M v R (No.2)

[2014] FCCA 2497

FEDERAL CIRCUIT COURT OF AUSTRALIA

M v R (No.2) [2014] FCCA 2497

Catchwords:
BANKRUPTCY – COSTS – Whether Court should set the amount of the respondent’s costs pursuant to r.21.02(2)(a) of the Federal Circuit Court Rules 2001 (Cth) – order setting the amount of costs made.

Legislation:

Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), r.13.01
Federal Circuit Court Rules 2001 (Cth), rr.21.02(2), 21.02(2)(a)
Federal Circuit Court of Australia Act 1999 (Cth), s.79
Federal Court Rules 2011 (Cth), Part 40
Schedule 3

M v R [2014] FCCA 1044

Applicant: MS M

Respondent: MR R

File Number: SYG 1000 of 2014

Judgment of: Judge Manousaridis

Hearing date: Decided on the papers

Date of Last Submission: 15 July 2014

Delivered at: Sydney

Delivered on: 31 October 2014

REPRESENTATION

Applicant is self-represented

Solicitors for the Respondent:

Mr R. Kent

Kent Attorneys

ORDERS

1. Pursuant to r.21.02(2)(a) of the Federal Circuit Court Rules 2001 (Cth) the costs of the respondent are set in the amount of $7,486.99.

IT IS NOTED that publication of this judgment under the pseudonym M v R (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1000 of 2014

MS M

Applicant

And

MR R

Respondent

REASONS FOR JUDGMENT

Introduction

1. On 23 May 2014 I dismissed an application to set aside a bankruptcy notice issued by the respondent to the applicant, and ordered that the applicant pay the respondent’s costs.[1] On that day I directed the parties to file and serve evidence and submissions about the assessment of the costs I ordered the applicant to pay.

   [1] M v R [2014] FCCA 1044

Parties’ evidence and submissions

1. The respondent filed an affidavit sworn by his solicitor, Mr Kent, on 16 June 2014. Mr Kent says he is a practitioner with over 30 years’ experience in this Court and in the Federal Court. He further says he has participated in over 30 proceedings that have resulted in costs being taxed. He says that, based on his opinion, the amount for costs that would normally be allowed on a party and party taxation is between 65% and 80% of the actual costs incurred by a party.

2. Mr Kent further deposes that the respondent incurred actual costs of $11,680.90. This amount includes the costs of preparing submissions and evidence on costs. Mr Kent says there are two methods for estimating taxed costs. One is to assess between 65% and 80% of actual costs. Using the mid-point percentage of 72.5%, that would result in an estimate of $8,468.65. The second is to discount actual professional charges by reference to the scale rates set out in Schedule 3 to the Federal Court Rules 2011 (Cth) (FCR). That method, according to Mr Kent, would result in an estimate of $6,732.22, although I note Mr Kent used an hourly rate of $114 for a paralegal rather than the $110 allowed by the Schedule.

3. The respondent submits this is an appropriate case for the making of a lump sum costs order. He submits this will save the parties the time and expense of taxation; and, in any event, the applicant has committed an act of bankruptcy, and is unlikely to be in a position to meet any costs that will be assessed. The respondent further submits that both methods for estimating the costs are logical and reasonable, and should give the Court comfort that the estimates the methods produce approximate the amount that would be awarded on taxation.

4. In response to the respondent’s submissions and affidavit of Mr Kent, on 30 June 2014 the applicant filed an affidavit and some submissions. Although the applicant was legally represented at the hearing, that is no longer the case. In her affidavit the applicant says she has discharged her solicitor who has been of enormous help to her, and that “Your Honour will despite all legal niceties see this as a cry of a person in distress”. The applicant deposes she is a single mother on Centrelink benefits, anxious to avoid the opprobrium of bankruptcy, and that no useful purpose would be served by her being made bankrupt, other than vengeance. The applicant says that the costs the respondent has incurred were unnecessary. The applicant also sets out what she claims is the genesis of the dispute that led to the making of the costs order against her and which led to the judgment on the basis of which the bankruptcy notice was issued against her. The applicant also set out what is a complex history revolving around the issue of an apprehended violence order (AVO) on the application of the respondent and the respondent’s mother, and the applicant’s being charged for a number of breaches of the AVO resulting in a number of convictions, all but two of which have been set aside on appeal.

5. On 9 July 2014 the respondent’s solicitor sent a letter dated 7 July 2014 to my associate in which he made submissions in response to the affidavit filed by the applicant. The respondent’s solicitor submits the affidavit raises a number of irrelevant matters, manifests a propensity to cavil with every issue, thus foreshadowing a lengthy and expensive taxation, if I were to order that the respondent’s costs be taxed. The respondent’s solicitor also points to admissions made in the applicant’s affidavit that she has no means to pay any costs. The applicant responded with a letter to my associate submitting that I should only order that costs be taxed.

Should I make a lump sum costs order?

1. The first issue I must consider is whether I should make a lump sum costs order. There is no question I have power to make a lump sum costs order. Under r.13.01 of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), a person who is entitled to costs in a proceeding to which the Bankruptcy Act 1966 (Cth) applies is entitled to costs in accordance with Part 40 of the FCR “unless the Court otherwise orders”. At the very least, this reservation directs attention to the Court’s power to award costs, and to other rules that relate to costs. The power to award costs is conferred by s.79 of the Federal Circuit Court of Australia Act 1999 (Cth); and rules relating to costs are to be found in Division 21.2 of the Federal Circuit Court Rules 2001 (Cth) (FCCR). Of relevance to the application before me is r.21.02(2) of the FCCR which provides that in making an order for costs in a proceeding, the Court may, among other things, “set the amount of the costs”.

2. There are a number of factors that are relevant to determining whether the Court should set the amount of costs, rather than refer the assessment of costs to taxation. The first is whether setting the amount of costs will save the parties time and expense. All things being equal, setting the amount of costs will save time and expense compared to time and expenses associated with assessing costs by taxation. The second factor is the likelihood of the Court being able to set the amount of the costs at that amount that would be assessed by taxation. As a rule of thumb, the greater the amount of work involved, and the more protracted the proceedings for which a costs order has been made, the less likely it will be that the Court would be able to set an amount for costs that would reflect the amount that would be assessed on taxation. A third factor is whether the person against whom the costs order is made will have the capacity to pay the costs.

3. In my opinion, I should exercise my discretion and set the amount of the respondent’s costs. First, my setting the amount will save time and expense. Second, the proceeding in relation to which the costs order relates is relatively confined. Third, the applicant will not be in a position to pay any costs that will be set.

4. There is nothing in the affidavit or letter submitted by the applicant which indicates I should not make an order setting the amount of the respondent’s costs.

For what amount should I set the costs?

1. Nor is there anything in the affidavit or letter submitted by the applicant that indicates that the amount of work undertaken on behalf of the respondent in resisting the application to set aside the bankruptcy notice, or the amounts charged for that work, or the method for estimating the amount for which those costs will be taxed, are unreasonable. And, subject to one exception, which I will discuss in the next paragraph, I find that the two methods Mr Kent has suggested for estimating the taxed costs, and the amounts the respondent actually incurred in resisting the application to set aside the bankruptcy notice, are reasonable, given the rates allowed under the FCR.

2. I am not satisfied that the amount estimated for the work done after the date I delivered judgment is reasonable. That is so because Mr Kent in his affidavit estimates that the respondent will incur between $800 to $1,200 (excluding GST) in preparing the bill of costs if the matter proceeds to taxation, including a filing fee of $200; yet the respondent claims $2,008.60 (inclusive of GST) for work after the date I delivered judgment.

3. In my opinion, a fair estimate of the costs for which the respondent’s costs would be taxed will be $6,286,99. That represents 65% of the actual cost the respondent incurred up to the date I delivered my reasons ($9,672.30). The respondent should also be allowed the costs he incurred in connection with his seeking a lump sum costs order because he had offered to the applicant to accept a lump sum costs order of $5,500. The applicant’s failure to accept that offer has put the respondent to the expense of making the present application. In my opinion, however, the respondent should be allowed no more than what he would have incurred had he proceeded to taxation. A reasonable amount for that expense is $1,200, being the mid-point between $800 and the sum of $1,000 and the filing fee of $200.

4. Accordingly, I propose to make an order pursuant to r.21.02(2)(a) of the FCCR that the respondent’s costs be set in the amount of $7,486.99.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis

Associate: 

Date:  31 October 2014