Schimann v Carnival Plc

[2014] FCCA 593

FEDERAL CIRCUIT COURT OF AUSTRALIA

SCHIMANN & ANOR v CARNIVAL PLC [2014] FCCA 593

Catchwords:
COSTS – Whether costs order that departs from a fixed sum pursuant to Schedule 1 of the Federal Circuit Court Rules2001 should be made.

Legislation:

Federal Circuit Court Rules 2001, rr.13.02, 21.10, 21.10(a), Schedule 1, Parts 1 and 2 of Schedule 2
Federal Court Rules 2011
The Australia Consumer Law, s.23(1)

Cases cited:
Pierson’s Pro-Health Pty Ltd v Silvex Nominees Pty Ltd (No.3) [2010] FMCA 250

Applicants: MANFRED SCHIMANN AND FAYE SCHIMAN

Respondent: CARNIVAL PLC ABN 107 998 443

File Number: BRG 1123 of 2012

Judgment of: Judge Jarrett

Hearing date: 24 February 2014

Date of Last Submission: 24 February 2014

Delivered at: Brisbane

Delivered on: 11 March 2014

REPRESENTATION

Counsel for the Applicants: Mr Kelly

Solicitors for the Applicants: Rodgers Barnes & Green

Counsel for the Respondent: Mr Coveney

Solicitors for the Respondent: HWL Ebsworth

ORDERS

1. The applicants pay the respondent’s costs of and incidental to the application fixed in the sum of $13,576.99.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 1123 of 2012

MANFRED SCHIMANN AND FAYE SCHIMANN

Applicants

And

CARNIVAL PLC ABN 107 998 443

Respondent

REASONS FOR JUDGMENT

1. On 20 December, 2013 the applicants filed a notice of discontinuance in respect of the whole of the proceedings that they commenced against the respondent on 20 December, 2012.  By the present application filed on 5 February, 2014 the respondent seeks its costs of the proceedings.  These reasons relate to that costs application.

2. The applicants accept that there ought to be an order for costs in favour of the respondent.  The issue is the basis upon which those costs should be quantified. 

3. By its application in a case the respondent seeks an order that the applicants pay its costs of the proceedings:

   a)to be assessed on an indemnity basis; or

   b)alternatively, to be taxed on a party and party basis in accordance with Part 40 and Schedule 3 of the Federal Court Rules2011; or

   c)alternatively, to be taxed on a party and party basis in accordance with rule 21.10 and Parts 1 and 2 of Schedule 2 of the Federal Circuit Court Rules 2011 (which I take to be a reference to Parts 1 and 2 of Schedule 1 of the Federal Circuit Court Rules2001); or

   d)in the further alternative, in a fixed sum to be determined by the Court.

4. The respondent also seeks an order that the applicants pay its costs of the costs application.

5. The applicants submit that an order that the applicants pay the respondent’s costs of the proceedings in a sum fixed in accordance with the scale set out in Schedule 1 of the Federal Circuit Court Rules is the only order that is appropriate in the circumstances.

6. The written submissions delivered by the respondent, and the oral submissions made on its behalf placed more emphasis upon the Court fixing an amount to be paid by the applicants to the respondent, than making an order for the taxation of those costs.

7. There is no issue between the parties that the Court has power to award costs and that the power is a discretionary power to be exercised judicially according to the circumstances of the case. Both parties accept that, unless the Court otherwise orders, a party who is entitled to costs of a proceeding is entitled to those costs in accordance with Parts 1 and 2 of Schedule 1 of the Federal Circuit Court Rules (see FCCR 21.10(a)).

8. The costs scale under the Federal Circuit Court Rules is an event based costs scale in respect of which a party receives a fixed sum in respect of specified events. The fixed sum may be varied, up or down, by the Court in the exercise of its discretion. Departure from the event based scale is, however, the exception rather than the rule: Pierson’s Pro-Health Pty Ltd v Silvex Nominees Pty Ltd (No.3) [2010] FMCA 250 at [43]. The respondent asks the Court to depart from the scale in this case.

9. The first point made by the respondent is that this was an important case for it, and for the travel industry, generally.  The primary proceedings were said in argument to be something of a “test case” dealing with the application of the unfair contract term provisions of the Australia Consumer Law to contracts of travel insurance.  Although the applicants were named individuals, the uncontroversial position seems to be that the claim was commenced and pursued by the applicants’ insurer exercising its right of subrogation pursuant to a contract of travel insurance issued to the applicants in respect of a cruise aboard one of the respondent’s vessels.

10. In the principal application the applicants claim that a certain clause in their contract with the respondent that provided for the forfeiture of the fare paid by them in the event that they cancelled their travel was unfair, and therefore void, pursuant to s.23(1) of the Australian Consumer Law.  The amount at stake in the claim was about $14,000.

11. The respondent relies upon evidence from Mr Simon Tolhurst, a partner at the respondent’s solicitors firm in support of its application.  In Mr Tolhurst’s opinion:

    a)the actual costs incurred by the respondent in the conduct of the litigation on the indemnity basis are $127, 582.75;

    b)the respondent’s estimated recoverable costs pursuant to Schedule 1 of the Federal Circuit Court scale are $13,576.99; and

    c)the respondent’s estimated recoverable costs pursuant to the Federal Court scale are $179,724.75.

12. That the respondent’s actual costs incurred in the litigation are significantly lower than the costs of the litigation if they were to be taxed according to the Federal Court scale is curious.  There is no explanation for that apparent anomaly.  However, the applicants have not filed any evidence disputing the estimates sworn to by Mr Tolhurst.

13. The respondent submits that:

    a)an award of costs under Schedule 1 of the Federal Circuit Court Rules would be manifestly inadequate;

    b)referring the matter to assessment is likely to incur further expense and create further disputes and will not achieve finality; and

    c)there is little utility in referring the matter to assessment as the assessable amount far exceeds the actual amount spent by the respondent. 

14. For those reasons, the respondent contends that there ought to be a “gross sum” costs order.  The respondent submits that ordering a lump sum of $127,582.75 for costs is a logical, fair and reasonable approach.

15. The respondent submits that the making of a “gross sum” costs order is appropriate in this case because:

    a)it will achieve finality;

    b)the making of a “gross sum” costs order would not involve the parties incurring additional costs; and

    c)the costs of taxation of costs would become disproportionate to the amount of costs that would seriously be in dispute.

16. Whilst the making of a “gross sum” costs order might avoid the matters set out above, so too would the fixing of costs according to Schedule 1 of the Federal Circuit Court scale. The respondent’s argument must be that a departure from the Federal Circuit Court scale is appropriate and that rather than referring the parties to taxation, a “gross sum” costs order is appropriate.

17. To the extent that that the respondent’s submissions might be seen as suggesting that an order for indemnity costs is appropriate, I am not satisfied that costs ought to be awarded on an indemnity basis.  The normal practice, not to be lightly departed from, is to provide for costs on a party-party basis.  There are, however, circumstances where the Court will give consideration to making an indemnity costs order.  The applicant for indemnity costs must establish special or unusual circumstances warranting an indemnity costs order.

18. I accept the applicants’ submission that:

    a)the application was not without its reasonable chances of success;

    b)the application was not unnecessary;

    c)there was no ulterior motive or extraneous purpose to the litigation;

    d)there was no wilful disregard of known facts nor was the claim contrary to well established law; and

    e)there has been no delinquency on the part of the applicants.

19. In my view, there are no special or unusual features to justify the exercise of the Court’s discretion to order indemnity costs. 

20. Moreover, I do not accept the respondent’s submission that this was not a routine matter. It was a claim by two applicants (albeit by their insurer exercising its right of subrogation) for the sum of $14,000. Whilst I accept that the outcome of these proceedings might have had some effect upon the way in which the respondent chose to conduct its business in the future and the terms of the contracts of carriage into which it might enter with its passengers, I am not satisfied that much significance attaches to the proposition (even if true) that the case was run by an insurer as a test case on “important new national consumer legislation”. Whilst it may be the case that s.23(1) of the Australian Consumer Law might be engaged in respect of the types of clauses that were the subject of this litigation, it is also right to say, I think, that each case must necessarily be decided upon on its own facts and by reference to the particular contractual terms concerned.

21. That the respondent has incurred costs substantially in excess of the amounts provided for in Schedule 1 of the Federal Circuit Court Rules is not of itself a basis for seeking actual costs: Hinchcliffe v University of Sydney (No 2) [2004] FMCA 640 at [11].

22. In my view, no good reason has been shown to depart from the scale of costs set out in Schedule 1 of the Federal Circuit Court Rules. I decline to make a gross sum costs order calculated on any basis other than that set out in Schedule 1.

23. Adopting, where necessary, the items (although not necessarily the amount claimed) set out in exhibit 9 to the affidavit of Simon Tolhurst filed on 5 February, 2014 I assess the costs according to the Federal Circuit Court scale at:

Item	Description	Amount (including GST)
Item 2	Opposing an application which includes interim orders (other than procedural orders) up to the completion of the first court date	$2,663.00
Item 13	Daily hearing fee – short mention	$271.00
Item 12	Advocacy loading	$135.50
Item 13	Daily hearing fee – short mention	$271.00
Item 12	Advocacy loading – short mention	$135.50
Item 13	Daily hearing fee – half day	$997.00
Item 12	Advocacy loading – half day	$498.50
Item 13	Daily hearing fee – short mention	$271.00
Item 12	Advocacy loading – short mention	$135.50
Item 5	Dispute resolution litigation intervention	$2,793.00
Item 14	Disbursements – mediator’s costs	$1,100.00
Item 14	Disbursements – photocopying	$26.00
Item 14	Disbursements – expert evidence costs	$2,200.00
Item 14	Disbursements – filing fee - subpeona	$120.00
Item 15	Disbursements – photocopying (junior counsel’s brief)	$35.19
Item 15	Disbursements – photocopying (junior counsel’s brief)	$627.90
Item 15	Disbursements – photocopying (senior counsel’s brief)	$627.90
Total		$13,576.99

1. The respondent has secured orders to which the applicants were prepared to agree.  It has otherwise failed on the application.  It should not have its costs of this application.  The applicant’s seek no orders as to costs.  I make no orders about the costs of this costs application.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 26 March, 2014.

Associate: 

Date: 26 March 2014