; and Part 40 of the FC Rules contains no provision that permits an objector to withdraw unilaterally a notice of objection. Further, it is difficult to characterise the Registrar’s decision to permit Mr Lawrence to withdraw his notice of objection as a direction waiving the application of r 40.21 of the FC Rules, because as a matter of fact Mr Lawrence did file a notice of objection pursuant to that rule on 17 June 2022.
The Registrar, however, was aware there is no provision that empowered the Court to permit an objector to withdraw his or her notice of objection. That is apparent from order 2 of the orders the Registrar made on 26 April 2023; the Registrar ordered, purportedly pursuant to s 192(1) of the FCFC Act, that the Bill not be taxed and, if requested by the respondents, a certificate of taxation be issued for the amount of $49,100. It appears, therefore, that the provisions the Registrar ordered be waived pursuant to s 192(1) of the FCFC Act are, first, r 40.21(2)(c) of the FC Rules which, as I have noted, provides that, on receipt of a notice of objection and the payment of $2,000 into the Litigants’ Fund, the Registrar may direct that the taxation of the bill proceed; and, second, r 40.24 of the FC Rules, which provides that the Registrar “will give notice that a bill is to be taxed if”, among other things, the Registrar has so directed under r 40.21(2)(c) of the FC Rules.
The table in r 21.01(1) of the GFL Rules does not include s 192 of the FCFC Act. It does include, however, s 254(2), including paragraph (k), namely, to make an order “exempting a party to proceedings from compliance with a provision of these Rules”. Assuming that Part 40 of the FC Rules falls within the expression “these Rules”,[29] the question arises whether an order that waives the operation of rr 40.21(2)(c) and 40.24 of the FC Rules may properly be characterised as “exempting a party to proceedings from compliance with a provision of these Rules”. In my view, such order may be so properly characterised. Without such order the respondents would have been entitled to proceed to tax their bill, and Mr Lawrence would have been bound by the consequences of such taxation proceeding, including his being liable to an order for costs under r 40.33 of the FC Rules. I am therefore satisfied that, by ordering that the Bill not be taxed, the Registrar, relying on s 192(1) of the FCFC Act, intended to waive the operation of rr 40.21(2)(c) and 40.24 of the FC Rules; and that he had the power to waive the operation of those rules.
[29] That assumption is correct. The effect of r 13.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules) is to incorporate Part 40 of the FC Rules. It has been held that the power under the equivalent to r 1.07 of the GFL Rules to dispense with compliance, or full compliance, with any of “these Rules” at any time applies to the Bankruptcy Rules – see Burrell v Reavill Farm Pty Ltd & Ors [2014] FCCA 1449, at [42]-[46]
The next question is whether the Registrar’s ordering that the operation of rr 40.21(2)(c) and 40.24 of the FC Rules be waived provided an occasion for the exercise of the power to order costs. The starting point to answering that question is s 214 of the FCFC Act, which provides:
(1) This section does not apply to:
(a) family law or child support proceedings; or
(b) proceedings in relation to a matter arising under:
(i) the Fair Work Act 2009; or
(ii) section 14, 15 or 16 of the Public Interest Disclosure Act 2013.
(2)The Federal Circuit and Family Court of Australia (Division 2) or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
(3) Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Circuit and Family Court of Australia (Division 2) or Judge.
The power to order costs is granted in broad terms; and, subject to any contrary rule, the power extends to making an order in relation to costs a party incurred in connection with any part of a proceeding, including that part of a proceeding that involves the taxation of costs.
The Registrar was of the view that r 40.33 of the FC Rules is the sole source of power to order costs in relation to taxation of costs. I agree, provided a party’s application to have his or her costs taxed proceeds to a taxation according to the provisions of Part 40 of the FC Rules. The power to order costs is engaged, however, when, pursuant to s 192(1) of the FCFC Act, an application is made, or consideration is given, to waive the operation of one or more of the provisions of Part 40. That is so because the waiving of one or more provisions of Part 40 of the FC Rules, as with the waiving of rules of court in general, calls for the exercise of discretion; and a usual consideration when determining whether to exercise a discretion is whether a party will suffer prejudice if the discretion is or is not exercised and, if a party will suffer prejudice, whether that prejudice can be mollified by making an order for costs. I therefore respectfully disagree with the Registrar’s view that, having determined to waive the operation of rr 40.21(2)(c) and 40.24 of the FC Rules, he did not have the power to order costs. In determining whether to waive the operation of rr 40.21(2)(c) and 40.24 of the FC Rules it is relevant to consider whether, by waiving the operation of these rules, the respondents would unfairly suffer prejudice in the form of having incurred costs that would be thrown away if the operation of these rules were waived; and, if so, whether such unfair prejudice could be sufficiently mollified by waiving the operation of rr 40.21(2)(c) and 40.24 on terms that Mr Lawrence pay the respondents’ costs that would be thrown away by waiving the operation of these rules.
I therefore conclude that a Judge of this Court has jurisdiction to review the Registrar’s order dismissing the respondents’ application that Mr Lawrence pay their costs.
EXERCISE OF DISCRETION
The respondents submit that I should order that Mr Lawrence pay the costs the respondents incurred in connection with the attempt to tax their costs because Mr Lawrence’s withdrawal amounted to a capitulation. Mr Lawrence, on the other hand, relied on a number of matters. One is a submission that the position Mr Lawrence sought to vindicate in applying to set aside the bankruptcy notice has subsequently been vindicated by judgments given by the Supreme Court of New South Wales. That Mr Lawrence may have been vindicated is not relevant to whether the discretion to order costs should be exercised against him; and that is because the question of costs is to be premised on the correctness of the order I made dismissing Mr Lawrence’s application to set aside the bankruptcy notice. Mr Lawrence, however, also submitted that he had agreed to withdraw his objection in the belief that that would finally conclude all disputes as to costs. This submission is relevant, because it directs attention to what occurred before the Registrar at the Taxation Hearing.
It may with some force be said that Mr Lawrence’s decision on 3 March 2023 to withdraw his notice of objection was a capitulation of the position he advanced in relation to the costs the respondents were seeking to have taxed. But Mr Lawrence made the decision to withdraw in a particular context. Mr Lawrence made his decision after the Registrar expressed his views about the general objections Mr Lawrence made to the Bill, and, more significantly, after the Registrar expressed the view that, if Mr Lawrence withdrew his objection, the Registrar had no power to award costs against Mr Lawrence in relation to the costs the respondents had incurred in the course of their application to have their costs taxed. I am not satisfied that Mr Lawrence would have elected to withdraw his notice of objection had he believed he may have been liable to pay the respondents’ costs; it may be that Mr Lawrence would have elected to proceed with the taxation of the Bill, and preserve rights he may have had under r 40.34 of the FC Rules to apply for review if the taxation of the respondents’ costs would have been sufficiently adverse to Mr Lawrence’s position such as would have led to an order for costs being made against him pursuant to r 40.33 of the FC Rules.
In these circumstances, I am not in a position to properly exercise my discretion about costs on the basis that, by electing to withdraw his notice of objection, Mr Lawrence had capitulated; I can only properly exercise my discretion on that basis if I receive evidence that is capable of proving, and I find, that Mr Lawrence would have elected to withdraw his notice of objection knowing that, contrary to the view the Registrar expressed, by doing so, he would or may be liable to pay the costs the respondents had incurred in the course of their application to have their costs taxed.
What I say in the previous paragraph reveals another potential difficulty. Assume it is the case that Mr Lawrence would not have elected to withdraw his notice of objection, had he known he would or may have been liable to pay the respondents’ costs. The respondents have not sought the review of orders 1, 2, and 3 of the Registrar’s orders made on 26 April 2023. It might be unfair to the respondents if I were to determine the question of costs on the basis that Mr Lawrence would not have elected to withdraw his notice of objection, but leave undisturbed orders 1, 2, and 3 of the Registrar’s orders. If Mr Lawrence would not have elected to withdraw his notice of objection, had he known he would or may have been liable to pay the respondents’ costs, the just outcome might be to make orders setting aside orders 1, 2, and 3 of the Registrar’s orders, as well as order 4, and thus place the parties in the position they were in at the commencement of the Taxation Hearing; and order that the respondents’ application that their costs be taxed proceed to taxation.
For these reasons, I am not in a position to dispose of the application for review.
FURTHER CONDUCT
The parties have at least two options. First, if it is Mr Lawrence’s position that he would not have elected to withdraw his notice of objection, had he known he would or may be liable to pay the respondents’ costs, the parties may agree to my making the following consent orders:
(a)The application for review stand as including an application for the review of orders 1, 2, and 3 of the orders made by the Registrar on 26 April 2023.
(b)Orders 1, 2, 3, and 4 of the orders made by the Registrar on 26 April 2023 be set aside.
(c)The bill of costs filed by the applicant for review on 11 March 2022 proceed to taxation pursuant to r 40.27 of the FC Rules.
(d)The costs of the application for review be costs in the taxation; in other words, that the applicants for review (that is the respondents) would be entitled to the costs of the application for review only if an order for costs is made in their favour pursuant to r 40.33 of the FC Rules.
The other option would be for me to list the matter for directions to determine whether, having regard to these reasons for judgment, any further evidence and submissions should be filed, and whether the matter should be listed for further oral argument.
The only order I propose to make at this stage is to list the matter for a directions hearing at 9:30 am on 22 November 2023.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 1 November 2023
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