Red Hill Iron Pty Ltd v API Management Pty Ltd
[2012] WASC 323 (S)
•5 NOVEMBER 2012
RED HILL IRON LTD -v- API MANAGEMENT PTY LTD [2012] WASC 323 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 323 (S) | |
| Case No: | CIV:2508/2011 | ON THE PAPERS | |
| Coram: | BEECH J | 5/11/12 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Limits on scale items removed Costs orders made | ||
| B | |||
| PDF Version |
| Parties: | RED HILL IRON LTD API MANAGEMENT PTY LTD |
Catchwords: | Practice and procedure Costs Application to remove limits on items in the scale of costs Whether costs of private mediation are incidental to the proceedings and can be the subject of a costs order |
Legislation: | Legal Profession Act 2008 (WA), s 280 Supreme Court Act 1935 (WA), s 37 |
Case References: | Cazaly Iron Pty Ltd v Minister for Resources [No 5] [2008] WASCA 181 Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629 Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2011] WASC 268 (S2) Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 Heartlink Ltd v Jones [2007] WASC 254 (S) O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36 (S) Pourzand v Telstra Corporation Ltd [2012] WASC 210 (S2) Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 Suffolk v Suffolk [2010] FamCA 170 Tranchita v Danehill Nominees Pty Ltd [No 3] [2009] WASC 49 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
API MANAGEMENT PTY LTD
Defendant
Catchwords:
Practice and procedure - Costs - Application to remove limits on items in the scale of costs - Whether costs of private mediation are incidental to the proceedings and can be the subject of a costs order
Legislation:
Legal Profession Act 2008 (WA), s 280
Supreme Court Act 1935 (WA), s 37
Result:
Limits on scale items removed
Costs orders made
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : No appearance
Defendant : No appearance
Solicitors:
Plaintiff : Tottle Partners
Defendant : DLA Piper Australia
Case(s) referred to in judgment(s):
Cazaly Iron Pty Ltd v Minister for Resources [No 5] [2008] WASCA 181
Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2011] WASC 268 (S2)
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95
Heartlink Ltd v Jones [2007] WASC 254 (S)
O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36 (S)
Pourzand v Telstra Corporation Ltd [2012] WASC 210 (S2)
Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323
Suffolk v Suffolk [2010] FamCA 170
Tranchita v Danehill Nominees Pty Ltd [No 3] [2009] WASC 49
(Page 3)
- BEECH J:
Introduction
1 On 12 September 2012, I delivered my reasons for judgment after the trial of this action: Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323. I ordered that the proceedings be dismissed, and that Red Hill pay API's costs of the proceedings, including reserved costs, to be taxed if not agreed. I also made an order providing that any application for special orders in relation to costs be made by 26 September 2012, supported by affidavit and submissions. By consent, the date for any such application was extended.
2 API has made an application for special costs orders. It seeks an order that the limits provided by the scale (the Scale) in the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 be removed in respect of preparing the defence, requesting and giving particulars, giving discovery, getting up for trial, and counsels' fees. It also seeks an order in relation to the costs of a private mediation, and an order that there be an allowance for the attendance of both a senior practitioner and a junior practitioner at the trial.
Special costs orders - principles
3 Section 280(2) of the Legal Profession Act 2008 (WA) provides:
[I]f a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a) order the payment of costs above those fixed by the determination;
(b) fix higher limits of costs than those fixed in the determination;
(c) remove limits on costs fixed in the determination;
(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.
4 There was no dispute about the relevant legal principles.
5 The principles have recently been summarised by Edelman J in Pourzand v Telstra Corporation Ltd [2012] WASC 210 (S2) [9] - [14]:
[B]efore a discretion can be exercised to make a special costs order, the court must be of the opinion:
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- (1) the Scale item is inadequate, and
(2) the inadequacy arises because of the unusual difficulty, or complexity, or importance of the matter: Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [11] (Martin CJ).
These questions are to be addressed as matters of impression rather than detailed evaluation: EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) [7] (Martin CJ). Courts should draw from their experience and act on impressions gained during the litigation to take into account the issues which have been involved, albeit without attempting to make an estimate of the time which is thought to be appropriate when the information for that assessment is not all available: Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S) [43] (Pullin J).
As to (1) (inadequacy of the Scale item), the inadequacy will be demonstrated if there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination: Heartlink Ltd [16] (Martin CJ).
A conclusion that it is fairly arguable that the taxing officer might properly allow costs at an amount greater than the amount allowable under the Scale does not always require evidence of the costs actually incurred: Frigger v Lean [2012] WASCA 66 [81] (Allanson J; Newnes & Murphy JJA agreeing).
As to (2) (inadequacy arising due to the unusual difficulty, complexity, or importance of the matter), the adjective 'unusual' qualifies only the 'difficulty' of the matter, not its complexity or importance: see, in relation to the identical terms of the predecessor to s 280(2): Heartlink Ltd [17] (Martin CJ); Hodgkinson v Doepel & Associates Architects Pty Ltd [2006] WASC 237 (S) [33] (Simmonds J); SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26 (S2) [102] - [106] (Roberts-Smith J).
Finally, although replacing the amount of the Scale item with a different ceiling may be appropriate where sufficient information exists to make that assessment, it is not uncommon for an order to be made removing the limit for the Scale item without replacing that limit with a different ceiling: EDWF Holdings [8] - [9], [13] (Martin CJ). When the Scale ceiling is lifted a taxing officer is otherwise unconstrained and need not allow costs above the previous Scale ceiling.
6 Further, one of the policy considerations that should guide a court in addressing an issue under s 280(2) is that the court should not usurp the role of the taxing officer: Heartlink Ltd v Jones [2007] WASC 254 (S) [13]; O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36 (S) [20].
(Page 5)
7 'Importance' in s 280(2) encompasses importance to the parties; it does not require broader importance to the public or a sector of the public: Heartlink v Jones [17] - [19].
8 'Unusual' in s 280(2) means unusual having regard to what one might describe as the usual run of civil cases determined in the Supreme and District Courts. That involves a value judgment by the court taking into account the court's experience of a particular case compared to the usual run of cases: O'Rourke v P & B Corporation Pty Ltd [23] - [25].
9 It is convenient to begin consideration of the application of these principles to this case with the question of whether the case was one of 'unusual difficulty, complexity or importance'.
Was the case complex, important, or unusually difficult?
10 API submits, and Red Hill accepts, that this action was complex, important for both parties, and more than usually difficult (API's submissions [12]; Red Hill's submissions [3]). I am satisfied that that is so. The subject-matter of the action was, broadly speaking, whether the assessment and development of rail and port facilities were joint venture activities under the Joint Venture Agreement between Red Hill and API and whether API had any fiduciary duties in these spheres. The evidence before the court demonstrated that the potential project for the assessment and development of that transport infrastructure was in the scale of several billion dollars. Moreover, Red Hill alleged that API had breached its contractual and fiduciary duties as a joint venturer. The evidence at trial established that API was the manager of a number of other joint ventures in the Pilbara region. The defence of those allegations would doubtless have been of substantial importance to API.
11 Further, relative to the usual run of cases, the action gave rise to complex issues requiring close attention to the instruments governing the parties' relationship, and their dealings.
12 I am satisfied that these features and character of the action gave rise to the inadequacy of the Scale items referred to below.
13 I turn to the items of the Scale in respect of which API seeks a lifting of the limit. For the reasons that follow, I would remove the limit in each case.
(Page 6)
Defence
14 The Scale limit (item 3) is 10 hours of work by a senior practitioner, with an allowance of $4,290.
15 Considerable detail is provided on the time spent in the preparation of the various iterations of the defence by the team of lawyers on behalf of API: see the affidavit of Ms Mackay [12] - [30]. The initial defence alone involved considerably more work than the Scale contemplates. There is a fairly arguable case that this item on the bill of costs may tax at an amount greater than the Scale amount.
16 Red Hill does not oppose the lifting of the limit. However, it submits that API took 'an extravagant approach' by which no expense was spared in the conduct of the litigation. In my view, that is a matter that falls to be determined in the course of the process of taxation. It will be for the taxing officer to determine the reasonableness of the work done in relation to the defence, and the amended defences.
17 For the benefit of the taxing officer, I would observe that, from the court's perspective, the detail pleaded in the defence, and the subsequent amended defences, elucidated API's case on the proper construction of the instruments, and the parties' dealing, in a way that was conducive to the efficient and just resolution of the action.
18 I would remove the limit for item 3.
Requesting and giving particulars
19 The Scale provides a limit of three hours for a junior practitioner for requests for particulars, and five hours for the giving of particulars (item 6).
20 I am satisfied by the evidence of Ms Mackay ([31] - [43]) that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the Scale. Consequently, I would remove the Scale limit for these items.
Discovery
21 The Scale limit (item 7) is 10 hours by a senior practitioner, an amount of $4,290.
(Page 7)
22 The evidence of Ms Mackay establishes that the time spent on discovery was almost 1,000 hours.
23 Red Hill does not oppose the lifting of the limit for discovery. However, Red Hill submits that the court should fix a limit, although none is suggested. I decline to do so. In my view, the court is not well placed to fix a limit. The assessment of what was reasonable is a matter for the taxing officer.
Getting up case for trial
24 The Scale limit (item 17) is 120 hours by a senior practitioner, an amount of $51,480.
25 The evidence of Ms Mackay is that the time spent by counsel and instructing solicitors in getting the case up for trial was about 15 times that figure.
26 Red Hill accepts that the limit should be lifted, but suggests that the limit should be fixed at six times the scale. There is no explanation as to the derivation of that figure.
27 As in relation to discovery, I am not persuaded that it is appropriate to fix a limit. Rather, I consider that the limit should be removed, and the question of what are the reasonable costs of getting up be determined by the taxing officer.
Counsels' fees on trial
28 The Scale limit (item 20) is 3.5 days preparation, plus the first day of the trial. The maximum allowable daily rates for subsequent days under the Scale are $6,050 per day for senior counsel, and $3,410 per day for junior counsel.
29 The evidence of Ms Mackay is that both senior and junior counsel for API spent over three weeks (working on the basis of a five-day week) in preparation for trial. Senior counsel's rates are more than double the Scale. Junior counsel charged at the Scale rate for senior counsel.
30 It is clear that the court does not lift the limit on hourly rates merely because a party's solicitor or counsel has charged at a rate higher than the Scale: Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [22]; Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2011] WASC 268 (S2) [7].
(Page 8)
31 In my view, the complexity and importance of this action made it reasonable and proper for API to engage senior counsel and counsel at rates above those allowed in the Scale. There is a fairly arguable case that item 20 on the bill may tax at an amount greater than the limit in item 20. The limit should be lifted.
32 An order lifting the limit on item 20 does not constrain or affect the discretion of the taxing officer to allow only for rates, hours and amounts which are, in all the circumstances of the case, reasonable: Cazaly Iron Pty Ltd v Minister for Resources [No 5] [2008] WASCA 181 [10].
33 In this regard, like Le Miere J in Verve [12] - [13], I consider it appropriate to leave the determination of the appropriate hourly rate to the taxing officer, rather than attempt to fix a maximum rate myself.
Two solicitors at trial
34 Under item 20(f) of the Scale, provision is made for a clerk or paralegal to attend a trial, in addition to an instructing senior practitioner, at a maximum hourly rate of $209. API seeks an allowance for a junior practitioner. The maximum hourly rate for a junior practitioner is $297.
35 Based on my observations as trial judge, and as case manager, I am satisfied that it was appropriate and reasonable, in a party-party sense, for API to have both a senior practitioner and a junior practitioner present at the trial to assist and instruct counsel.
Costs of private mediation
36 Although there are some old authorities taking a different view, it is clear that in Western Australia the costs of a court ordered mediation are part of the costs of an action and can be the subject of a party-party costs order. See, for example, item 24(a) of the Scale.
37 In Tranchita v Danehill Nominees Pty Ltd [No 3] [2009] WASC 49, Martin CJ made these observations about the costs of mediation in the context of considering whether there should be an allowance for the attendance of counsel at a mediation:
Mediation is a most desirable process that has now become a primary focus of the activity of the court. The success of mediations conducted by officers of the court has substantially reduced the proportion of cases going to trial. That success is likely to be enhanced if parties are encouraged to bring all necessary legal advisers, including their counsel, to a mediation to give them advice at that mediation, with a view to achieving resolution of the action [6].
(Page 9)
38 The policy reasons for treating mediation and settlement negotiations as an element of party-party costs were explained by Mansfield J in Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629 [92] - [93].
39 In this case, the parties elected to conduct a private mediation, not a mediation through the court. API submits that the Chief Justice's observations apply with equal force to private mediations. By contrast, Red Hill submits that the court does not have jurisdiction to award costs in relation to mediations that are conducted by someone who is not an officer of the court. Further, Red Hill submits that the court's jurisdiction to make costs orders is restricted to costs that are 'of and incidental to all proceedings in the [court]': s 37 of the Supreme Court Act 1935 (WA), and that a private mediation is not of that character.
40 I do not accept these submissions of Red Hill. The question can be approached by considering the recoverability of costs of an informal settlement conference between the solicitors and parties, without any mediator. To my mind, such costs are plainly incidental to the proceedings. Further, they are specifically encompassed by item 24(b) of the Scale.
41 In my view, the same position applies to a settlement conference conducted by way of a private mediation. In my opinion, a private mediation of an action before the court can properly be described as 'incidental' to the proceedings before the court. Further, the policy considerations favouring the encouragement of attempts to settle the case seem to me to support this construction of s 37 of the Supreme Court Act, and item 24 of the Scale.
42 Although the statutory framework is not identical, I note that in Suffolk v Suffolk [2010] FamCA 170, O'Reilly J held that the costs of a private mediation were part of the costs of the proceedings.
43 In this case, by a written mediation agreement, the parties agreed to bear the mediators costs as mediator in equal properties. Subsequently, the parties also agreed to jointly appoint a pricing expert, with each party bearing half the cost. As a matter of discretion I would not order Red Hill to pay API's costs of paying the mediator's fees, or the costs of the expert. I see no justification for departing from the agreement between the parties on that topic. I do not construe their agreement to share the costs equally as intended to be subject to a costs order after trial (in the event the mediation failed to resolve the action).
(Page 10)
44 I have considered the terms of the written mediation agreement between the parties. If I considered that it revealed an intention that each party should bear its own costs in relation to the mediation, I would have declined to make a costs order respecting the mediation. However, I do not think the mediation agreement reveals any intention as to the costs of the mediation generally. Rather, it is concerned only with the immediate question of the payment of the mediator's fees.
45 In the circumstances of this case I think the parties' costs of mediation should be an element of party-party costs and thus awarded to API.
46 For those reasons, apart from the mediator's and the expert's costs, I would make the orders sought by API in relation to its costs of the mediation.
47 The several elements of reasonableness in the allowance for costs will require the assessment of the taxing officer.
Costs of this application
48 API has, in substance, succeeded on the matters in dispute on this application. Consequently Red Hill should pay the costs of this application.
Orders
49 For the reason given, I make the following orders:
1. The limits provided by the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 be removed in respect of the following items:
1.1 Item 3(b) - Defence
1.2 Item 6(a) - Requesting particulars
1.3 Item 6(b) - Giving particulars of a pleading
1.4 Item 7(b) - Giving discovery of documents
1.5 Item 17 - Getting up a case for trial
1.6 Item 20(a), (b), (c) and (d) - Counsel's fees
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- 2. There be allowance for the private mediation conference between the parties held in June 2010 as an informal conference that was reasonably held, and reasonable amounts be allowed for:
2.1 the preparation reasonably undertaken for the mediation conference;
2.2 conferences between counsel and own instructing legal practitioner where reasonably necessary;
2.3 the attendance by counsel and instructing legal practitioner at the mediation conference, including for travel and accommodation; and
2.4 all disbursements reasonably incurred in relation to the mediation conference, but not including the costs of the mediator and experts.
3. There be allowance for the attendance of both a senior practitioner and a junior practitioner at the trial.
4. The plaintiff pay the costs of this application to be taxed if not agreed.
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