Murphie v Vita Domus Pty Ltd (No.2)

[2019] FCCA 2370

FEDERAL CIRCUIT COURT OF AUSTRALIA

MURPHIE v VITA DOMUS PTY LTD (No.2)

[2019] FCCA 2370

Catchwords:

BANKRUPTCY – PRACTICE AND PROCEDURE – Costs.

Legislation:

Bankruptcy Act 1966 (Cth), s.41(7)

Federal Circuit Court Rules 2001 (Cth), rr.21.15, 21.16

Cases cited:

Bunnag vMinister for Immigration and Citizenship [2008] FMCA 430

Colan Products Pty Ltd v Luxon Pty Ltd (No.2) [2002] FMCA 90

Hamlin v University of Queensland (No.3) [2013] FCCA 1129

Kavangh & Madgwick (No.3) [2008] FMCAFam 287

Lee v Procter & Gamble Australia Pty Ltd (No.2) [2012] FMCA 1075

Murphie v Vita Domus Pty Ltd [2019] FCCA 2063

Rentoul v Poynton (No.2) [2008] FMCAFam 295

Starr v Westpac Banking Corporation (No.2) [2019] FCCA 18

Applicant:

MATTHEW MURPHIE

Respondent:

VITA DOMUS PTY LTD

File Number:

SYG 505 of 2018

Judgment of:

Judge Barnes

Hearing date:

By written submission

Date of Last Submission:

20 August 2019

Delivered at:

Sydney

Delivered on:

27 August 2019

REPRESENTATION

Solicitors for the Applicant:

Sparke Helmore

Solicitors for the Respondent:

Hunt & Hunt

ORDERS

(1)     Vita Domus Pty Ltd pay Mr Matthew Murphie’s costs fixed in the sum of $7,708.

1. FEDERAL CIRCUIT COURT

OF AUSTRALIA

AT Sydney

SYG 505 of 2018

Matthew Murphie

Applicant

And

Vita Domus Pty Ltd

Respondent

REASONS FOR JUDGMENT

1.      On 23 February 2018 the Applicant, Mr Murphie, applied to set aside a bankruptcy notice issued on the application of the Respondent, Vita Domus Pty Ltd (Vita Domus).  On 1 May 2018 a registrar made an order setting aside the bankruptcy notice by consent.  The issue of costs was contested.  The registrar ordered that Vita Domus pay Mr Murphie’s costs “as agreed or taxed”. Vita Domus sought review of this decision. I set aside the registrar’s costs order and ordered that Vita Domus pay Mr Murphie’s costs in relation to the application to set aside the bankruptcy notice fixed in accordance with Part 1 of Schedule 1 to the Federal Circuit Court Rules 2001 (Cth) (the FCC Rules) (see Murphie v Vita Domus Pty Ltd [2019] FCCA 2063).

2.      I gave the parties the opportunity to file an agreed calculation of costs or, if they were unable to agree, to file and serve written submissions calculating costs in accordance with the FCC Rules.  The parties were unable to agree.  Each party filed a written submission and agreed that the issue of the calculation of costs should be dealt with on the papers.  Mr Murphie seeks costs in the sum of $15,327.50.  Vita Domus calculated that the costs should be $6,177.

3. Mr Murphie seeks an order for costs (including disbursements) in the sum of $15,327.50 on the basis that he should be entitled to costs in relation to items 1, 6, 12, 13 and 14 in Part 1 of Schedule 1 to the FCC Rules. He disputed any contention by Vita Domus that he sought to recover costs incurred in relation to evidence prepared to support an application to set aside orders made by NCAT that formed the basis for the Local Court order relied on in the bankruptcy notice or that the majority of evidence filed in connection with the application to set aside the bankruptcy notice went to issues to be advanced before NCAT and the merits of the case before NCAT.

4. As Mr Murphie pointed out, in support of the application to set aside the bankruptcy notice he claimed that he had a counter-claim, set-off or cross demand exceeding the amount of the judgment debt within s.41(7) of the Bankruptcy Act 1966 (Cth). Hence some material evidence of the claim, and not a mere assertion that such a claim existed, had to be provided to the court.

5. In any event, the parties do not dispute that the Applicant should have the lump sum amount provided for in paragraph (a) of item 1 in Part 1 of Schedule 1 to the FCC Rules in relation to initiating or opposing an application up to completion of the first court date. They also now both accept that the applicable amount at the relevant time was the sum of $2,936. This is in accordance the FCC Rules as they stood at the time the work was done and service performed (see the Federal Circuit Court Amendment (Costs and Other Measures) Rules 2017 (Cth)). 

6.      Item 1 also provides that the costs for initiating or opposing an application up to the completion of the first court date includes the daily hearing fee mentioned in item 13, which applies to the hearing on the first court date. 

7. The application of this aspect of the events based system for assessing costs in Schedule 1 to the FCC Rules is complicated by the fact that in this case there was not the “usual” first court date at which there were appearances at a directions hearing and subsequently a final hearing.  Rather, after the application to set aside the bankruptcy notice was filed, a registrar made orders on 27 February 2018 extending the time for compliance with the bankruptcy notice up to and including 13 March 2018, which was the first court date as notified on the notice of filing and hearing.  However on 22 February 2018, Mr Murphie had also filed an application in NCAT to set aside the orders that formed the basis for the Local Court judgment relied on in the bankruptcy notice. 

8.      On the first court date of 13 March 2018, consent orders were made by a registrar extending the time for compliance with the bankruptcy notice to 1 May 2018.  The parties were not required to appear.  There is no suggestion that there was any appearance for Mr Murphie on 13 March 2018.  Clearly no daily hearing fee should be recoverable in respect of 13 March 2018.  The parties did not suggest otherwise, but appear to have proceeded on the basis that the first court date was 1 May 2018.

9.      On 13 March 2018 the matter was “relisted” before a registrar on 1 May 2018 at 11am.  There was no indication in the orders of 13 March 2018 as to whether there would be a final hearing on 1 May 2018 of the application to set aside the bankruptcy notice. 

10.    In any event, on 3 April 2018 Mr Murphie’s application to set aside the NCAT orders was successful.  The parties subsequently agreed (by about 16 April 2018) that the bankruptcy notice (and also the Local Court judgment) should be set aside.  However the parties were unable to agree in relation to costs.  Further correspondence ensued in that respect.

11.    When the matter next came before the registrar on 1 May 2018, the parties appeared.  The registrar set aside the bankruptcy notice by consent, but heard the parties in relation to costs and then made a costs order, for which he gave reasons.

12. In addition to an amount under item 1 the Applicant sought an amount under item 6 in Part 1 of Schedule 1 for “Preparation for final hearing - one day matter”.  As the Respondent submitted, no amount should be allowed under item 6.  I do not accept the Respondent’s submission (in relation to item 1) that no further work on the part of the Applicant’s legal representative was required after the application was filed (or, indeed, after the first court date of 13 March 2018).  There was evidence of considerable subsequent correspondence between the parties in relation to the bankruptcy proceedings (not limited to the dispute in relation to costs).  However, once agreement in relation to setting aside the bankruptcy notice was reached, there was no further need to prepare for any final hearing of the substantive application to set aside the bankruptcy notice, certainly not for a one day hearing.   

13. On the other hand, I accept that there ought to be an allowance in relation to costs incurred in this period and for the short hearing on 1 May 2018. Even after agreement was reached in relation to setting aside the bankruptcy notice, it was clearly anticipated by both parties that any outstanding issues were to be determined by the registrar on 1 May 2018. In my view it is appropriate to allow an amount equivalent to the costs specified in item 3 in Part 1 of Schedule 1 for an interim or summary hearing as a discrete event. Item 3 provides that this “stage” applies to “an interim application or a summary proceeding of a type not otherwise addressed in the fee structure” and does not include the item 1 component (which in this case related to costs up to 13 March 2018). At the relevant time the sum of $1,832 was specified in item 3. In this context, the daily hearing fee and advocacy loading in relation to 1 May 2018 are also recoverable.

14.    The Applicant claimed a daily hearing fee calculated on the basis of a half-day hearing on 1 May 2018 (that is $1,099) and also an advocacy loading of 50% of this amount ($549.50).  In addition the Applicant sought counsel’s fees of $2,695 as well as the court filing fee under item 14 (disbursements).

15.    For its part, the Respondent accepted that a daily hearing fee and advocacy loading were appropriate in relation to 1 May 2018, but suggested that the appearance on 1 May 2018 warranted no more than the amount of $299 for a short mention plus an advocacy loading of $149.50. The Respondent also submitted that counsel’s fees were excessive and that the court should allow only half of the amount claimed therein as a disbursement ($1,347.50) plus the court filing fee of $1445.

16. Neither party has expressly asked the court to certify that it was reasonable to employ an advocate to appear for Mr Murphie in accordance with r.21.15 of the FCC Rules. However it is implicit in their submissions that they both see it as appropriate that counsel appeared. I agree, and I certify that it was reasonable for Mr Murhpie to employ an advocate to appear for him in the proceeding before the registrar on 1 May 2018.

17.    However there is authority, which I consider that I should follow, in relation to the interaction between the event based system for costs in the FCC Rules and reimbursement of counsel’s fees. The claim that counsel’s fees should be included as a disbursement is inconsistent with the approach taken by this court to the proper construction of the FCC Rules.

18.    In Colan Products Pty Ltd v Luxon Pty Ltd (No.2) [2002] FMCA 90, Raphael FM considered circumstances in which a party had claimed counsel’s fees as a disbursement in addition to a daily hearing fee for an instructing solicitor. His Honour stated at [7] in relation to Part 1 of Schedule 1 to the Federal Magistrates Court Rules 2001 (Cth) (the FMC Rules) (the predecessor to the FCC Rules):

The event based system for costs found in the Federal Magistrates Court Rules is an attempt to simplify the assessment of costs and to avoid the necessity for either the state-based consideration by costs assessors or the Federal Court taxation approach. Unfortunately, like all well-intentioned ideas it is hostage to misunderstandings and the purpose of this judgment is to attempt to correct those for the benefit not only of these parties but for the benefit of others who come in the future.

19.    In circumstances where the hearing in question took approximately 2 hours, Raphael FM allowed the “scale” figure in Part 1 of Schedule 1 to the FMC Rules for hearing preparation (in that case for an interim or summary hearing), the half-day daily hearing fee for counsel and for the instructing solicitor, and the advocacy loading for counsel.

20.    His Honour relevantly explained at [13]:

… In respect of the advocacy loading I would explain this as follows. Where it has been certified that the matter is fit for an advocate under Part 20.15 this means that the advocate is entitled to 150% of the daily hearing fee. In addition, the instructing solicitor is entitled to the daily hearing fee. The only exception is when the advocate and the instructing solicitor both come from the same firm. In those circumstances (as set out in the Rules) only one fee of 150% of the daily hearing fee is payable. In this case counsel is therefore entitled to the advocacy loading on the daily hearing fee making the total payable to him of $1,027.50. This is all that counsel is entitled to. The applicant is not entitled to submit counsel's fee note as a disbursement.

21.    The judgment in Colan has been followed on a number of occasions including in relation to the provisions of Part 1 of Schedule 1 to the FCC Rules (see for example Rentoul v Poynton (No.2) [2008] FMCAFam 295 at [36]; Kavangh & Madgwick (No.3) [2008] FMCAFam 287 at [42]; Bunnag vMinister for Immigration and Citizenship [2008] FMCA 430 at [11]; Lee v Procter & Gamble Australia Pty Ltd (No.2) [2012] FMCA 1075 at [39]; Hamlin v University of Queensland (No.3) [2013] FCCA 1129 and Starr v Westpac Banking Corporation (No.2) [2019] FCCA 18 at [20]).

22. Consistent with the approach taken in these cases, counsel’s fees are not recoverable as a disbursement within item 14, but are to be calculated to include advocacy loading as well as the daily hearing fee in accordance with items 12 and 13 in Part 1 of Schedule 1 to the FCC Rules.

23.    I do not accept the Applicant’s contention that the applicable advocacy loading and daily hearing fee should be calculated on the basis that the hearing on 1 May 2018 was a half-day hearing.  It was not.  On the other hand, contrary to the Respondent’s submission, the matter was not resolved by a “short mention” on 1 May 2018.  Counsel for Mr Murphie and the solicitor for Vita Domus provided consent orders to the registrar in relation to setting aside the bankruptcy notice and then each made submissions in relation to appropriate costs orders and the basis on which this issue should be determined.  The registrar made a decision in that respect for which he gave reasons.  In my view the appropriate basis on which to calculate the daily hearing fee and the advocacy loading in the circumstances is twice the amount applicable for a “short” mention.

24.    Accordingly, the amount payable for counsel to appear is the daily hearing fee of $598 plus an additional 50% loading of $299.  There should also be an allowance for a daily hearing fee of $598 for the instructing solicitor.

25.    As indicated, counsel’s fees are not allowable as disbursements under item 14.  The parties do not dispute, and I agree, that the court filing fee of $1,445 should be recoverable under item 14.

26.    Accordingly, I order that Vita Domus pay Mr Murphie’s costs, including disbursements, fixed in the sum of $7,708.

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Judge Barnes

Associate: 

Date:     27 August 2019