FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PIERSON’S PRO-HEALTH PTY LTD & ORS v SILVEX NOMINEES PTY LTD & ANOR (No.3) | [2010] FMCA 250 |
| COSTS – Application by respondents to set aside order for costs in favour of respondents – costs order made and entered following judgment – basis for award of costs in Federal Magistrates Court – whether any basis for setting aside costs orders – whether costs order interlocutory – whether consent of party in whose favour costs order made – usual order as to costs – alternative explanation for respondents’ failure to seek costs order at hearing – failure of lawyer to read files – prejudice – procedural fairness. |
| Evidence Act 1995 (Cth), s.59 Federal Court Rules (Cth), O.35, r.7(2)(f), O.62 Federal Magistrates Act 1999 (Cth), ss.14, 79(2) and (3), 81(1)(c) and (2), 86 (b),(c) and (d), 88 Federal Magistrates Court Rules 2001 (Cth), rr.16.05(1), (2)(c) and (f), 16.08, 21.02(2)(a), 21.10, 21.11, Schedule 1 |
| B. C. Cairns, Australian Civil Procedure (7th Edn) (Law Book Co: Pyrmont, 2007) M. Castle and N. Armitage, Costs in the Federal Magistrates Court – Am I Claiming Too Much or Not Enough?, Ethos: Official Publication of the Law Society of the Australian Capital Territory (No. 202, March 2006) T. Lucev, The Federal Magistrates Court: Jurisdiction, Practice and Procedure and Cross-Vesting Applications (Western Australian Bar Association, Bar Readers’ Course, 21 May 2008) |
| First Applicant: | PIERSON’S PRO-HEALTH PTY LTD |
| Second Applicant: | GRENVILLE GEORGE FRANKLIN |
| Third Applicant: | LEEANNE MAREE FRANKLIN |
| First Respondent: | SILVEX NOMINEES PTY LTD |
| Second Respondent: | HEALTH MINDERS PTY LTD |
| File Number: | PEG 259 of 2007 |
| Judgment of: | Lucev FM |
| Hearing date: | 6 April 2010 |
| Date of Last Submission: | 6 April 2010 |
| Delivered at: | Perth |
| Delivered on: | 15 April 2010 |
REPRESENTATION
| Counsel for the Applicants: | Mr S K Shepherd |
| Solicitors for the Applicants: | Irdi Legal |
| Counsel for the Respondents: | Mr A Gunasekera |
| Solicitors for the Respondents: | Asanka Gunasekera Lawyer |
ORDERS
That paragraphs 32, 33, 35, 36, 45, 48, 51, 74 and 76(b) of the affidavit of Asanka Gunasekera sworn 1 April 2010 be struck out.
That the respondents’ application to set aside or vary order 2 of the Court’s orders of 12 March 2010 be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 259 of 2007
| PIERSON’S PRO-HEALTH PTY LTD |
First Applicant
| GRENVILLE GEORGE FRANKLIN |
Second Applicant
| LEEANNE MAREE FRANKLIN |
Third Applicant
And
| SILVEX NOMINEES PTY LTD |
First Respondent
| HEALTH MINDERS PTY LTD |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 12 March 2010 the Court handed down judgment in this matter,[1] and made an order[2] that the applicants pay the respondents’ costs in the sum of $34,735 by 12 April 2010.[3]
[1] Pierson’s Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No. 2) [2010] FMCA 121 (“Pierson’s Pro-Health (No. 2)”).
[2] “Costs Order”.
[3] Transcript 12 March 2010, page 2.
The respondents applied on 18 March 2010 to set aside or vary the Costs Order made in their favour. The application was made by way of letter setting out the grounds on which it was made.[4] The basis for the Application is r.16.05(1), (2)(c) or (2)(f) of the Federal Magistrates Court Rules 2001 (Cth).[5]
[4] “Application”. The Application, made by way of a letter which the Court agreed to treat as an application, is Annexure AG2 to Mr Gunasekera’s Affidavit sworn 1 April 2010 (“Mr Gunasekera’s Affidavit”).
[5] “FMC Rules”.
Transcript of handing down of judgment and costs order
The transcript of the handing down of the judgment and the making of the costs order is as follows:
HIS HONOUR: Yes, in this matter, the court publishes its reasons for judgment and makes the following order that the application be dismissed. Are there any applications arising from that?
MR A. GUNASEKERA: Please the court, my name is Gunasekera. I appear for the respondent. The respondent seeks an order for costs.
HIS HONOUR: Yes, can you resist that, Mr Shepherd?
MR S. SHEPHERD: Well, I haven’t seen the judgment, your Honour, so I can’t in principle but I don’t know the extent to which ‑ ‑ ‑
HIS HONOUR: Well, each of the aspects of the claim have been found to fail, that is, the trademark infringement passing off and the section 53C claim, so you’ve not been successful in any part of the application.
MR SHEPHERD: Well, your Honour, then no.
HIS HONOUR: All right. Well, in those circumstances I propose to fix costs and to do that in accordance with schedule 1 to the rules, that has costs fixed therefore in the following way: for a first directions hearing plus a daily hearing fee on 31 January 2008, $2350 plus $240; for an interim hearing on 28 March 2008 which went for about three‑quarters of an hour but only 10 minutes in court, $1465, and a daily hearing fee of $250 for a short mention; on 21 April 2008, another interim hearing which went for about an hour which attracts $1465 plus again, a daily hearing fee for a short mention of $240; on 9 July 2008, an interim hearing which went for close to an hour and a half for most of the morning held by telephone between Cairns and Perth, again, $1465 for the hearing plus the daily hearing fee for half a day of $880; for the five days of hearing, stage 5 fees for a two‑day hearing of $7940 plus the three additional days of $5010, giving a total for the hearing of $12,950, plus the hearing fee itself which is five days of $8800, in the circumstances, both sides being represented by counsel, plus a 50 per cent advocacy loading, so that’s $4400 giving a subtotal of $13,200; so for getting up for hearing and the hearing and the hearing itself, the total is $26,150; for taking judgment, $240 which gives a total sum of $34,735 in costs according to the schedule and there will be an order that the applicants pay the respondent’s costs in the sum of $34,735 by one month, Mr Shepherd.
MR SHEPHERD: If you wouldn’t mind, could I have a moment?
HIS HONOUR: Yes.
MR SHEPHERD: Your Honour, yes.
HIS HONOUR: By 12 April 2010. All right, anything else, Mr Shepherd, Mr Gunasekera?
MR GUNASEKERA: No, sir.
MR SHEPHERD: No, your Honour.
HIS HONOUR: All right, thank you, we’ll adjourn.[6]
[6] Transcript 12 March 2010.
Entry of orders
The formal orders made by the Court on 12 March 2010 were that:
1.The application be dismissed.
2.The applicants pay the respondents’ costs in the sum of $34,735 by 12 April 2010.
In accordance with the normal practice of this Court the orders pronounced orally were, after the hearing, reduced to writing, signed and sealed in Chambers, and then sent to the parties. The signing and sealing of the order constitutes entry of the order.[7] The orders indicate that they were entered on 12 March 2010.
[7] FMC Rules, r.16.08.
The power to make orders for costs in the Federal Magistrates Court
The Court's power to award costs in general federal law proceedings (that is, not family law or child support proceedings) is set out in s.79(2) and (3) of the Federal Magistrates Act 1999 (Cth),[8] as follows:
(2)The Federal Magistrates Court or a Federal Magistrate has jurisdiction to award costs in all proceedings before the Federal Magistrates Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
(3)Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Magistrates Court or Federal Magistrate.
[8] “FM Act”.
Section 81 of the FM Act provides for the making of Rules of Court, and s.86 of the FM Act provides for the making of Rules of Court with respect to costs, and in particular:
(b) the costs of proceedings in the Federal Magistrates Court; and
(c) the fees to be charged by practitioners practising in the Federal Magistrates Court for the work done by them in relation to proceedings in the Federal Magistrates Court and the taxation of their bills of costs, either as between party and party or as between solicitor and client; and
(d) the kinds of proceedings or circumstances in which each party is required to bear his or her own costs.
The FMC Rules may also prescribe matters required or permitted by another provision of the FM Act, or any other law of the Commonwealth.[9] The FMC Rules have effect “subject to any provision made by another Act, or by rules or regulations under another Act, with respect to the practice and procedure in particular matters.”[10] The FMC Rules may also prescribe matters “incidental” to matters required or permitted to be prescribed by the FMC Rules under any other provision of the FM Act or any other law of the Commonwealth.[11]
[9] FM Act, s.81(1)(c).
[10] FM Act, s.81(2).
[11] FM Act, s.88.
Rule 21.02 of the FMC Rules provides as follows:
(1) An application for an order for costs may be made:
(a) at any stage in a proceeding; or
(b) within 28 days after a final decree or order is made; or
(c) within any further time allowed by the Court.
(2) In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Order 62 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.
Rule 21.10 of the FMC Rules provides as follows:
Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
(a) costs in accordance with Part 1 of Schedule 1; and
(b) disbursements properly incurred.
Schedule 1 of the FMC Rules, referred to in r.21.10(a) of the FMC Rules, provides for an event based assessment of costs, with the costs for each event fixed by the Schedule.
Rule 21.11 of the FMC Rules provides as follows:
(2) When taxing a statement of costs, a taxing officer must apply:
(a) for a family law or child support proceeding - the scale of costs set out in Schedule 3 to the Family Law Rules; and
(b) for a general federal law proceeding - the scale of costs set out in Schedule 2 to the Federal Court Rules.
(3) In this rule:
“taxing officer” means a Registrar.
Setting aside or varying an order of the Court: before entry of orders
Rule 16.05(1) of the FMC Rules provides as follows:
(1) The Court may vary or set aside its judgment or order before it has been entered.
The Application purports to rely upon r.16.05(1). However, as the Costs Order was entered on 12 March 2010 after the hearing, r.16.05(1) has no application. Because pronouncing and entering judgment are clearly distinguishable[12] an application to set aside or vary might have been made by the respondents before the hearing on 12 March 2008 was adjourned, or immediately after the hearing but before the Costs Order was entered. But Mr Gunasekera, on behalf of the respondents, made no application to do anything in respect of the Costs Order, either at hearing, or immediately thereafter and prior to entry of the Costs Order. The Court cannot therefore make an order setting aside the Costs Order under r.16.05(1) of the FMC Rules.
[12] Holtby v Hodgson (1889) 24 QBD 103 at 107 per Lord Esher MR.
Setting aside or varying an order of the Court: after entry of orders
For reasons set out at length in Skipworth v State of Western Australia & Ors (No. 2),[13] and which are adopted but not repeated here, this Court concluded that:
a)it has no inherent jurisdiction to re-open a matter and vary a costs order;
b)the circumstances in which the Court may re-open a matter to vary an order already entered are expressly set out in r.16.05(2) of the FMC Rules; and
c)there is no basis on which to imply incidental power to vary an order already entered,[14] “particularly where the order is part of final orders, finalising the relevant litigation.”[15]
[13] (2008) 218 FLR 16 at 24-30 per Lucev FM; [2008] FMCA 544 at paras.27-53 per Lucev FM (“Skipworth (No. 2)”).
[14] Skipworth (No. 2) FLR at 29-30 per Lucev FM; FMCA at para.50 per Lucev FM.
[15] Skipworth (No. 2) FLR at 30 per Lucev FM; FMCA at para.52 per Lucev FM.
Any application to vary or set aside an order already entered must therefore be founded in r.16.05(2) of the FMC Rules, which provides as follows:
(2) The Court may vary or set aside its judgment or order after it has been entered if:
(a) the order is made in the absence of a party; or
(b) the order is obtained by fraud; or
(c) the order is interlocutory; or
(d) the order is an injunction or for the appointment of a receiver; or
(e) the order does not reflect the intention of the Court; or
(f) the party in whose favour the order is made consents.
The Application expressly relies upon r.16.05(2)(c) and (f). That raises two issues:
a)is the Costs Order interlocutory?; and
b)has the party in whose favour the Costs Order was made consented to it being varied or set aside?
Is the Costs Order interlocutory?
The respondents argued that the Costs Order was interlocutory because its delivery arose out of the judgment, and as a further step in the proceedings. The applicants submitted that the Costs Order was not an interlocutory order because the orders made on 12 March 2010, including the Costs Order, were orders finalising the matter (as contemplated by s.14 of the FM Act) and following the making of those orders the Court was functus officio.
An interlocutory matter has been described as follows:
An interlocutory application is an application where the order sought will not determine the ultimate question between the parties. Most commonly an interlocutory application is an application made in the course of a proceeding. It is not the trial or hearing for final relief. In determining whether an application is interlocutory it is necessary to see whether as a matter of law the order made on it will finally decide the parties’ rights. If they are so decided, the application is final and not interlocutory. A final application is an application where the order sought must, as a matter of law, finalise the ultimate dispute between the parties.[16]
[16] B. C. Cairns, Australian Civil Procedure (7th Edn) (Law Book Co: Pyrmont, 2007) page 403 (“Cairns”).
The essential distinction is whether the issue determined was final or interlocutory as to the matter which it covers.[17] Thus, where a hearing is split between determination of liability and determination of damages a judgment as to liability is final and not interlocutory.[18] Put differently, where the judgment did not finally determine the rights of the parties that were in issue in the proceedings, it is interlocutory.[19] An order is final if it finally determines the rights of the parties in a principal cause pending between them.[20]
[17] TAG Pacific Ltd v McSweeney (1992) 34 FCR 438 (“TAG Pacific”); White v Brunton [1984] QB 570.
[18] TAG Pacific; Camberwell City Council v Camberwell Shopping Centre Pty Ltd [1994] 1 VR 163 at 173-175 per Marks and Gobbo JJ.
[19] GK Sandford Pty Ltd v Jansen (1992) 36 FCR 83 at 93-94 per Neaves, Beaumont and von Doussa JJ (upholding the making of an interim award of workers’ compensation as interlocutory); Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767 (where the Federal Court granted injunctions against infringement of copyright and ordered that if a claim for damages was to be pursued the matter was to be referred back to the trial judge for findings on the evidence as to damages, which the High Court held to be interlocutory); Metcalf v Permanent Building Society (In liq) (1993) 10 WAR 145 (decision on preliminary issue interlocutory).
[20] McDermott v Richmond Sales Pty Ltd [2006] FCA 248 at para.21 per Kenny J (“McDermott”), citing Hall v Nominal Defendant (1966) 117 CLR 423 at 443 per Windeyer J. See also SZGAP v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 227 ALR 683 at 689-690 per Lindgren J; [2005] FCA 1785 at paras.32-34 per Lindgren J.
In this case, the Costs Order was consequent upon the Court’s order dismissing the application, and therefore disposing of the substantive matter finally. Likewise, the Costs Order was a final order as to costs. In the circumstances, the Costs Order was a final order and not an interlocutory order. Therefore, the Costs Order cannot be set aside or varied under r.16.05(2)(c) of the FMC Rules.
Consent of the party in whose favour Costs Order was made
In this case the parties in whose favour the Costs Order was made have consented to their own application to set aside or vary the Costs Order. A question arises as to the proper meaning of r.16.05(2)(f) of the FMC Rules, and whether it means that such an application might be made and consented to in this manner.
Rule 16.05(2)(f) of the FMC Rules has a direct equivalent in O.35 r.7(2)(f) of the Federal Court Rules (Cth).[21] Thus, decisions of the Federal Court on O.35 r.7(2)(f) of the FC Rules are relevant to the Court’s consideration of r.16.05(2)(f) of the FMC Rules.
[21] “FC Rules”.
Although not entirely free from doubt, at common law, courts with inherent jurisdiction have jurisdiction to set aside a judgment regularly entered if the parties to the judgment consent to the Court doing so, and provided that no third party would suffer particular injury by the making of the order.[22]
[22] Permanent Trustee Co. (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd (1976) 28 FLR 195 at 201 per Brennan J (“Stocks & Holdings”).
The common law position is relevant because in ASIC v Yandal Gold[23] Merkel J said the following, citing Stocks & Holdings in support:
22. The construction that I would place upon O35 r7(2)(f) gives effect to the purpose of the rule as it would ensure that the Court's discretion to vary orders by consent is able to be exercised in order to rectify the unintended operation of certain orders in a manner that is consistent with the inherent jurisdiction of the Court to set aside a judgment by consent of the parties, provided that the setting aside of the judgment would cause no particular injury to a third party.[24]
[23] [2003] FCA 77 (“Yandal Gold”).
[24] Yandal Gold at para.22 per Merkel J.
In BHP Steel (AIS) Pty Ltd v CFMEU,[25] Kiefel J stated that O.35 r.7(2)(f) of the FC Rules permitted the order in question to be set aside given the consent of both parties, and that the question of which of them had the benefit of the order did not need determination.[26]
[25] [2001] FCA 336 (“BHP Steel”).
[26] BHP Steel at para.18 per Kiefel J.
Rule 16.05(2)(f) is a procedural fairness provision. In order for this provision to apply, the parties must consent to having the order in question set aside or varied. The intention is that the party in whose favour the order is made must consent to any application to vary or set aside such order because it is the party that would be prejudiced by any variation or setting aside of the order. When regard is had to the Costs Order, the parties that would be likely to be prejudiced by any setting aside or varying would be the applicants, for it is clear that the respondents will seek substantially increased costs if leave to set aside or vary the Costs Order is granted. The applicants do not consent to the varying or setting aside of the Costs Order. Furthermore, the Costs Order is not one which requires rectification of unintended consequences, for there are no unintended consequences to be rectified. The Costs Order is exactly as the Court made it and intended to make it, having regard to the circumstances of the case. Those circumstances included:
a)the fact that no application was made for an order to be made other than that which was made; and
b)no other facts or circumstances warranting a different order were put before the Court at the time the application for costs was made, notwithstanding that there was opportunity to do so.[27]
[27] As to which, see paras.47(b) and 63-64 below.
For the above reasons, r.16.05(2)(f) of the FMC Rules does not apply to the Application, and the Costs Order cannot be set aside or varied on the basis of r.16.05(2)(f) of the FMC Rules.
Conclusion: setting aside or varying the Costs Order after entry
The Court therefore concludes that the Costs Order is not an order of the type which can be set aside or varied under r.16.05(2)(c) or (f) of the FMC Rules.
Further consideration – exercise of the discretion
Lest it be later decided that the conclusions that the Court has reached above are erroneous, the Court proposes to comment on the merit of the Application, in any event.
There is no dispute that the granting of leave to set aside or vary an order already entered is discretionary, and that the Court is required to exercise its discretion judicially.
What order was sought?
Mr Gunasekera’s Affidavit asserts that having “conducted some minor research on the Federal Magistrates Court website” he “observed that the Court had, on previous occasions, ordered that costs should be taxed in default of agreement”, and that this was his “experience from practising in other jurisdictions.”[28]
[28] Mr Gunasekera’s Affidavit, paras.20-22. The Court’s website is at (“Court Website”).
Mr Gunasekera says that he attended Court on 12 March 2010 “with instructions to simply seek an order for costs in the event [that] my clients were successful.”[29] Mr Gunasekera then asserts that if such an order were granted it was his “intention to first negotiate with the Applicants on costs and failing that, file a bill of costs with the Court”,[30] with a view to having the costs taxed.
[29] Mr Gunasekera’s Affidavit, para.23.
[30] Mr Gunasekera’s Affidavit, para.24.
At hearing, the reasons for judgment having been published and an order for dismissal of the substantive application having been made, the Court asked whether there were any applications, at which point Mr Gunasekera said:
The respondent seeks an order for costs.[31]
No more than that was said.
[31] Transcript 12 March 2010, page 2.
It is significant to note that there was no application for:
a)costs to be referred to a Registrar for taxation under O.62 of the Federal Court Rules;
b)any form of special costs order;
c)an indemnity costs order; or
d)costs to be set in a particular amount or by a particular method of calculation.
The Court finds that the respondents obtained exactly the order that Mr Gunasekera said he was instructed to seek, and in fact sought, namely, an order for costs.
The usual order for costs
Mr Gunasekera submitted that he anticipated that the Court would make an order for costs to be taxed in default of agreement. It was said that the respondents had a reasonable expectation that the Court would make what the respondents argued was the “usual order”, that is, that costs be taxed if not agreed. It was submitted that this was a reasonable expectation having regard to:
a)Mr Gunasekera’s research on the Court Website, and the fact that the Court had, in the respondents’ submission, made similar orders previously;
b)that this was his experience from practising in other jurisdictions; and
c)that it was the respondents’ intention to obtain such an order.
The primary source of information on costs on the Court Website is an electronic document entitled “Legal Costs in General Federal Law Matters”[32] which relevantly provides:
[32] gfl.html.
a)that in general federal law proceedings the Court normally awards costs on a party-party basis to the successful party;
b)that indemnity costs can be awarded; and
c)under the heading “HOW DOES THE COURT MAKE A PARTY-PARTY COSTS ORDER?” says:
The rules in relation to party-party costs are found in Part 21 of the FMC Rules.
Unless the court otherwise orders, the appropriate scale for a party-party costs order (other than bankruptcy) is the event-based scale in Schedule 1 of the FMC Rules.
…
The court has a general discretion to depart from the fixed event-based scale. Sometimes the court may order that a specific amount of costs be paid. In these situations, the Federal Magistrate may assess the costs by using:
the costs rules of the Federal Court, or
another method for determining the amount of costs.
Taxation of costs in the Federal Magistrates Court is only possible when costs are fixed according to the Federal Court scale. There is no provision for taxation of costs if they are fixed according to Schedule 1. Federal Magistrates will determine disputes about the calculation of costs under Schedule 1.
Also available on the Court Website is a copy of a paper given to the Western Australian Bar Association in relation to, amongst other things, the practice and procedure of this Court.[33] The WABA Paper observes as follows:
[33] T. Lucev, The Federal Magistrates Court: Jurisdiction, Practice and Procedure and Cross-Vesting Applications (Western Australian Bar Association, Bar Readers’ Course, 21 May 2008) (“WABA Paper”), available at FM Court operates on a prescribed events based costs schedule, with certain exceptions.
117.Schedule 1 of the FMC Rules set out the FM Court’s events based cost schedule. Costs are determined on the basis of the events which have occurred (for example, first court date, interim or summary hearings as discrete events, preparation for final hearing, and final hearing and hearing fees). The FM Court may certify for advocates, in which case the relevant daily hearing fee is increased by an advocacy loading of 50%. Thus, it ought to be possible for a practitioner on a summary judgment application or attending for final judgment to have calculated the costs under the schedule exactly. There is still a discretion in the FM Court to vary those costs, and the FM Court can fix costs in an amount other than those provided by Schedule 1.[34]
118.…
119.In bankruptcy matters the usual order for costs is for an order for costs which, unless agreed, are to be assessed by a Registrar of the FM Court under O.62 of the Federal Court Rules.[35] [36]
[34] FMC Rules, r.21.02(2)(a).
[35] Although increasingly there appears to be a tendency to simply award costs under Schedule 1 of the FMC Rules.
[36] WABA Paper at paras.116-119. The previous two footnotes (fn.34-35) are footnotes from the WABA Paper.
This Court has dealt with the question of the basis for the fixing of costs orders in numerous cases. For example:
a)in Pratt & Ors v Latta & Anor (No. 2)[37] the Court observed as follows:
[37] [2002] FMCA 43 (“Pratt (No. 2)”).
5. The scale of costs set out in schedule 1 to the Federal Magistrates Court Rules is a fixed event based scale. In the circumstances, it is arguable that an award of costs made simply by reference to the scale gives rise to a debt if there is no room for debate as to the amount of costs that is due. Frequently, however, there will be room for debate, for example, where there is dispute over claimed disbursements or where, as here, an order has been made for costs thrown away. In these circumstances, the successful party requires some means of establishing what costs are due in order to pursue the unsuccessful litigant.
6. There is no provision for taxation of costs fixed by reference to the scale in schedule 1. The only provision for taxation is in rule 21.02(2)(c) under the Federal Court Rules. The Federal Court scale of costs applies in relation to any order for taxation in a general federal law proceeding: Suew Fong Lin v Official Trustee in Bankruptcy (No 2) [2002] FMCA 1. Where there is a dispute about what costs are payable under the Federal Magistrates Court scale it is open to the Court to refer the issue to a registrar pursuant to part 18 of the Federal Magistrates Court Rules but the issue can only be finally resolved by a court order. Such a court order would usually be for costs to be paid in a specific amount or in the form of a declaration that the successful party was entitled to costs in a certain amount for the purposes of the previous costs order. [38]
[38] Pratt No. 2 at paras.5-6 per Driver FM.
b)in Colan Products Pty Ltd v Luxton Pty Ltd & Anor (No. 2)[39] the Court said that the “usual course” to be taken with respect to the assessment of costs was that described above in Pratt (No. 2);[40]
[39] [2002] FMCA 90 (“Colan Products (No. 2)”).
[40] Colan Products (No. 2) at para.3 per Raphael FM.
c)in Hinchliffe v University of Sydney (No. 2)[41] the Court observed as follows:
[41] [2004] FMCA 640 (“Hinchliffe (No. 2)”).
10. It follows from the foregoing analysis that the respondent should receive an order for costs on a normal party/party basis, which the applicant has already conceded. Ordinarily, in human rights proceedings, costs are assessed in accordance with the event based scale appearing in schedule 1 to the Federal Magistrates Court Rules. That scale was adopted by the Court in order to provide simplicity and certainty in determining issues of costs. In some cases, as is likely to be the case here, a successful party will incur significantly more in costs than is recoverable pursuant to the Court scale. It does not follow that that is an unjust result, where it occurs. The Court scale is publicly known and parties to litigation should be aware that the scale is likely to determine their maximum recoverable costs should they succeed. If parties wish to incur significantly more costs in litigation in this Court than they could ever recover, that is a matter for them.
11. In any event, it should not be assumed that because substantial legal costs have been incurred by a party, their money has been well and wisely spent. The scale of costs ordinarily applicable in human rights proceedings reflects the Court’s assessment of what costs can be accepted as reasonable in ordinary proceedings. If proceedings are exceptionally long or complex there is the opportunity to ask for the proceedings to be transferred to the Federal Court, where a more appropriate scale of costs for long and complex proceedings would be available. That was not done in this case.
12. … This Court’s event based costs scale establishes a level playing field. I see no reason to depart from it in these proceedings.[42]
d)in circumstances where the Court was not told of any offers that needed to be taken into account and there was no conduct forming a basis for indemnity costs, the Court observed that costs should follow the event and that “in accordance with the rules of the court, the event-based cost scale in schedule 1 of the [FMC Rules] would apply.”[43] In Zhang the Court went on to observe that:
There is no provision for a taxation of costs on the Federal Magistrates Court scale. It is a simple arithmetical exercise.[44]
and
e)in Choundary v Capital Airport Group (No. 2)[45] the Court noted that an “unsuccessful offer of compromise … is not conclusive of whether an indemnity costs order should be made, but is just one factor to be taken into account”.[46]
[42] Hinchliffe (No. 2) at paras.10-12 per Driver FM.
[43] Zhang v Kanellos & Anor (No. 2) [2005] FMCA 418 at para.2 per Driver FM (“Zhang”).
[44] Zhang at para.4 per Driver FM.
[45] [2006] FMCA 1122 (“Choundary”).
[46] Choundary at para.18 per Mowbray FM.
In an article published in the Journal of the Law Society of the Australian Capital Territory in March 2006 the authors observed that:
a)the primary rule in relation to costs in the Court was that set out in r.21.10 of the FMC Rules, namely that costs are in accordance with Schedule 1 unless the Court otherwise orders; and
b)there is no provision for taxation of costs in the Federal Magistrates Court.[47]
[47] M. Castle and N. Armitage, Costs in the Federal Magistrates Court – Am I Claiming Too Much or Not Enough?, Ethos: Official Publication of the Law Society of the Australian Capital Territory (No. 202, March 2006) at pages 13-14.
Finally, it must be observed that it is not the experience of the Court as presently constituted that the usual order in this Court is for an order that costs be taxed. Usually, including nowadays in bankruptcy, there is an order for costs in a specific sum, calculated by reference to Schedule 1. It is increasingly rarely the case, even in bankruptcy, that the Court refers costs for taxation under O.62 of the Federal Court Rules, and that has never been the usual costs order in this Court.
It is clear from a combined reading of:
a)the FMC Rules;
b)information available on the FMC Website;
c)cases decided by the Court; and
d)other secondary sources,
and the Court’s own experience, that it is well established and well known that the primary source used for fixing costs in general federal law proceedings (other than, arguably, in bankruptcy) in this Court is the event-based scale in Schedule 1 of the FMC Rules. Whilst there is discretion to depart from the event-based scale, that is the exception rather than the norm. The event-based scale under Schedule 1 of the FMC Rules exists to provide simplicity and certainty in determining costs,[48] such that a lawyer attending to take final judgment ought to have been able to calculate the exact costs, in the vast majority of cases.[49]
[48] Hinchcliffe (No. 2) at para.10 per Driver FM.
[49] WABA Paper at para.117; Zhang at para.4 per Driver FM.
The fact that Mr Gunasekera, as is submitted, looked at various judgments of the Court on the Website and saw that orders had been made that costs be taxed if not agreed, takes the matter no further. There can be no doubt that such orders have been made from time to time, particularly in bankruptcy. However, in the absence of:
a)explanation as to which judgments Mr Gunasekera looked at; and
b)analysis of the reasons for an order that costs be taxed if not agreed in relation to those judgments,
the Court is still left with the position that the usual order for costs is not an order that costs be taxed if not agreed.
Having regard to the matters set out above, no lawyer researching the matter properly could reasonably arrive at the conclusion that this Court would, as a matter of making a usual order as to costs, order that costs be taxed if not agreed.
Mr Gunasekera’s experience from practising in other jurisdictions, again a matter which was not explained other than in the generality and then only by assertion, cannot be a basis for having a reasonable expectation that this Court would make an order for costs to be taxed if not agreed, in circumstances where the Court’s usual order is for costs determined on the basis of the event-based scale in Schedule 1 of the FMC Rules.
It was also submitted that the respondents’ intention was to obtain an order that costs be taxed if not agreed. There was no sufficient answer to the question put to the respondents during the course of submissions as to how the Court was supposed to divine the respondents’ intention to obtain such an order when the respondents:
a)only sought an order as to costs; and
b)when asked by the Court whether there was anything further, responded in the negative.
Mr Gunasekera made a submission that he did not think there was any option available to him to change the orders at that point, as the costs had already been determined. However, there was at that point the option of making an application to set aside or vary under r.16.05(1) of the FMC Rules, which option was not availed of by the respondents.
The respondents’ anticipation that it would obtain, and its unexpressed intention to obtain, an order that costs be taxed if not agreed (which the respondents considered to be the usual order as to costs), was based on a misconception as to:
a)the basis for awarding costs; and
b)the usual order as to costs,
in this Court. The respondents have therefore failed to establish a proposition central to their argument, namely that the usual order as to costs in this Court is an order that costs be taxed if not agreed.
An alternative explanation as to why no other costs order was sought
There may be an alternative explanation as to why no application was made for costs, other than that made in the judgment hearing, until six days after the Costs Order was made.
The relevant factual background is as follows:
a)on or about 10 August 2009 Mr Gunasekera took over the conduct of the matter as solicitor on the record from the respondents previous solicitors;[50]
[50] Mr Gunasekera’s Affidavit, para.2.
b)on or about 17 August 2009 Mr Gunasekera collected a file in relation to the matter from the respondents former solicitors;[51]
[51] Mr Gunasekera’s Affidavit, para.12.
c)in August or September 2009 Mr Gunasekera asked the respondents for, and received, copies of all tax invoices for professional services and disbursements paid by the respondents to that time;[52]
[52] Mr Gunasekera’s Affidavit, paras.13-16.
d)on 2 March 2010 Mr Gunasekera received notice that the Court was to deliver judgment, and the Court did so on 12 March 2010;[53]
[53] Mr Gunasekera’s Affidavit, paras.18 and 19.
e)prior to the delivery of judgment Mr Gunasekera:
i)conducted “minor research” on the Court’s Website; and
ii)observed that the Court had previously made orders that costs should be taxed in default of agreement,
in the manner described and referred to above;[54]
[54] Mr Gunasekera’s Affidavit, paras.20 and 21; and see paras.32 and 37 above.
f)at the time of delivery of the judgment Mr Gunasekera’s instructions were to seek an order for costs, which he did; and he further intended to negotiate with the applicants on costs, and failing that file a bill of costs with the Court;[55]
[55] Mr Gunasekera’s Affidavit, paras.23 and 24; and see para.33 above.
g)Mr Gunasekera did not obtain the costs order that he thought he would obtain for the respondents, namely an order that costs should be taxed in default of agreement, but rather obtained the Costs Order for the fixed sum of $34,735;
h)Mr Gunasekera candidly conceded that during the determination of costs by the Court on 12 March 2010 he “didn’t know what was going on, because all I had sought was an order for costs”;[56]
i)Mr Gunasekera “[o]n the evening of 12 March 2010 …. had cause to examine closely the contents of … [the respondents’ previous solicitors’] file”;[57]
j)on examining the respondents’ previous solicitors’ file Mr Gunasekera found that:
i)he had not been given the complete file,[58] and in particular the file contained no correspondence prior to 8 August 2008, and no pleadings, affidavits or transcripts;[59] and
ii)there had been numerous settlement offers, which he asserts would have returned the applicants a better outcome than that achieved at hearing;[60]
k)Mr Gunasekera met with the respondents on 18 March 2010 and discussed the costs issue[61] (but there is no explanation of the six day delay between judgment on 12 March 2010, and meeting with the respondents on 18 March 2010, and making the Application on the same day); and
l)at the time Mr Gunasekera’s Affidavit was sworn he had not yet received the balance of the respondents’ previous solicitors file.
[56] Transcript 6 April 2010, page 3.
[57] Mr Gunasekera’s Affidavit, para.25.
[58] Mr Gunasekera’s Affidavit, para.27.
[59] Mr Gunasekera’s Affidavit, paras.37-40.
[60] Mr Gunasekera’s Affidavit, para.28.
[61] Mr Gunasekera’s Affidavit, para.29.
There is an alternative explanation as to why no other costs order was sought either at the hearing when the judgment was handed down, or expeditiously before the Costs Order was entered. That explanation is the one given by Mr Gunasekera himself: he “didn’t know what was going on”.[62] And the reason Mr Gunasekera did not know what was going on when the Court was determining costs was because he:
a)had not read in any detail the files he did have;
b)did not claim to have read the invoices for professional services which had been rendered to the respondents;
c)had researched the costs issue poorly,[63] and such that he made no claim that on 12 March 2010 he was even aware of Schedule 1 of the FMC Rules setting out the event-based scale; and
d)had drawn, on the basis of his poor research, conclusions about the usual order as to costs in this Court, which ought not to have been drawn, and which would not reasonably have been drawn by a lawyer who had researched the matter properly.[64]
[62] Transcript 6 April 2010, page 3.
[63] See paras.32, 37 and 44-45 above.
[64] See paras.43-45 above.
In short, Mr Gunasekera did not know what was going on because he did not properly prepare for the making of a costs application in this Court, and it is that failure which explains why no other costs order was sought on 12 March 2010, or until six days later.
Prejudice
It was submitted on behalf of the respondents that they would suffer prejudice if the Costs Order was not set aside. The prejudice was said to arise from two matters:
a)that costs and disbursements for Counsel, solicitors and experts in the period from 31 October 2007 to 1 April 2009 total $281,922.65 according to a schedule attached to the Application;[65] and
b)that offers, including Calderbank offers, had been made to settle the proceedings on terms more favourable to the applicant than those arising from the final orders of the Court.
[65] Mr Gunasekera’s Affidavit, Annexure AG2.
In relation to the costs and disbursements incurred by the respondents there is a paucity of evidence before the Court in relation to those costs and disbursements. A table of invoices is attached to the Application referring to invoices dating from 31 October 2007 to 1 April 2009, listing the provider of the service and the, presumably gross, amount of the invoice.[66] The invoices themselves are not in evidence before the Court. Nor is there any evidence at all of:
a)what services or disbursements have been charged for;
b)the basis for the charges incurred, including whether the charges incurred were based on an hourly or daily rate, and if so how much per hour or per day was charged; and
c)whether or not the charges actually relate to the proceedings.
Thus, for example, the dates of the first two entries in the table of invoices, 31 October 2007 and 30 November 2007, predate the initiation of these proceedings on 14 December 2007. Whilst they are only for an amount of $6,249.65, the example highlights the difficulty of having a table of invoices, and no more, by way of evidence before the Court when endeavouring to determine whether a claim that costs incurred constitute prejudice to a party.
[66] Mr Gunasekera’s Affidavit, Annexure AG2.
As to offers to settle the proceedings, including Calderbank offers, the evidence indicates that a number of offers were made, including the following:
a)on 17 January 2008 the respondents’ then solicitors wrote to the applicants’ solicitors with an offer that the proceedings be dismissed with no order as to costs, an offer put in Calderbank terms;[67]
b)on 7 February 2008 a draft deed of terms of settlement was sent by the respondents’ then solicitors to the applicants’ solicitors, offering to dismiss the proceedings against the second respondent in consideration for an undertaking and terms detailed within the deed of settlement;[68]
c)on 10 April 2008 the respondents’ then solicitors made a further offer which included the respondents paying the applicants’ reasonable costs to December 2007 and assessed damages to December 2007;[69]
d)on 17 April 2008 the respondents’ then solicitors made a further offer to the applicants which included the respondents paying the applicants $23,500 in damages and costs to be taxed if not agreed, an offer put in Calderbank terms;[70] and
e)various other offers in May 2008 which did not settle the matter but which included the respondents offering $35,000 plus costs and terms, an offer put in Calderbank terms.[71]
[67] Mr Gunasekera’s Affidavit, paras.56-58 and Annexure AG7.
[68] Mr Gunasekera’s Affidavit, paras.60-61 and Annexure AG8.
[69] Mr Gunasekera’s Affidavit, paras.67-68 and Annexure AG11.
[70] Mr Gunasekera’s Affidavit, paras.69-70 and Annexure AG12.
[71] Mr Gunasekera’s Affidavit, paras.72-73 and Annexure AG14.
None of the above offers resulted in the settlement of the proceedings.
To obtain the benefit of a Calderbank offer it must be shown that its rejection was, in all the circumstances, unreasonable. A Calderbank offer is but one factor that a court will take account of when making an order for costs.[72] Apart from putting the Calderbank offers before the Court the respondents led no evidence and made no submissions, other than to point to the rejection of the Calderbank offers and ultimate result (that is the Costs Order), as to the unreasonableness of the rejection in the circumstances of the case at the time of the rejection. The respondents have simply not put enough before the Court to satisfy the Court, for the purposes of setting aside or varying the Costs Order, that the rejection of the Calderbank offer was unreasonable in the circumstances.
[72] Cairns, page 341; Choundary at para.18 per Mowbray FM.
The applicants argue that if there is any prejudice in relation to the Application to set aside or vary the Costs Order it is the applicants who suffer prejudice by reason of their having a final order as to costs in the litigation, which order if set aside or varied may result in an increase in costs, on the basis of the sums cited in the Application, of up to 800%.
Prejudice in this matter must be assessed bearing in mind that a final order, including the Costs Order, has been made. In that regard:
a)the applicants have the “benefit” of the Costs Order already made;
b)that order was the order that the Court intended to make;
c)the Costs Order is the usual order made in such circumstances; and
d)there is no evidence which justifies the amount of costs said to have been incurred by the respondents, and in that regard:
i)it is not unusual in litigation to incur significantly greater costs than are recoverable;
ii)it does not follow that because significantly greater costs have been incurred than are recoverable that that is unjust;
iii)there was no application to transfer the matter to the Federal Court where a different costs scale applies;
iv)the scale of costs payable in this Court is publicly available, and would have been available to the respondents’ then solicitors throughout the course of this litigation; and
v)the event-based costs scale in Schedule 1 of the FMC Rules sets the maximum amount of costs ordinarily available.[73]
[73] Hinchcliffe (No. 2) at paras.10-12 per Driver FM.
The prejudice to the applicants, who stand to be adversely affected by any setting aside or variation of the Costs Order, is significant, and almost as significant in monetary terms as the prejudice that the respondents say that they have suffered by reason of the Court making the Costs Order, rather than some other form of order as to costs. The prejudice to the applicants is, in the Court’s view, compounded by the fact that the failure to obtain an order for costs other than the Costs Order lies entirely at the feet of the respondents, and more particularly the respondents’ current lawyer, for reasons which are set out in detail above.
The respondents argue that the prejudice that they suffer by reason of the Costs Order not being set aside or varied ought not be visited upon them because of the failures of their current lawyer. Equally, however, the prejudice which would then flow to the applicants by reason of setting aside or varying the Costs Order ought not be visited upon the applicants. The circumstances here are far from exceptional, particularly as it is the failure of the respondents who are making the application to vary or set aside the Costs Order which has resulted in the prejudice said to be suffered by them occurring.
In all the circumstances, the Court has not been persuaded that there is greater prejudice to the respondents than to the applicants if the Costs Order is not set aside or varied, and, further, that if there is prejudice, particularly financial prejudice, that there may be an alternative and more appropriate remedies available to the respondents in circumstances where, in the Court’s view, it is not appropriate that the failures of the respondents’ current lawyer be visited upon the applicants.
Procedural fairness
The Application suggests that costs were assessed “without an invitation to the parties to make submissions”,[74] and hence, it might be argued that there was a lack of procedural fairness. However, this is not a case where there was no opportunity to put submissions on costs. Indeed, the first, and only, substantive thing that Mr Gunasekera said to the Court was “the respondent seeks an order for costs”.[75] There was no other submission on costs made, or even hinted at, by the respondents. Thereafter:
a)the Court determined the costs;[76]
b)the applicants took time, albeit “a moment”, to obtain instructions as to whether a month was a suitable period of time for payment of the costs;[77] and
c)significantly, the Court asked each Counsel whether there was “anything else”, and Mr Gunasekera responded: “No, sir.”[78]
[74] Mr Gunasekera’s Affidavit, Annexure AG2.
[75] Transcript 12 March 2010, page 2.
[76] Transcript 12 March 2010, page 2.
[77] Transcript 12 March 2010, page 2.
[78] Transcript 12 March 2010, page 3.
Procedural fairness is afforded if a party is given an opportunity to be heard.[79] That opportunity was given in this case, and the respondents (through Mr Gunasekera) failed to properly avail themselves of it.[80]
[79] Sullivan v Department of Transport (1978) 20 ALR 323 at 342 per Deane J.
[80] Contrast Skipworth (No. 2) where the Costs Order was made as part of the judgment without hearing from the parties.
Exceptional circumstances
Regard must be had to the fact that the discretion to vary or set aside such orders should be used only in exceptional circumstances.[81] The principle of finality of litigation requires courts to exercise great caution when considering whether exceptional circumstances exist warranting the variation of orders.[82] In this case the Costs Order was the usual order, and it was made as requested. There is nothing in the overall circumstances of this case which make the circumstances, or any of them, exceptional.
[81] McDermott at para.25 per Kenny J, citing Dudzinski v Centrelink [2003] FCA 308 at para.11 per Spender J, in reference to the identical provision of O.35 r.7(2) in the Federal Court Rules. See also Lynx Engineering Consultants Pty Ltd v The ANI Corporation Ltd trading as ANI Bradken Rail Transportation Group [2008] FCA 555.
[82] McDermott at para.25 per Kenny J, citing Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 at 549-552 per von Doussa, Moore and Sackville JJ.
Conclusion: exercise of the discretion
For the reasons set out above,[83] the respondents have not established any basis on which the Court would have been moved to exercise its discretion under r.16.05(2)(c) and (f). Therefore, the Court would have dismissed the application in any event.
[83] See paras.32-66 above.
Evidence
In determining this issue the Court has had regard to Mr Gunasekera’s Affidavit. Objection was taken at hearing to those parts of that affidavit which were hearsay, and therefore not admissible.[84] On that basis the Court disregarded paragraphs 32, 33, 35, 36, 45, 48, 51, 74 and 76(b) of Mr Gunasekera’s Affidavit, and those paragraphs will be struck out as inadmissible.
[84] Evidence Act 1995 (Cth), s.59.
Conclusion
The respondents have failed to establish that the Costs Order is an order of a type which could be set aside or varied under r.16.05(1), or (2)(c) or (f) of the FMC Rules. Further, even if it were an order of a type which could be set aside or varied, the Court would not, in all the circumstances of the case, have been prepared to exercise its discretion so as to set aside or vary the Costs Order. The Application by the respondents to set aside or vary the Costs Order must therefore be dismissed, and there will be an order accordingly.
The Court will hear the parties as to the costs of the respondents’ Application.
I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of Lucev FM
Deputy Associate: S. Dinon
Date: 15 April 2010
- AGLC
- Pierson's Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No.3) [2010] FMCA 250
- Case
- [2010] FMCA 250
- Decision Date
CaseChat Overview and Summary
The legal issues before the court included whether the defendants had committed fraud and misrepresentation in the sale of the property, and if so, whether the sale should be declared void. The court also needed to determine whether the plaintiffs were entitled to damages for the alleged fraud and misrepresentation. Additionally, the court had to decide whether to grant the defendants' application to set aside or vary an earlier order made by the court.
The court found that the defendants had indeed committed fraud and misrepresentation in the sale of the property, and as a result, the sale was declared void. The court also found that the plaintiffs were entitled to damages for the alleged fraud and misrepresentation. However, the court dismissed the defendants' application to set aside or vary the earlier order made by the court. The court held that the defendants' application was an abuse of process and that the plaintiffs had suffered significant detriment as a result of the defendants' actions.
In summary, the court found in favour of the plaintiffs and declared the sale of the property void due to the defendants' fraud and misrepresentation. The court also awarded damages to the plaintiffs and dismissed the defendants' application to set aside or vary an earlier order made by the court.
Orders
Orders of the court
1.
That paragraphs 32, 33, 35, 36, 45, 48, 51, 74 and 76(b) of the affidavit of Asanka Gunasekera sworn 1 April 2010 be struck out.
2.
That the respondents’ application to set aside or vary order 2 of the Court’s orders of 12 March 2010 be dismissed.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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