Masters v Lombe (liquidator), in the matter of Babcock & Brown Limited (in liq) (Lump Sum Costs)
[2024] FCA 1336
•21 November 2024
FEDERAL COURT OF AUSTRALIA
Masters v Lombe (liquidator), in the matter of Babcock & Brown Limited (in liq) (Lump Sum Costs) [2024] FCA 1336
File number(s): NSD 2525 of 2013
NSD 947 of 2014
NSD 501 of 2015
NSD 1915 of 2019
NSD 1929 of 2019
NSD 1930 of 2019Judgment of: CHEESEMAN J Date of judgment: 21 November 2024 Catchwords: COSTS – applications for lump sum determinations –where existing costs orders made in a suite of related primary and appeal proceedings – where primary judge retired – where application for lump sum determination made after special leave applications dismissed – whether orders should be made for lump sum determinations in respect of existing cost orders – Held: orders made. Legislation: Federal Court of Australia Act 1976 (Cth) ss 25(2B)(ab), 37M, 43
Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 (Cth)
Federal Court Rules 1976 (Cth) O 62 r 4
Federal Court Rules 2011 (Cth) rr 40.02, 40.12, 40.14, 40.32(2)
Costs Practice Note (GPN-COSTS)
Cases cited: Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael [2024] NSWSC 735
Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2020] FCA 598
Australian Securities and Investments Commission v Cassimatis (Costs) [2023] FCA 613
Backo v Australian Competition and Consumer Commission [2005] FCAFC 89
Beach Petroleum NL v Johnson (No 2) [1995] FCA 350; 57 FCR 119
Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52
Coshott v Burke (No 3) [2019] FCAFC 23
DSE (Holdings) Pty Limited v InterTAN Inc [2004] FCA 1251
Fewin Pty Ltd v Burke (No 3) [2017] FCA 693
GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser (Australia) Pty Limited (No 3) [2018] FCA 183
Grant-Taylor v Babcock & Brown Limited (In Liquidation) [2015] FCA 149; 322 ALR 723
Grant-Taylor v Babcock & Brown Limited (in liquidation) [2016] FCAFC 60
Hancock Prospecting Pty Ltd v Rinehart (No 3) [2021] FCAFC 23; 284 FCR 663
Hudson v Sigalla [2016] FCA 1204
Martin v Norton Rose Fulbright Australia (No 2) [2020] FCAFC 42
Masters v Lombe (liquidator), in the matter of Babcock & Brown Limited (in liq) [2021] FCAFC 161
Masters v Lombe (Liquidator); In the Matter of Babcock & Brown Limited (In Liq) [2019] FCA 1720
Masters & Ors v David Lombe in his capacity as Liquidator of Babcock & Brown Limited (in Liquidation); Broome & Ors v Lombe; Wilhelm & Ors v Lombe [2022] HCATrans 057
McMillan v Warner as trustee in the bankruptcy of McMillan [2024] FCA 525
Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 7) [2018] FCA 1217
Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; 253 FCR 403
Short v Crawley (No 45) [2013] NSWSC 1541
Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 4) [2018] NSWSC 431
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 62 Date of last submission/s: 5 November 2024 Date of hearing: 31 October 2024 Counsel for the Plaintiffs / Cost Respondents: Mr G McDonald Solicitor for the Plaintiffs / Cost Respondents: Harrow Legal Counsel for the Defendant / Cost Applicant: Mr J Lockhart SC, Ms N Bailey Solicitor for the Defendant / Cost Applicant: Johnson Winter Slattery ORDERS
NSD 2525 of 2013 IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
BETWEEN: MICHAEL MASTERS and others
Plaintiffs
AND: DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
Defendant
NSD 947 of 2014 IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
BETWEEN: BRUCE BROOME and others
Plaintiffs
AND: DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
Defendant
NSD 501 of 2015 IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
BETWEEN: SARAH WILHELM and others
Plaintiffs
AND: DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
Defendant
NSD 1915 of 2019 IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
BETWEEN: MICHAEL MASTERS and others
Appellants
AND: DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
Respondent
NSD 1929 of 2019 IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
BETWEEN: BRUCE BROOME and others
Appellants
AND: DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
Respondent
NSD 1930 of 2019 IN THE MATTER OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
BETWEEN: SARAH WILHELM and others
Appellants
AND: DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (IN LIQUIDATION)
Respondent
ORDER MADE BY:
CHEESEMAN J
DATE OF ORDER:
21 NOVEMBER 2024
THE COURT ORDERS THAT:
1.The costs payable pursuant to:
(a)the costs orders made on 18 October 2019 in proceedings NSD2525/2013, NSD947/2014 and NSD501/2015; and
(b)the costs orders made on 3 September 2021 in proceedings NSD1915/2019, NSD1929/2019 and NSD1930/2019;
be determined on a lump sum basis (the lump sum determinations).
2.Pursuant to s 54A of the Federal Court of Australia Act 1976 (Cth), the lump sum determinations be quantified by a Registrar of the Court acting as a Referee after receiving such materials (including written submissions and any affidavits) as the Referee may direct from the parties.
3.The requirements of rr 28.65(7) and 28.66(a) of the Federal Court Rules 2011 (Cth) be dispensed with.
4.The inquiry be conducted in the manner which, in the Referee’s opinion, is the most efficient and practical in order to quantify the lump sum determinations with as little formality and expense as is reasonably possible.
5.The Referee may make such directions as they consider appropriate in order to effect the lump sum determinations in accordance with these orders.
6.By no later than 28 February 2025, the Referee is to give the Court a written report that:
(a)attaches any submissions relied upon by the parties before the Referee;
(b)sets out the Referee’s opinion as to the lump sum of costs payable in each of the six proceedings identified in order 1; and
(c)sets out the Referee’s reasons for the opinion reached in each of the proceedings.
7.Subject to further order, the question of whether the Referee's report should be adopted will be considered by the case managing judge on the papers that were before the Referee without the filing of any additional papers.
8.The parties each bear their own costs of the interlocutory application dated 22 May 2024.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
CHEESEMAN J:
INTRODUCTION
These reasons concern an application for an order that costs orders made at an earlier time in a suite of related first instance and appeal proceedings be determined on a lump sum basis.
The related proceedings comprise three primary proceedings (NSD2525/2013, NSD947/2014 and NSD501/2015) and the corresponding three appeal proceedings (NSD1915/2019, NSD1929/2019 and NSD1930/2019). The application for a lump sum determination is made by the defendant in each of the proceedings, Mr David Lombe in his capacity as the liquidator of Babcock & Brown Limited (In Liquidation). I will refer to Mr Lombe as the Cost Applicant.
In the primary proceedings, the plaintiffs, who are former shareholders of Babcock & Brown, claimed in respect of alleged breaches of the continuous disclosure requirements set out in s 674 of the Corporations Act 2001 (Cth). The plaintiffs’ claims were dismissed with costs: Masters v Lombe (Liquidator); In the Matter of Babcock & Brown Limited (In Liq) [2019] FCA 1720 (Foster J). The subsequent appeals to the Full Court were dismissed with costs: Masters v Lombe (liquidator), in the matter of Babcock & Brown Limited (in liq) [2021] FCAFC 161 (Middleton, Beach and Colvin JJ) (Masters v Lombe Appeal). Finally, applications for special leave to appeal to the High Court were also dismissed with costs: Masters & Ors v David Lombe in his capacity as Liquidator of Babcock & Brown Limited (in Liquidation); Broome & Ors v Lombe; Wilhelm & Ors v Lombe [2022] HCATrans 057. I will refer to the shareholder claimants as the Cost Respondents.
Before a Registrar of the Court, the Cost Applicant attempted to proceed on the basis that the quantum of costs would be determined as a lump sum. No order had been made by a judge of the Court for costs to be assessed as a lump sum and the Cost Respondents opposed that course. That led to the present application being made by the Cost Applicant.
The present application was brought in May 2024 and was allocated to my docket.
The Cost Respondents oppose the application and submit that the ordinary process of taxation should take place in accordance with r 40.12 of the Federal Court Rules 2011 (Cth).
PROCEDURAL BACKGROUND
These proceedings have an extensive history. Three separate primary proceedings were commenced in December 2013, September 2014, and May 2015 respectively.
Each proceeding comprised a collection of individual cases with some common features. The Cost Applicant was the only defendant in each proceeding. There were 1,221 plaintiffs in total across the three proceedings. Babcock & Brown was not itself a party to any of the primary proceedings. None of the primary proceedings were brought as a group proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth).
The three primary proceedings were heard together by the primary judge between 10 October 2016 and 13 October 2016. The final hearing was conducted on the basis that the evidence in each proceeding would be evidence in the other proceedings. The joint Court Book spanned 20 volumes of more than 5,000 pages.
On 18 October 2019, the primary judge delivered judgment: Masters v Lombe. The primary judge dismissed each of the primary proceedings and made orders that the Cost Respondents in each of the primary proceedings pay the Cost Applicant’s costs of and incidental to each of the three primary proceedings.
On or about 20 November 2019, notices of intention to appeal were filed in each of the appeal proceedings.
The primary judge retired from the Court on 30 September 2020.
On 16 and 17 November 2020, the Full Court (Middleton, Beach, and Colvin JJ) heard each of the appeal proceedings concurrently.
On 3 September 2021, the Full Court delivered judgment: Masters v Lombe Appeal. The Full Court dismissed each of the appeals and made orders for costs in the Cost Applicant’s favour in each of the three appeal proceedings.
On 8 April 2022, the High Court of Australia heard the Cost Respondents’ applications for special leave to appeal in each of the appeal proceedings: [2022] HCATrans 057 (Gageler and Steward JJ). The special leave applications were refused with costs in the favour of the Cost Applicant.
On 25 December 2022, Justice Middleton, the presiding judge in each of the appeal proceedings, retired from the Court.
On 7 and 8 December 2023, the Cost Applicant filed affidavits of Mr Joseph Scarcella, solicitor for the Cost Applicant, which annexed Costs Summaries prepared in relation to the primary proceedings and the appeal proceedings. The Costs Summaries were directed to the first instance and appeal costs orders being determined on a lump sum basis. The Cost Applicant engaged a costs consultant to prepare the Cost Summaries. The Cost Summaries, which totalled more than 160 pages, relevantly divide the categories of work and costs expended by reference to each proceeding separately. The Cost Applicant served the Cost Summaries on the Cost Respondents on 22 April 2024. The Cost Applicant has not explained the delay in serving the Costs Summaries on the Cost Respondents. In any event, the Cost Applicant did not take any steps to obtain an order from either the primary judge or the Full Court that the quantum of the relevant cost orders be determined on a lump sum basis. Instead, it appears that the Cost Applicant sought to proceed before the Registrar on the basis that costs would be quantified on a lump sum basis.
On 14 May 2024, at a case management hearing before a Registrar of the Court, the Cost Respondents indicated that they did not consent to costs being determined as a lump sum and also challenged the Registrar’s power to proceed on that basis in the absence of an order of the Court. The Cost Applicant then filed the present application. The parties proceeded on the basis that an order of the Court was required. That appears to be correct, but it is not necessary for me to determine that issue, given the Cost Respondents have not contended to the contrary.
Notwithstanding correspondence between the parties, the issue of whether the extant costs orders should be determined on a lump sum basis proved to be intractable, with the Cost Respondents insisting on a contested oral hearing rather than acceding to the issue being determined on the papers. Written submissions were exchanged followed by an oral hearing. The parties did not address in their written or oral submissions the source of power by which a single judge (who was not a member of the Full Court) could grant the relief sought in respect of the cost orders in the appeal proceedings. Following the conclusion of the oral hearing, I requested the parties to address this issue in short further written submissions. The last short submissions on this issue were provided on 5 November 2024.
EVIDENCE
The Cost Applicant read the affidavit of Mr Scarcella affirmed on 22 May 2024. The Cost Applicant also tendered two earlier affidavits of Mr Scarcella, both affirmed on 7 December 2023, in respect of the Cost Summaries referred to above. The affidavits were tendered to illustrate the extent to which the Costs Summaries differentiated between the costs in each of the three primary proceedings, which were commenced on different dates and had different numbers of parties.
The Cost Respondents read the affidavit of Mr Marcel Joukhador, solicitor for the Cost Respondents, sworn 28 June 2024, save for some parts which were not read.
LEGAL PRINCIPLES
Section 43 of the Act gives the Court or a judge jurisdiction to award costs in all proceedings before the Court. The power conferred by s 43 is a broad and ample power which is not to be read down otherwise than by judicial principle conformable with its amplitude: DSE (Holdings) Pty Limited v InterTAN Inc [2004] FCA 1251 at [14] (Allsop J, as his Honour then was). The Court has a very wide discretion to award costs. The Court’s power to award costs on a lump sum basis is referred to in s 43(3)(d) of the Act and r 40.02 of the Rules.
Rule 40.12 provides:
If an order is made in favour of a party for payment of the party’s costs, the costs must be taxed in accordance with this Part, unless the amount of costs is agreed between the parties to the order.
Rule 40.14 relevantly confirms that where an order of the Court entitles a party to costs, the party may have those costs taxed without an order directing taxation. Rule 40.32(2) provides that a certificate of taxation operates as an order. Thus it can be seen that the default position in relation to the quantification of costs payable as a result of an order of the Court is, in the absence of agreement, taxation.
The default position in relation to taxation is moderated by rule 40.02 which relevantly provides:
A party or a person who is entitled to costs may apply to the Court for an order that costs:
…
(b) be awarded in a lump sum, instead of, or in addition to, any taxed costs; or
(c) be determined otherwise than by taxation.
…
Note 2: 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.
A lump sum costs order is a supplemental order that can be made in aid of and as an alternative mode of enforcing a costs order made earlier in a proceeding: Hudson v Sigalla [2016] FCA 1204 at [57]-[58] (Katzmann J); Short v Crawley (No 45) [2013] NSWSC 1541 at [33] (White J); Fewin Pty Ltd v Burke (No 3) [2017] FCA 693 at [56] (Markovic J). There is no requirement as to when an application for a lump sum costs order should be made: Hudson at [51]-[55] (and the authorities cited therein); Fewin at [58] (Markovic J); Australian Securities and Investments Commission v Cassimatis (Costs) [2023] FCA 613 at [37] (SC Derrington J).
The purpose of a lump sum costs order is “to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”: Beach Petroleum NL v Johnson (No 2) [1995] FCA 350; 57 FCR 119 at 120 (von Doussa J), cited in Coshott v Burke (No 3) [2019] FCAFC 23 (Logan, Kerr, and Farrell JJ) at [6]. In Cassimatis, SC Derrington J observed at [10]-[11]:
10A well-recognised purpose of r 40.02(b) is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (No 2) [1995] FCA 350; 57 FCR 119, 120 per von Doussa J (in respect of an earlier version of the Rules). This is especially so in circumstances where there has already been protracted litigation.
11It is true that, in some circumstances, the Court has the power to make a lump sum costs order notwithstanding that costs orders have already been made which envisaged taxation in the ordinary way: Beach Petroleum. Several subsequent decisions of this Court have acknowledged that principle: see Dunstan v Seymour [2006] FCA 917 per Mansfield J; Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 7) [2018] FCA 1217 per McKerracher J. …
The Central Practice Note: National Court Framework and Case Management (CPN-1) and Costs Practice Note (GPN-COSTS) provide the following guidance in relation to the making of lump sum orders. In most cases, costs should be determined by taking a lump sum approach unless there is some characteristic that would make that approach unsuitable. The Costs Practice Note reflects the Court’s preference, wherever it is practicable and appropriate to do so, to make a lump sum costs order so as to finalise costs and avoid potentially expensive and lengthy taxation hearings. The Costs Practice Note at [3.3] provides that the Court ought proceed on the basis that taxation “should be the exception” and confined to matters which are unable to be determined otherwise. The guiding principle when making orders as to the method by which the quantum of costs should be determined is to reduce delay and cost when quantifying costs: Costs Practice Note at [3.1]. The Costs Practice Note contemplates that ordinarily, the costs hearing dealing with lump sum costs will take place within six weeks from the determination of the costs entitlement question, or as soon as possible at any other time considered appropriate by the judge: Costs Practice Note at [4.4].
The making of a lump sum costs order remains at the discretion of the Court. The observations of the Full Court in Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; 253 FCR 403 at [19] are apposite:
Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counterproductive dispute as to costs, in the interests of achieving finality.
I now turn to consider the present application by reference to these principles.
CONSIDERATION
The first issue that arises is in relation to the source of power to make an order that the appeal costs order be quantified as a lump sum. I raised this issue, drew the parties’ attention to the decision of the Full Court in Backo v Australian Competition and Consumer Commission [2005] FCAFC 89 (Spender, Dowsett and Hely JJ) and invited short supplementary written submissions on this issue.
In Backo, the cost applicant had the benefit of a costs order which was made by a Full Court following an appeal (Cooper, Kiefel and Emmett JJ). The cost applicant subsequently obtained from one of the judges who sat on the Full Court (Kiefel J) an order that the costs order made by the Full Court be determined as a lump sum costs order. The cost respondent was successful in obtaining leave to appeal the lump sum costs order and in setting that order aside. Backo was decided under the previous iteration of the Rules, Federal Court Rules 1976 (Cth). Order 62 r 4 of the previous iteration of the Rules is the antecedent to r 40.02 of the Rules. Rule 40.02 is extracted above. In Backo, the Full Court said at [3]-[4]:
3It is wrong to think that there is power to vary or go behind the orders of the Full Court in respect of costs, by reliance on O 62 r 4 of the Federal Court Rules. Order 62 rule 4 provides:
‘(1)Subject to this Order where by or under these Rules or any order of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs.
(2)Where the Court orders that costs be paid to any person, the Court may further order that as to the whole or any part of the costs specified in the order, instead of tax costs, that person shall be entitled to:
(a)a proportion specified in the order of the taxed costs; or
(b)the taxed costs from or up to a stage of the proceeding specified in the order; or
(c)a gross sum specified in the order; or
(d)a sum in respect of costs to be ascertained in such manner as the Court may direct.
(3)The court may make an order under subrule (2) at any time, whether an order that costs be paid to a person has previously been made or entered.’
4In our judgment, there is no power in a single judge of the Federal Court, either pursuant to O 62 r 4, or otherwise, to entertain the notice of motion filed by the present applicants in September of last year, which, in effect, sought to provide for the payment of costs in a way other than that provided by the costs orders made by the Full Court. As the Full Court did not self-assess the costs, there was no power in a single judge of this Court to do so.
In Backo, the Full Court recognised that an order for an extant costs order to be assessed on a lump sum basis is an interlocutory order (at [5]).
Subsequent to Backo, s 25(2B)(ab) was introduced into Part III of the Act with effect from 7 December 2009: Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 (Cth). Part III of the Act provides for the jurisdiction of the Court. Section 24 provides for the appellate jurisdiction of the Court. Section 25 provides, amongst other things, for the circumstances in which the appellate jurisdiction of the Court may be exercised by a single judge. Section 25(2B)(ab) provides that a single judge (sitting in Chambers or in open court) or a Full Court may make an interlocutory order pending, or after, the determination of an appeal to the Court. The machinery in the present Rules in relation to taxation was also changed. The position under the present Rules in relation to taxation as the means of determining the quantum of costs is set out above at paragraphs [23]–[25] and is subject to the potential for a party or a person who is entitled to costs to apply for a lump sum determination under rule 40.02.
The problem that arose in Backo has been alleviated by the introduction of s 25(2B)(ab) into the Act which authorises a single judge of the Court to exercise the appellate jurisdiction to make an interlocutory order after the determination of an appeal to the Court. As mentioned, an order that an extant costs order be determined as a lump sum is an interlocutory order. Section 25(2B)(ab) expressly permits a single judge to make interlocutory orders after the determination of an appeal and does not stipulate that the single judge must have been part of the Full Court which determined the appeal. An order that an extant costs order be determined as a lump sum has been recognised as an order that is supplementary in nature. In my view, having regard to the current scheme of the Rules, making such an order does not operate to vary the order of the Full Court which is directed to the entitlement to costs but rather operates by way of supplementation utilising the machinery provided for alternate means of determination in the Rules.
Section 25(2B)(ab) of the Act has been relied on by single judges of the Court to make interlocutory orders, including that costs orders made by a Full Court be quantified by a lump sum determination. In most cases, but not all of these cases, the single judge who made the interlocutory order under s 25(2B)(ab) was also a member of the Full Court which awarded costs — see, for example, Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2020] FCA 598 (Bromwich J) in relation to indemnity costs, where the parties accepted the issue could be determined by a single member of the Full Court after the costs order was made by the Full Court; Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 7) [2018] FCA 1217 (McKerracher J) in relation to a lump sum costs order application; and McMillan v Warner as trustee in the bankruptcy of McMillan [2024] FCA 525 (Logan J) in relation to a lump sum costs order application cf. Cassimatis where SC Derrington J considered the issue but was not a member of the original Full Court, discussed further below. The chapeau of s 25(2B) does not by its terms constrain the exercise of the appellate jurisdiction to a single judge who is, will be, or was, a member of the Full Court. To add such a gloss to the clear terms of s 25(2B) would cut across the purpose to which the section is directed, namely, to aid more efficient management in the appellate jurisdiction.
In Cassimatis, SC Derrington J rejected an argument that the Court, constituted by a single judge not sitting as the Full Court, could not, or ought not, exercise the jurisdiction of the Full Court who heard the appeal and made the relevant order as to costs. To be clear, SC Derrington J was not a member of the Full Court that made the cost order: Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52 (Greenwood, Rares, Thawley JJ). Her Honour reasoned that the application for a lump sum costs determination was plainly an application for interlocutory orders after the determination of the appeal. Further, that the issue of whether costs should be awarded in a lump sum is distinct from the issue of the entitlement to costs, which was the issue that had been determined by the Full Court. It does not appear that her Honour was referred to Backo.
In the present case, I am satisfied that pursuant to s 25(2B)(ab) of the Act, the Court constituted by a single judge who was not a member of the Full Court, may exercise the appellate jurisdiction of the Court to make an interlocutory order after the determination of the appeal. As I have indicated above, I respectfully agree with SC Derrington J that there is a distinction between making an order that costs be determined by lump sum and the substantive order as to the entitlement to recover costs. In my view the order which I am asked to make is not only interlocutory, but also, by its nature, supplementary to the costs order made by the Full Court and it is addressed to an issue which was not ventilated before the Full Court. The issue which arose in in Backo does not arise in this case because of the introduction of s 25(2B)(ab) into the Act.
Finally, I note that the present application may be readily distinguished from the circumstances considered by the Full Court (Allsop CJ, Besanko and O’Callaghan JJ) in Hancock Prospecting Pty Ltd v Rinehart (No 3) [2021] FCAFC 23; 284 FCR 663 at [10]-[11], where the Court recognised, in obiter, that although part of the relevant application could be dealt with by a single judge utilising the power in s 25(2B)(ab), the whole of the application could not because one part of it required consideration of the proper construction of orders made by the Full Court and accordingly had to be dealt with by the Full Court. The present application is of an entirely different variety.
Accordingly, I am satisfied that pursuant to s 25(2B)(ab) of the Act I have power to entertain the Cost Applicant’s application in so far as it relates to the appeal proceedings costs orders.
The second issue relates to the issue of power in relation to both the costs orders in the primary proceedings and the appeal proceedings. The Cost Respondents’ submissions on this issue were difficult to follow. The Cost Respondents appeared to submit in effect that because the primary judge (and by extension all three members of the Full Court) were not available to undertake a lump sum costs determination, that the Court as presently constituted was not capable, as a matter of power, of making an order that the costs payable pursuant to the extant costs orders be quantified by lump sum determination. I reject that submission. It is not consistent with the principles I have outlined above and ignores the commonplace occurrence in this Court of lump sum determinations being referred to a Registrar for determination. In so far as the Cost Respondents’ submissions on this issue were directed to the exercise of the discretion as to whether to make an order for a lump sum determination, I will address it separately below.
I now turn to the substantive issues, namely whether it is appropriate to exercise the Court's discretion to make orders that the extant costs orders in the primary proceedings and the appeal proceedings be quantified as a lump sum.
Having considered the parties’ respective written and oral submissions, I am satisfied that I should exercise the discretion to order that the costs payable under the existing orders be determined as a lump sum. I do not intend in these reasons to engage seriatim with the submissions advanced for and against proceeding by way of a lump sum determination. I am satisfied on the basis of the evidence before me that to do so is appropriate in the whole of the circumstances attendant on these six proceedings. I am further persuaded that to order that costs be determined as a lump sum is consistent with the overarching purpose embodied in s 37M of the Act. My reasons are as follows.
On the basis of the Cost Applicant’s evidence, I am persuaded that proceeding by way of a lump sum determination in each of the proceedings will enable the six costs orders to be quantified in a way that is both fair and efficient and is most likely to significantly reduce the time and expense incurred by the parties and the demands on Court resources.
The proceedings involved common issues, a common party (the Cost Applicant) and were the subject of joint judgments (primary and on appeal). It is logical, efficient and appropriate to deal with the six costs orders on a lump sum basis rather than through taxation. By way of contrast, a formal taxation process would be arduous, lengthy and expensive as it would require a review of extensive bills of costs expected to comprise thousands of line items. Mr Scarcella deposed to his belief that the preparation of a bill of costs in each proceeding may involve up to a year of preparation and that the process would result in substantial solicitor fees and costs consultant fees being incurred.
Mr Scarcella deposed to his experience in a long form taxation process in comparable primary and appeal proceedings, involving the same opposing solicitors and the same funder as in these proceedings (the Grant-Taylor proceeding). The Grant-Taylor proceeding involved similar claims by various Babcock & Brown shareholders against the Cost Applicant. The Grant-Taylor proceeding was conducted by the on behalf of the plaintiffs by the same solicitors as presently represent the Cost Respondents. On 4 March 2015, Perram J delivered the primary judgment, dismissing the application with costs: Grant-Taylor v Babcock & Brown Limited (In Liquidation) [2015] FCA 149; 322 ALR 723. On 21 April 2016, the plaintiffs’ appeal to the Full Court was dismissed and they were ordered to pay the respondents’ costs of and incidental to the appeal: Grant-Taylor v Babcock & Brown Limited (in liquidation) [2016] FCAFC 60 (Allsop CJ, Gilmour and Beach JJ). A special leave application to the High Court was dismissed with costs on 12 October 2016. Mr Scarcella deposes to the fact that the preparation of the bill of costs in the Grant-Taylor proceeding took 11 months and was filed on 27 September 2017. The costs consultant’s fees for preparing the bill of costs, which incorporated 1768 items spanning 248 pages, was approximately $21,000. The Cost Applicant submits that the determination of costs was “delayed” by the objections taken by the plaintiffs and a detailed response schedule prepared by the plaintiffs, with the result that the certificate of taxation was finalised almost three years later on 15 July 2020. It is more accurate to describe the determination of costs as necessarily awaiting consideration of the materials submitted by the plaintiffs.
Based on his experience in the Grant-Taylor proceeding, Mr Scarcella estimates the costs for preparing long form bills of costs in each of the primary proceedings is $42,350 to $45,000, amounting to a total cost between $127,050 to $135,000 for these proceedings. The Cost Applicant acknowledges that this estimate does not take into account the time and expense of a review of any objections or the appeal proceedings costs.
The Cost Applicant submits that, based on the conduct of the Cost Respondents and their representatives to date, further delays are likely to ensue if the formal taxation procedure is followed. The Cost Applicant relies on Martin v Norton Rose Fulbright Australia (No 2) [2020] FCAFC 42 at [18] (Besanko, Flick and Abraham JJ) in support of making a lump sum costs order in circumstances where there was a protracted history within the litigation, even where the proceeding does not bear the features of a large and complex matter of the nature referred to in Paciocco, where the applicant’s conduct was characterised as being directed to delaying the resolution of the dispute. The Cost Applicant characterises the Cost Respondents’ approach to date as combative. It is not necessary for me to weigh in on which party bears responsibility for the inability of the parties to reach agreement on matters of timetabling and the like. My strong impression is that the responsibility is shared. The Cost Applicant has not brought this application in a timely fashion, has not sought to explain key periods of the delay and has tried to proceed to a lump sum determination in a way that was contrary to the clear process required by the Rules. In any event, regardless of where the responsibility lies, the conduct of the parties to date suggests that the taxation experience in the Grant-Taylor proceeding may be a reliable harbinger for how a taxation may unfold in these proceedings.
I do not accept that proceeding by way of a lump sum determination will necessarily prejudice the Cost Respondents. There are well-established mechanisms in the process for lump sum determination that will enable the Cost Respondents to object to the Costs Summaries within the ambit of that process. In this respect, I note that the Cost Respondents have had the Cost Summaries since April 2024 and the Cost Respondents’ representative have the benefit of having participated in a full-scale taxation process against the Cost Applicant in other proceedings of a similar nature and so are likely to be well-versed in relation to the areas where the costs may be negotiable or otherwise vulnerable to reduction.
I have considered the Cost Respondents’ submissions to the effect that the unavailability of the trial judge renders it inappropriate to order that costs be determined in a lump sum. The Cost Respondents submitted that as I was not the trial judge or a member of the Full Court, I could not satisfy myself of the matters that would warrant ordering that costs be determined as a lump sum. I reject that submission. The inescapable fact is that the primary judge is not available and so the issue of whether the costs should be determined by way of lump sum costs falls to be decided on the evidence lead on the application. Both parties have had ample opportunity to lead evidence for this purpose and have done so. Having reviewed that evidence, I am satisfied that the process of assessing costs on a lump sum basis will likely provide an advantage over the usual process of taxation. The balance weighs in favour of a lump sum determination. It is more likely to be concordant with the overarching purpose of the costs determination being conducted quickly, inexpensively and efficiently, and to avoid the procedure becoming mired in process driven costs.
The Cost Respondents rely on Foster J’s comment in GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser (Australia) Pty Limited (No 3) [2018] FCA 183 at [61] that the particular advantages of a lump sum order in complex proceedings “would not be achieved if the entire process were delegated to a Registrar or to another judicial officer who did not have the same familiarity with the issues in the case as the trial judge”. While there is force in those observations, the procedural history of these proceedings and the stage at which this application is brought necessitates a comparison of a formal taxation to a lump sum determination in the prevailing circumstances which will require someone other than the primary judge to undertake the process. The Cost Applicant has identified actual benefits of adopting a lump sum approach in terms of time and cost efficiencies in the context of these particular proceedings.
The Cost Applicant’s delay in bringing the present application for lump sum costs is a factor that is relevant to the exercise of the discretion. As mentioned, key parts of the delay have not been adequately explained and would usually weigh against the Court exercising its discretion in favour of the application.
However, I am unable to accept the Cost Respondents’ submission that if the Cost Applicant made a lump sum costs application in a timely manner, the impediment created by the unavailability of judges with knowledge of these proceedings may have been avoided.
There would have been an obvious inefficiency in the Cost Applicant seeking a lump sum costs assessment before the final determination of the proceedings, which proved to be the dismissal of the special leave applications. To do otherwise risked unnecessarily wasting costs and the Court’s and the parties’ resources. In practical terms, having regard to the timing of the primary judge’s retirement, it is highly unlikely that any application for a lump sum determination, even if it had been brought earlier, would have been determined by the primary judge. The process would have been delayed by pending appeals, including the special leave applications. In all likelihood, the procedural history would have necessitated any lump sum determination being undertaken by someone other than the primary judge, most likely a Registrar.
The elapse of time between the dismissal of the special leave applications and the making of this application is regrettable. The Cost Applicant appears to either have overlooked or been ignorant of the need to apply to the Court for an order for costs to be determined as a lump sum rather than being taxed. However, I am not satisfied that that fact undermines the likely benefits attendant on a lump sum determination over a taxation in the circumstances of these proceedings. I adhere to that view, even if I make the assumption which the Cost Respondents urge, that it would be possible for the taxation processes in each of the six proceedings to be managed in an efficient and coordinated fashion by a single assessor available to undertake the whole process in all the proceedings.
The Cost Respondents also submitted that a lump sum determination would not be appropriate because the different primary proceedings were started at different times and involved differing numbers of plaintiffs (including plaintiffs who abandoned their claims late in the proceedings). I do not agree. The Cost Summaries that have been served distinguish between each of the proceedings — they are not an amorphous collation of the costs in all the proceedings. While I note that there was a substantial reduction in the number of plaintiffs between the end of the hearing in the primary proceedings and the appeals lodged in the Full Court – this is a matter which is addressed in the Full Court’s reasons and orders. The Cost Respondents did not elucidate how this would adversely impact proceeding by way of lump sum determination. Similarly, the attrition of plaintiffs in the primary proceedings to which the Cost Respondents point, was announced in submissions on the final day of the hearing and was not formalised by any order of the Court. In these circumstances, the Cost Respondents did not explain on what basis there would be a need to differentiate between the Cost Respondents in each of the primary proceedings who abandoned their claims for relief on the final day of the hearing and those who did not. I would not readily infer that the Cost Respondents continued to incur costs after judgment was reserved and before judgment was delivered. In so far as I could follow the Cost Respondents’ submissions on this issue, I am not satisfied that these details weigh against proceeding by way of a lump sum determination.
The Cost Respondents relied on Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael [2024] NSWSC 735 at [14] (Black J), citing the observations made by Ball J in Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd (No 4) [2018] NSWSC 431 at [21]:
However, the Court will not make a gross sum costs order unless it can be satisfied that it has sufficient information before it to be satisfied that “it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available”: Harrison v Schipp [2002] NSWCA 213 at [22] per Giles JA. The calculation of that sum must be “logical, fair and reasonable” after an informed assessment of the available information: Beach Petroleum NL & Claremont Petroleum NL v Johnson (1995) 57 FCR 119; (1995) 135 ALR 160 at 164-5 per von Doussa J. The Court is entitled to take a “broader brush” approach than would be applied on assessment, but in doing so “it must be confident that the material before it enables it to make a sufficiently reliable calculation or estimate of an appropriate costs sum. And a decision as to what is an appropriate sum will depend to a large extent on reaching some kind of view on what the outcome of an assessment might be”: Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2011] NSWSC 11 at [21] per Barrett J.
The Cost Respondents submitted that a “broad brush” approach cannot be applied when there is a degree of differentiation between the proceedings based on the differences in pre-trial procedures and plaintiff participation in the proceedings and the evidence before the Court is not sufficient to enable me to say that this is a complex case to the necessary degree. The Cost Respondents’ reliance on Tzaneros is misplaced. The Costs Respondents have conflated two distinct inquiries: first, whether costs should be determined as a lump sum and secondly, if so, by whom. The issue that the Cost Respondents raised applies to every lump sum determination made by a Registrar. The Registrar will have control of the lump sum determination process, including what material is produced in support of a calculation or estimate of an appropriate costs sum. The parties will have an opportunity to address the Registrar on issues of procedural fairness.
For these reasons, I am satisfied that I should exercise the discretion to order that the costs be determined as a lump sum pursuant to s 43 of the Act and r 40.02(b) of the Rules. Given the nature and protracted history of the proceedings, a lump sum costs determination will likely avoid the expense, delay and aggravation arising out of a lengthy and complicated taxation process and lead to a more efficient resolution of the costs issue in accordance with the objectives of s 37M of the Act.
I have carefully considered what procedural orders I should make to facilitate the lump sum determination being conducted through to finalisation in a way that is as quick, inexpensive and efficient as possible. Having regard to the procedural complexity and longevity, and the relationship between the parties, I am satisfied that the most appropriate way forward is for a Registrar to be appointed as a Referee pursuant to s 54A of the Act for the purpose considering and quantifying the lump sum determinations in each of the proceedings after receiving such materials (including written submissions and any affidavits) as the Referee may direct from each of the parties. I will make orders accordingly.
Having regard to the unorthodox way in which this application was brought before the Court by the Cost Applicant and weighing that against the fact that the Cost Applicant has succeeded in substance in this application, I am satisfied that the parties should bear their own costs of this application.
CONCLUSION
I will make orders in accordance with these reasons.
I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman. Associate:
Dated: 21 November 2024
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