Owston Nominees No 2 v Branir Pty Ltd
[1998] FCA 1798
•31 AUGUST 1998
FEDERAL COURT OF AUSTRALIA
PRACTICE AND PROCEDURE – costs – notice of objection to a Registrar’s assessment of a bill of costs – by whom is the taxation fee payable – for whom is the taxation undertaken where one party objects to an assessment of the other party’s bill of costs
COSTS – security for an interlocutory costs order
Federal Court of Australia Act 1976 (Cth) s 43
Federal Court Rules 1979 (Cth) O 62 r 46
Federal Court of Australia Regulations Reg 2
Re Stubberfield; Ex Parte Paradise Grove Pty Ltd [1995] 134 ALR 169
OWSTON NOMINEES NO 2 & ANOR v BRANIR PTY LTD & ORS
NG 3184 of 1995
EINFELD J
SYDNEY
31 AUGUST 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 3184 of 1995
BETWEEN:
OWSTON NOMINEES NO.2 PTY LIMITED
FIRST APPLICANTWARREN PERRY ANDERSON
SECOND APPLICANTAND:
BRANIR PTY LIMITED
FIRST RESPONDENTTOVEHEAD PTY LIMITED
SECOND RESPONDENTABURIZAL BAKRIE
THIRD RESPONDENTJUDGE:
EINFELD J
DATE OF ORDER:
31 AUGUST 1998
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The Registrar’s direction that the applicants pay the Item 12 fee provided in the Schedule to the Federal Court of Australia Regulations for the taxation of costs be set aside.
The respondents pay $2000 within 28 days after the provision of the security in Order 3 in satisfaction of the requirement in regulation 2 for a fee for the taxation of costs.
The applicants provide security for the costs order of 27 August 1997 in the sum of $100,000 within 28 days either in cash or in another form acceptable to a Registrar. In default a certificate of taxation in the sum of $150,000 plus interest is to issue forthwith.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 3184 of 1995
BETWEEN:
OWSTON NOMINEES NO.2 PTY LIMITED
FIRST APPLICANTWARREN PERRY ANDERSON
SECOND APPLICANTAND:
BRANIR PTY LIMITED
FIRST RESPONDENTTOVEHEAD PTY LIMITED
SECOND RESPONDENTABURIZAL BAKRIE
THIRD RESPONDENT
JUDGE:
EINFELD J
DATE:
31 AUGUST 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
INTRODUCTION
The original application in this case came into the list in 1995 as an urgent matter. Since then the matter has progressed with more speed away from a hearing than towards it. After a long and complex preparation period, the case was set down for a final hearing of two weeks to begin on 27 August 1997. On the morning of the first day of the trial, the applicants requested that the hearing be vacated and that leave be given to them to file amended pleadings, to join a third respondent who resided out of the jurisdiction, and to file further evidence. The applicants put this application on several bases, including that they had very recently changed their solicitor, whereupon the inadequacies in the preparation of their case were discovered. After some argument, I granted the adjournment and the requested leave, and made orders so that the matter might be properly constituted according to a strict timetable. The case is now fixed for hearing today. As to the costs occasioned by the adjournment, I made the following orders:
6. COSTS:
(i)The respondents have leave to present for taxation forthwith a bill of costs in respect of all costs orders made in the proceedings thus far.
(ii)The applicants are to pay the respondents’ costs of and occasioned by the adjournment and the amendment of the claim on an indemnity basis and the respondents have leave to present the bill for taxation forthwith.
(iii)The rights of the respondents are reserved in respect of making further applications for costs to date, when the applicants’ case becomes clear.
7. After taxation, the costs are payable forthwith.
There are currently two motions before the Court in this connection. The first dated 8 April 1998 is brought by the respondents seeking, inter alia, an order that the applicants pay a fee of $33,090.04, as prescribed by the Federal Court of Australia Regulations (the Regulations), in respect of the taxation of a bill of costs filed on 25 November 1997, pursuant to my order of 27 August 1997, seeking costs of $441,159.49. The second motion is an application by the respondents, first made orally on 24 July 1998, seeking security for the costs order of 27 August 1997.
LEGISLATIVE FRAMEWORK
The Court’s jurisdiction to award costs arises from section 43 of the Federal Court of Australia Act 1976 (Cth) (the Act) and the details are provided for in Order 62 of the Federal Court Rules 1979 (Cth) (the Rules) and the Regulations.
Order 62 rule 4(1) provides that, subject to a contrary order, where the Court orders that costs are to be paid to any person, that person shall be entitled to taxed costs. Rule 8 provides that, on presentation, a bill of costs shall be taxed, allowed and certified by a Registrar. The end result of the taxation process is a certificate of taxation. If the amount in the certificate is not paid within 14 days, the Registrar will draw up, sign and enter an order for the payment of that amount. That order operates as a final order in its own right: Re Stubberfield; Ex parte Paradise Grove Pty Ltd [1995] 134 ALR 169.
Order 62 rule 46 provides for three alternative methods by which a certificate of taxation may issue, other than by the bill proceeding to a full taxation. In accordance with the Notice to Practitioners issued by the Federal Court Registry on 14 November 1996, all bills of costs are initially dealt with under this rule:
46 (1) Notwithstanding anything in this Order, the Registrar shall have a discretion to apply the provisions or a provision of this rule, and may for that purpose decline to give an appointment to tax a bill on its being filed, and may require the party who filed the bill to lodge any documents in the possession or power of that party.
(2) If the Registrar decides to apply this rule, the Registrar may direct that action be taken under the provisions of subrule (3) or subrule (4). The Registrar may also or alternatively take action under subrule (6).
(3) (a) Upon the direction of the Registrar under subrule (2), a taxing officer may, without making any determination on the individual items in the bill, make an estimate of the approximate total for which, if the bill were to be taxed, the certificate of taxation would be likely to issue.
(b) The Registrar will notify each party interested in the bill in writing of an estimate made under paragraph (a).
(c) Unless within 14 days of receipt of notice under paragraph (b), a party interested files and serves on each other party a notice of objection o the estimate there shall be no taxation, and the amount of the estimate shall be deemed to be the amount for which a certificate of taxation may issue.
(d) Upon filing a notice of objection a party shall pay to the Registrar an amount of $750 as security for the costs of any taxation of the bill.
(e) Where a notice of objection is filed, the Registrar may direct that subrule (4) apply, or that taxation of the bill proceed.
(4) (a) Upon the direction of the Registrar under subrule (2) or paragraph (e) of subrule (3), a taxing officer may, in the absence of the parties, provisionally tax the bill, noting legibly upon it in ink all amounts provisionally taxed off.
(b) The Registrar will serve a photocopy of the bill so provisionally taxed on each party interested.
(c) Unless within 21 days of receipt of a photocopy of the provisionally taxed bill, a part interested files and serves on each other party a notice requiring a full taxation, there shall be no further taxation, and the amount at which the bill was provisionally taxed shall be deemed to be the amount for which a certificate of taxation may issue.
(d) A notice requiring a full taxation shall:
(i) set out a complete list of each item or part of an item in the bill to the treatment of which upon the provisional taxation the party filing the notice objects; and
(ii) specify the nature and grounds of objection and the extent to which it is contended each item or part of an item should have been allowed or disallowed as the case may be.
(e) Within 21 days of service of a notice under paragraph(c), a party served may file and serve on each other party a notice containing corresponding details of any item or part of an item to the treatment of which upon the provisional taxation that party objects and of the nature and grounds of such objections.
(f) On taxation of the bill and subject to a discretion of the taxing officer exercisable in exceptional circumstances only, all items shall be taxed as they were provisionally taxed to the extent that they are not referred to in a notice filed pursuant to paragraph (c) or (e) and no ground shall be relied on which is not specifically set out in such a notice.
(4A) If a notice of objection is filed under paragraph 46(3) (c), or a notice requiring a full taxation is filed under paragraph 46(4) (c), the party filing the notice shall bear the costs of taxation of all parties from the date of filing the notice unless, on taxation, there is obtained in that party’s favour a variation of at least 15% of the estimate of taxed costs or of the amount provisionally taxed.
(5) …(not presently relevant)
(6) At any time after the making of an order for costs, and before the issue of a certificate of taxation in accordance with an estimate or provisional taxation or full taxation:
(a) the Registrar may order (either on the application of a party or of the Registrar’s own motion) that the parties attend before a designated Registrar or other designated officer in confidential conference with a view to:
(i) reaching a mediated resolution of the amount for which a certificate of taxation should issue; or
(ii)clarifying the real issues in dispute; and
(b) if the Registrar makes an order under paragraph (a) – each party must file and serve on the other parties, at least 7 days before the date of the conference, a brief summary of the issues in dispute and the contentions to be raised in respect of the issues.
(6A) If:
(a) 21 days have passed after notification by the Registrar to the parties of a completed taxation or provisional taxation under this rule; and
(b) no party has objected to the taxation or provisional taxation;
the Registrar, after having regard to the liability of any party to pay the costs of the taxation under this Rule, must:
(c) determine how the amount paid to the Registrar as security for the costs of the taxation is to be distributed or refunded to the parties; and
(d) direct that payment be made out Court accordingly.
(7) In this rule a reference to a registrar extends only to persons occupying the office or for the time being performing the duties of Registrar or District Registrar of the Court.
Relevantly, the Regulations provide that:
2 (1) A fee is payable for an action of the Court, or an officer of the Court, that is specified in an item in the Schedule, being, except as provided by this regulation, regulation 2AA or regulation 2A, the fee specified in column 3 of the item.
(1A) Unless the Court, a Judge, Judicial Registrar or registrar orders otherwise:
(a) the fee mentioned in item 13 of the Schedule is payable by the applicant in the proceedings to which the mediation relates; and
(b) any other fee mentioned in the Schedule is payable by the person for whom the action is taken.
…
(3) A document must not be filed in a registry of the Court, or a service mentioned in items 11, 12, 13 or 14 in the Schedule must not be provided, unless the fee payable for that filing or service has been paid.
The Schedule to the Regulations provides for the following fee (the Item 12 fee):
Column 1
Item NoColumn 2
Document or serviceColumn 3
Fee
$12
For taxing a bill of costs – for every $100.00 or part of $100.00 of the amount claimed in the bill filed ……………………………………………………
7.50
FACTUAL BACKGROUND
When the respondents’ solicitors filed their bill of costs under consideration, in accordance with the usual practice, no appointment to tax the bill was made at the time of filing and a Registrar proceeded to deal with the matter under Order 62 rule 46(3). On 18 February 1998, the Registrar complied with rule 46(3)(b) by writing to the solicitors for the parties, notifying them of his assessment made pursuant to rule 46(3)(a). The letter stated in part:
I refer to the Bill of Costs filed by the First and Second Respondents on 25 November 1997.
Under Order 62, paragraph 46(3)(b) of the Federal Court Rules, I notify you that the estimate made of the approximate total for which, if the Bill were to be taxed, the certificate of taxation would be likely to issue is $150,000.
…
Please note that under Regulation 2 of the Federal Court of Australia Regulations, a fee is payable for taxing a bill of costs, being $7.50 for every $100 or part of $100.00 of the amount claimed in the bill filed. This fee will only be collected if a party files a notice of objection to an estimate. Generally, the fee will be payable by the party who filed the notice of objection. Payment of the fee will be required before an appointment is given for a full taxation.
On 4 March 1998, within the prescribed period of 14 days, the applicants filed a notice of objection and, in accordance with rule 46(3)(d), paid $750 as security for the costs of any taxation of the bill. The Registrar then exercised his discretion under rule 46(3)(e) and directed that a full taxation of the bill proceed. The parties were notified in writing of this direction on 10 March 1998:
I refer to the Applicants’ Notice of Objection to the estimate of costs under Order 62, rule 46(3)(c), filed on 4 March 1998. I have directed that a full taxation of the bill of costs (“the bill”) proceed.
Under regulation 2 of the Federal Court of Australia Regulations, a fee of $33,090.04 (being $7.50 for every $100.00 or part of $100.00 of the amount claimed in the bill filed) is payable for taxing the bill. This fee is payable by the applicants. Payment of the fee should be made within 21 days after the date of this letter. …
The applicants did not pay the Item 12 fee as directed by the Registrar, without which the taxation of the bill was, and remains, proscribed by regulation 2(3).
Following the expiration of the time period set by the Registrar for the payment of the Item 12 fee, there was a great deal of correspondence between the parties as to the appropriate course. The respondents submitted to the Registrar that a certificate of taxation should issue immediately for $150,000. The solicitors for the applicants initially maintained that they were awaiting a cheque for the amount of the fee from their clients and would pass it on to the registry, in payment of the fee, as soon as it was received. When payment was not received, the respondents filed on 8 April 1998 the motion presently before the Court. It sought the following orders:
1.An order that the applicants pay by 4.00pm on 15 April 1998 the sum of $33,090.04 Court fees in respect of the applicants’ notice of objection dated 4 March 1998 to the estimation of Registrar Segal dated 18 February 1998 regarding the bill of costs filed on behalf of the respondents.
2.An order that in default of the payment ordered in paragraph 1 above the certificate of taxation dated 5 March 1998 filed on behalf of the first and second respondents in accordance with the estimation given by Registrar Segal dated 18 February 1998 issue forthwith and be entered as an Order of this Honourable Court.
3.An order pursuant to Order 62 Rule 4(2) that if the payment ordered in paragraph 1 above is made by 4.00pm on 15 April 1998, then the applicants are to pay the first and second respondents within 14 days thereafter the sum of $100,000.00 as part payment of the costs awarded to the first and second respondents by the Honourable [Mr] Justice Einfeld on 27 August 1997.
The applicants submitted three alternative propositions. Primarily they argued that under the legislative scheme, the Item 12 fee is payable by the respondents. In the event that the Court determines otherwise, the applicants submitted that the Court should exercise its discretion under regulation 2(1A) and order that in this particular case the respondents pay the Item 12 fee. In the event that the Court determines that the Item 12 fee is payable by the applicants and refuses to exercise its discretion to order otherwise, then the applicants submitted that the regulation which imposes the fee is ultra vires.
The respondents submitted that, notwithstanding any construction of the regulations, the letter of 10 March 1998 from the Registrar constituted a direction that the applicants pay the Item 12 fee which is the end of the matter. If the Court determines otherwise, the respondents submitted that the true construction of the regulations is in accordance with the Registrar’s letter of 10 March 1998 and that the applicants are liable to pay the Item 12 fee.
The questions to be answered are therefore:
Did the Registrar direct that the applicants pay the Item 12 fee, either as a matter of law or within the ambit of the Court’s discretion in regulation 2(1A)?
On the proper construction of the regulations, who is liable to pay the Item 12 fee? In other words, when a notice of objection to an assessment is filed, what is ‘the action’ and for whom is it taken?
If the answer to 1 is ‘yes’ and to 2 is ‘ the taxation of the bill’ and ‘the applicants’, should the Court vary the Registrar’s order and direct the respondents to pay the fee?
If the answer to 3 is ‘no’, are regulation 2(1A)(b) and the Schedule ultra vires?
DID THE REGISTRAR MAKE AN ORDER UNDER REGULATION 2(1A)?
The Registrar’s letter of 18 February 1998 did not order the applicants to pay the fee. He informed the parties that that would be the usual order but that there is a discretion to make another order. However, in the letter of 10 March 1998, an order was made that the applicants pay the fee, apparently on the basis of the Registrar’s interpretation of regulation 2.
WHO IS LIABLE TO PAY THE ITEM 12 FEE?
Notwithstanding the applicants’ contention that the levying of the Item 12 fee and its quantum are ultra vires, there is no dispute that the legislative scheme operates to the effect that once a notice of objection to a Registrar’s assessment has been filed, a fee becomes payable before the matter can proceed to a full taxation of the bill in question.
The critical provision governing liability to pay the fee is regulation 2(1A)(b), which declares that the fee is payable “by the person for whom the action is taken”. The “action” in this case is clearly the taxing of the bill of costs, as is specifically identified in Item 12 of the Schedule. To determine who is liable to pay the Item 12 fee therefore requires a determination of the party for whom taxing the bill is undertaken when a notice of objection to a Registrar’s assessment has been filed.
The applicants submitted that the action was taken for the respondents, on the basis that it is the respondents who have a costs order in their favour. According to this view, it is the respondents who require the bill of costs to be taxed, in order to recover the ‘taxed costs’ to which they are entitled under rule 4(1) and the costs order made in the matter.
The respondents submitted that the action of taxing the bill is taken for the applicants, on the basis that without a notice of objection having been filed by the applicants, there would have been no need to proceed to a taxation of the bill. The respondents admitted that if the matter had proceeded directly to a full taxation without rule 46 being utilised, they would have to bear the cost of the fee. Having accepted the estimate and avoided the need for the full taxation, the onus to pay the fee shifted to the applicants when they filed their notice of objection.
Regulation 2 does create a problem of understanding and construction. Clearly its purpose is to encourage quick and efficient resolution of costs disputes and payment of costs orders. It seeks to persuade parties to accept Registrars’ estimates and discourage full taxations. By this reasoning , the party who does not accept the estimate is the person who brings about the taxation and for whom it is undertaken. In this case that would mean that the applicants are liable to pay the Item 12 fee. Moreover, it might be asked, why should the respondents as the parties entitled to their costs by order of the Court have to risk being out of pocket to the tune of $33,000 to achieve a minimum of $172,500 (ie $150,000 plus 15%) for their costs, and possibly paying a substantial premium to enforce their order? For their part, the respondents eschewed and ridiculed the ultra vires argument of the applicants so they presumably understood that this might be a possible consequence of their being unsuccessful in their motion.
On the other hand, the regulation is silent as to what happens if the fee is not paid. If the fee for the filing of a subpoena is not paid, the subpoena will not issue and the adverse results will fall on the party seeking it. By analogy, if the party seeking a certificate of taxation to enable it to enforce a costs order does not pay the fee for the taxation, the loss is its loss when the taxation is not held and the order remains unquantified and therefore unenforceable. Indeed, as the regulation makes no provision for a sanction if the objector is ordered to pay the fee and does not, the party entitled to costs would still be unable to have its costs order quantified and enforced. Thus, it seems, the deterrent to an objection is not the Item 12 fee, but the requirement of rule 46(4A) that if the objector does not achieve a 15% improvement on the Registrar’s estimate, it pays all parties’ costs of the taxation including the Item 12 fee.
In my opinion, the better view of this dilemma is that it is the party who lodged the bill for taxation who is the party for whom the taxation is done and who is therefore liable to pay the fee, if only because it is the only way an effectuation of the costs order can be ensured.
VARYING THE REGISTRAR’S ORDER
This construction of regulation 2 would require for this case a variation of the Registrar’s order of 10 March 1998 that the applicants as objectors pay the fee. One relatively minor variation would be to order that the fee be paid by the applicants as objectors within say 28 days, in default of which a certificate for taxation will issue in the amount of the estimate. That order would seemingly achieve the goal of the regulation to encourage acceptance of estimates to achieve expeditious inexpensive resolution of costs disputes. It would also seem to be permitted by the broad discretion embodied in regulation 2.
However, there appear to be no special circumstances for this case which would dictate a departure from the principle I believe is embodied in regulation 2 as to who should pay the Item 12 fee other than to correct what seems to be the anomaly it throws up. The tortuous history of this litigation would suggest that if anything is made to depend on timely action by the applicants, it will not be done in the time allowed. The principal issue here is to achieve the speedy resolution of the costs order made in favour of the respondents as mandated by the regulation. If the objection is justified, it is proper that it be so found at the taxation. If it is not, the applicants will be paying a significant penalty for their unjustified objection.
Nevertheless, a result that would, as a prerequisite to its recovery, have the respondents paying as much as a fifth of the amount they are willing to accept is so bizarre as to require the Court to find another solution. The Court has power to dispense with any of its rules and has a broad discretion to vary the requirements of regulation 2(1A) and the Schedule including Item 12, not only as to who should pay but as to how much should be paid. Pending a very necessary review of this regulation, I therefore vary the Registrar’s order by ordering that within 7 days after the provision of the security referred to below, the respondents pay a fee of $2,000 in satisfaction of the requirement in regulation 2 for a fee for the taxation of costs.
SECURITY
The respondents also seek security for the costs order of 27 August 1997. This matter was first raised on 24 July 1998, when consideration was deferred to 11 August 1998 and then to 14 August 1998. No evidence was led by the applicants who relied entirely on the submission that granting security would be inappropriate given the delay in making the application.
There are a number of factors which the respondents submitted weigh in favour of an award of security. First and foremost is the fact that it was the clear intention of the Court, when it made the indemnity costs order in August last year, that the respondents would have the benefit of the early receipt and use of their costs thrown away by the adjournment on the morning the hearing was scheduled to begin. That the respondents were to be able to recover their costs as soon as possible was made clear, as the order envisaged any bill being taxed and paid forthwith. Over twelve months later, on the eve of a second two week hearing, these costs have still not been paid. Apportioning blame for this delay would not be a useful exercise, and in any event the delay was at least partly due to the apparently genuine dispute over the payment of the taxation fee. Nevertheless, the protection designed to be delivered to the respondents by the indemnity costs order has not yet been forthcoming. The other factors the respondents pointed to are the several occasions on which some doubt has been cast on the applicants’ financial position, including the late change of solicitors before the hearing in 1997 due to the non-payment of fees, the inability of the applicants to complete their affidavit evidence for a period while their solicitors were not in funds, and their repeated failures to provide the security for the respondents’ costs of the trial within time as consented to by the applicants on 9 June 1998. Despite being given an opportunity to put on evidence as to their financial position, the applicants did not do so.
For their part, the applicants claimed that the delay in bringing this application is fatal. They submitted that the order in question was made over twelve months ago and that despite an application for security for any final costs order being brought in May 1998, no application for security for the previous costs order was sought until 24 July 1998. The applicants also pointed to the fact that the matter is now ready for hearing and that they have recently provided $200,000 by way of security for the respondents’ costs of the action as a whole. As a consequence, they submitted that any further order for security would be oppressive and unjust.
In my view, the delay in the application for security is at least partially explained by the respondents’ apparently justified belief that the terms of the order requiring payment forthwith gave them adequate protection and that an application for security would therefore have been an unnecessary waste of the Court’s time. Also, the applicants have been aware since the order was made that they would have to bear the burden of the costs of the respondents thrown away by the adjournment of the hearing. The fact that payment of those costs has been delayed has been to the applicants’ advantage and consequently I can give little weight to their pleas of oppression and prejudice. Given the history of these proceedings, and the applicants’ attitude to Court orders, especially when money is involved, the respondents are in my view entitled to some assurance, as they face a second set of trial dates, that an indemnity costs order in their favour made last year will not be rendered worthless. I therefore propose to order that security be provided.
The written submissions on the question of whether security should be ordered in principle gave at least some attention to the question of quantum although I had agreed that quantum could be deferred. In the circumstances it is in my view not necessary to engage in further debate. In their motion seeking orders that the applicants pay the Item 12 fee, the respondents sought $100,000 as a ‘down payment’ on these costs. Having regard to the amount sought in the bill of costs and the assessment of the Registrar, it is my view that that amount is appropriate to be paid by way of security for the unpaid costs order. I order that by not later than 4.00pm on Friday 28 September 1998 the applicants pay into Court by way of security for the costs order made on 27 August 1997 cash or surety in the sum of $100,000 in a form satisfactory to a Registrar. In default of such payment, a certificate of taxation for $150,000 plus interest is to issue forthwith.
I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Einfeld
Associate:
Dated: 31 August 1998
Counsel for the Applicant: Mr M. Steele Solicitor for the Applicant: Deacons Graham & James Counsel for the Respondent: Mr A. Street SC and Mr M. Condon Solicitor for the Respondent: Blake Dawson Waldron Date of Hearing: 21 April 1998 Date of Judgment: 31 August 1998
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