CATCHWORDS Practice and Procedure - costs - cost sharing arrangement between several parties made in respect of transcript - one party paid the full cost and recovered portion from other parties - whether full cost of transcript should be allowed on taxation of the bill of the party ordering the transcript - whether that party "incurred" the full cost of transcript - whether the Court should exercise its power under O 62 r 12 to order that only the net cost of the transcript borne by the party should be included in its bill of costs Federal Court of Australia Act 1976, s 43 Federal Court Rules O 62 r 12, Second Schedule Item 48 R v Miller (Raymond) and Anor [1983] 3 All ER 186 Johnson v Santa Teresa Housing Association and Anor (1992) 83 NTR 14 Matter No. SG 74 of 1991 HEIDELBERG GRAPHICS EQUIPMENT LIMITED v ANDREW KNOX & ASSOCIATES PTY LTD, CANVAS GRAPHICS PTY LTD and ANDREW McKENZIE KNOX - and - CANVAS GRAPHICS PTY LTD v HEIDELBERG GRAPHICS EQUIPMENT LIMITED and MILES INC. VON DOUSSA J ADELAIDE 20 MARCH 1995 IN THE FEDERAL COURT OF AUSTRALIA ) ) SOUTH AUSTRALIAN DISTRICT REGISTRY ) ) GENERAL DIVISION ) No. SG 74 of 1991 BETWEEN: HEIDELBERG GRAPHICS EQUIPMENT LIMITED Applicant AND: ANDREW KNOX & ASSOCIATES PTY LTD, CANVAS GRAPHICS PTY LTD and ANDREW McKENZIE KNOX Respondents AND: CANVAS GRAPHICS PTY LTD Cross-Claimant AND: HEIDELBERG GRAPHICS EQUIPMENT LIMITED and MILES INC. Cross-Respondents MINUTES OF ORDER JUDGE MAKING ORDER : VON DOUSSA J. WHERE MADE : ADELAIDE DATE OF ORDER : 20 MARCH 1995 THE COURT ORDERS THAT: 1. Pursuant to O.62, r.12 that Item 48 of the Second Schedule not apply in respect of the costs incurred for transcript and that the disbursement item for transcript be allowed at $23,451.42. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) SOUTH AUSTRALIAN DISTRICT REGISTRY ) ) GENERAL DIVISION ) No. SG 74 of 1991 BETWEEN: HEIDELBERG GRAPHICS EQUIPMENT LIMITED Applicant AND: ANDREW KNOX & ASSOCIATES PTY LTD, CANVAS GRAPHICS PTY LTD and ANDREW McKENZIE KNOX Respondents AND: CANVAS GRAPHICS PTY LTD Cross-Claimant AND: HEIDELBERG GRAPHICS EQUIPMENT LIMITED and MILES INC. Cross-Respondents REASONS FOR JUDGMENT Coram: von Doussa J. Place: Adelaide Date : 20 March 1995 The Court has been asked by the second cross-respondent, Miles Inc. ("Miles") to rule upon its entitlement to recover in full the costs of the Auscript transcript of the trial from the cross-claimant Canvas Graphics Pty Ltd ("Canvas") as part of the order for costs made in favour of Miles. By way of background O'Loughlin J, after a trial that ran for many months, delivered judgment on 13 May 1994. Relevantly, he dismissed the cross-claim of Canvas against Miles, and ordered Canvas to pay Miles' costs of the action. On 19 July 1994 Miles' solicitors, Fisher Jeffries, filed an interim bill for taxation. The bill was for the sum of $67,581.64 comprised entirely of moneys paid by Fisher Jeffries to Auscript for transcript supplied throughout the trial. The bill of costs was certified and allowed by a taxing officer at the amount claimed on 9 September 1994. No notice of opposition had been filed in respect of the bill of costs by Canvas. On 18 October 1994 Canvas applied to have execution stayed on the order for costs made in favour of Miles and, in substance, also sought to have the interim bill for the transcript costs reviewed. At that stage two interim bills had been filed, taxed and allowed. The other interim bill concerned counsel fees that had been incurred by Miles. The two bills together totalled $196,118.62. No bill of costs had been filed by Miles in respect of professional fees rendered by Fisher Jeffries. This had not been done as there was strong reason to doubt the ability of Canvas to pay either of the interim bills, and it was thought to be pointless at that stage to incur the considerable expense of drawing a bill of costs in taxable form for the professional fees. On 18 October 1994 the Court made the following ruling: "The certificates of the taxing officer dated 9 September 1994 for $4,380.41 and $196,118.62 [including $67,581.64 for transcript] respectively stand as unchallenged final orders save that the right is reserved to the respondents to challenge the amount allowed for transcript costs in the event that the second cross-respondent brings in a further bill of costs for taxation and to claim a set-off in respect of any amount inappropriately allowed for disbursements." When that ruling was made a Full Court was about to hear an appeal against the judgment of O'Loughlin J. The appeal was heard in November 1994 and judgment has yet to be delivered. Pending judgment, enforcement of the orders for costs has been stayed. However the entitlement of Miles to recover the transcript fees has become a live issue in another forum. As that is a question which arises out of these proceedings the parties have asked this Court to determine it. The complaint of Canvas is that a costs sharing agreement for the transcript existed at different times during the trial between all or some of the parties to the action, and that Fisher Jeffries on behalf of Miles should have claimed only Miles' share of the Auscript costs payable under that sharing agreement, whereas for much of the trial the interim bill claimed the total charges raised by Auscript. The facts which have been revealed to the Court regarding the arrangement to share transcript costs are set out in an affirmation of Ms K N Thomas, a partner of Fisher Jeffries, dated 3 March 1995. The paragraphs set out below assume the following facts as common knowledge: White Berman acted for Canvas in these proceedings, and also in a related matter wherein Canvas and others were suing Kodak (Australasia) Pty Ltd ("Kodak"). Finlaysons (and subsequently Johnson Winter & Slattery) acted for Heidelberg Graphics Equipment Limited ("Heidelberg"), another party to these proceedings. Thomsons acted for Kodak in the other action. "3. On commencement of the trial of this matter before the Honourable Justice O'Loughlin in April 1993, White Berman, solicitors for the cross-claimant, entered an arrangement with Auscript for the parties to these proceedings to share the costs of transcript. Each evening or early the next day, White Berman provided Fisher Jeffries with a computer disk of the transcript, from which Fisher Jeffries printed the transcript as well as providing a hard copy to Finlaysons. From time to time White Berman sent Fisher Jeffries and Finlaysons accounts for a share of the cost of the transcript. 4. This arrangement continued for several weeks until White Berman withdrew. David Berman of White Berman informed me that his clients could no longer afford to pay their share of the cost of the transcript. 5. Fisher Jeffries and Finlaysons (subsequently Johnson Winter & Slattery) and Thomsons then continued the cost sharing arrangement for transcript without White Berman. Fisher Jeffries took over the role of ordering the transcript and collecting and distributing it to Finlaysons/Johnson Winter & Slattery and Thomsons when they required it. 6. I made these arrangements with Finlaysons/Johnson Winter & Slattery and Thomsons on the basis and assumption that if my client was successful in recovering any of the transcript costs from Canvas Graphics Pty Ltd, it would reimburse Finlaysons/Johnson Winter Slattery's and Thomsons' clients for the share they had paid for transcript costs. 7. I discussed this with Sallie Johnston of Johnson Winter & Slattery and she confirmed my assumption that if my client was successful in recovering any of the transcript costs, it would reimburse Johnson Winter & Slattery's client for their share of the cost of transcript. Although I do not recall whether I discussed my assumption with Denise Morganthaler [from Thomsons] that my client would reimburse her client if it recovered any of the transcript costs shared, I acted on this basis. 8. If my client is successful in recovering any of the transcript costs it will reimburse Finlaysons/Johnson Winter & Slattery's and Thomsons' clients for their share of those costs. 9. For transcript in these proceedings covered by the interim bill of costs Fisher Jeffries paid $67,581.64 as follows: 9.1 $64,512.71 to Auscript directly; 9.2 $2,818.68 to White Berman; and 9.3 $250.25 to Thomsons. 10. Fisher Jeffries received $23,573.41 from Finlaysons/Johnson Winter & Slattery and $20,556.82 from Thomsons for their contribution to the cost of that part of the transcript they required. Miles Inc's contribution to transcript costs was $23,451.42." In further amplification of the facts disclosed in paragraphs 5, 6 and 7 above, in a further affirmation made on 3 March 1995 Ms Thomas says: "To the best of my recollection, the discussion referred to in paragraph 7 of my earlier affirmation first occurred at the time of the change to the cost sharing arrangement on 28 June 1993. I said to Sallie Johnston of Johnson Winter & Slattery words to the effect: 'As White Berman are no longer ordering the transcript, we will order it for both of us and give you the disk each day to print the transcript. If we are ever successful in recovering any of the transcript costs, my client will of course give you a refund for any monies your client has contributed towards the cost of the transcript. Is that OK with you?'. Sallie Johnston replied with words to the effect: 'That is fine.' We then discussed the logistics of how and when we would deliver the disk to her each day." The Court has been informed that the arrangements between the parties to share the costs of the transcript were known to Auscript which apparently consented to the distribution arrangements made between the parties. The Court was informed from the bar table by counsel for Canvas, without opposition from counsel for Miles that initially there were two arrangements: the first was between White Berman and Auscript whereby White Berman acquired the transcript; the second arrangement was between White Berman, Fisher Jeffries, and Finlaysons. Thomsons acting for Kodak were not a party to that sharing agreement. As between themselves White Berman, Fisher Jeffries and Finlaysons agreed that their clients would share the fees of Auscript as to one third each. Counsel for Canvas contended that when Canvas withdrew from the transcript sharing arrangement it is plain that two new agreements were reached: the first was between Fisher Jeffries and Auscript to obtain the transcript; and the second between Fisher Jeffries, Finlaysons and on this occasion Thomsons that their respective clients would share the cost. As appears from Ms Thomas's affirmation, Fisher Jeffries later received a substantial contribution towards the total costs incurred from the time of the second arrangements, from Finlaysons/Johnson Winter & Slattery, and from Thomsons. The question which the Court is asked to determine is whether the total Auscript charges from about 28 June 1993 which were invoiced by Auscript to Fisher Jeffries, and paid by that firm have been properly included in the Miles bill of costs and allowed on taxation, or whether the amount to be included and allowed should have been only the net amount of $23,451.42 contributed by Miles under the costs sharing agreement after allowing for the moneys received from the other two firms of solicitors. The Federal Court Rules, O.62, r.12(1) provides that: "Except as otherwise ordered in all proceedings commenced on and after the date these Rules came into operation, solicitors are, subject to these Rules, entitled to charge and be allowed the fee set forth in the Second Schedule in respect of the matters referred to in that Schedule and higher fees shall not be allowed in any case except such as are by this Order otherwise provided for." The Second Schedule, Item 48 provides: "DISBURSEMENTS all Court fees and other fees and payments to the extent to which they have been properly and reasonably incurred and paid shall be allowed." Whilst Item 48 is expressed in mandatory terms, O.62,r.12, reserves to the Court the power to "otherwise order" where it is for any reason inappropriate to apply the Second Schedule without modification. The terms of O.62, r.12 reflect the general discretion of the Court in relation to costs which arises under s.43 of the Federal Court of Australia Act 1976. Upon a literal application of O.62, r.12 and Item 48 a fee shall be allowed as a disbursement where it has been "properly and reasonably incurred". It is not disputed that it was proper and reasonable to incur costs in respect of transcript. However the point of contention on the application of Item 48 is whether Miles "incurred" a liability for the full cost of transcript, or whether it incurred a liability only for its proportionate share of the transcript under the second of the sharing arrangements entered into on or about 28 June 1993. Counsel for Miles relies upon the lines of authority which are considered and summarised in R v Miller (Raymond) and Anor [1921] 1 KB 495 and Johnson v Santa Teresa Housing Association and Anor (1992) 83 NTR 14. In Miller Lloyd J summarised relevant legal principle as follows: "I would hold, following Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 and the other cases I have mentioned, that costs are incurred by a party if he is responsible or liable for those costs, even though they are in fact paid by a third party, whether an employer, insurance company, motoring organisation or trade union, and even though the third party is also liable for those costs. It is only if it has been agreed that the client shall in no circumstances be liable for the costs that they cease to be costs incurred by him, as happened in Gundry v Sainsbury [1910] 1 KB 645." Mildren J in Johnson, after a consideration of cases decided in Australia, reached a similar conclusion. The primary submission advanced by counsel for Miles is that in making the arrangements which operated from 28 June 1993 Fisher Jeffries acted on Miles' behalf, and under the agreement reached with Auscript (implemented by the simple expedient of Fisher Jeffries on behalf of Miles completing an order form) Miles became liable for the full cost of the transcript. In these circumstances, even though under the separate arrangement with the other parties Miles had the right to recover contribution to the total cost of transcript, it is submitted that it was entitled upon taxation to have that total amount included as a disbursement under the Second Schedule, Item 48, as it had incurred the liability therefore. Alternatively it is submitted that when ordering the transcript pursuant to the arrangement reached between the three firms of solicitors Fisher Jeffries acted on behalf of each party so that each of Miles, Heidelberg and Kodak became jointly liable for the transcript costs. On that interpretation of events, it is submitted that Miles would again be entitled upon taxation to have the total transcript costs included under Item 48 as it had incurred the liability therefore, albeit jointly with the other two parties. The primary argument advanced by counsel for Canvas did not challenge the preferred interpretation of the facts advanced by Miles. However counsel contended that in the particular circumstances of this case Miller and Johnson should not be applied. It was put that as Miles had in place a plan to recover the disbursements from other parties, which it did, fairness and justice required that only the net cost to Miles of the transcript be allowed on taxation. A possible alternative interpretation of the facts is that Fisher Jeffries, in undertaking the management of the sharing arrangement entered into on 28 June 1993 did so as agent for each of Miles, Heidelberg and Kodak for their respective shares of the costs, so that each company only "incurred" a liability for its particular share. This possibility was disclaimed by counsel for Miles as untenable, and was not embraced with any enthusiasm by counsel for Canvas when it was suggested by the Court. The difficulty with this interpretation is that in ordering the transcript Fisher Jeffries did so ostensibly as agent for Miles, and there can be little doubt that Auscript would have looked to Fisher Jeffries and its client for payment of the full amount invoiced for the transcript. The interpretation would become tenable if Auscript were fully aware of the detail of the proposed sharing arrangement reached by the three companies so that it knew that Fisher Jeffries was placing the order for transcript on behalf of each of the three companies, and was aware of the extent to which each intended to pay. There is however no evidence that Auscript had this level of knowledge. As there is a dearth of evidence about the extent of the knowledge of Auscript of the arrangements between the parties, and about the communications which occurred first between White Berman and Auscript and later between Fisher Jeffries and Auscript, a matter acknowledged by both counsel, I must reach a conclusion on the information disclosed by the affidavit material and summarised earlier in these reasons. On that information I think the preferred interpretation given to the facts by counsel for Miles' primary submission should be accepted; and upon that interpretation an application of the principle summarised by Lloyd J in Miller would lead to the conclusion that, in the absence of an order of the Court to the contrary under O.62, r.12, Item 48 required that the full amount of the transcript cost be allowed upon taxation. However that conclusion, whilst expressing the legal position as it existed at the time when the interim bill of costs was lodged, and the certificate of taxation issued, it is not necessarily the final answer. On 18 October 1994 a judge of this Court was asked to review the certificate of the taxing officer. The process by which the matter was brought before the Court did not comply with O.62, r.44 but in the interest of saving unnecessary time and expense, and to address the real issue between the parties, the procedural irregularities were overlooked, and the ruling was made which is set out early in these reasons. This ruling was made after the parties had been heard at some length. Whilst it was not made by consent, it was made without opposition by either side. The certificates of taxation then issued were to stand as final orders but the right of Canvas was reserved to permit it to raise the question of the transcript costs in the event that any further claim for cost was pressed. In these circumstances the disbursement to be allowed to Miles for transcript fees remains a live issue. In my opinion it is one that the Court may still address under O.62, r.12. As a result of the judgments delivered by O'Loughlin J on 13 May 1994 in this matter and in the related Kodak matter, three orders for costs were made. On the dismissal of the cross-claim by Canvas against Miles, Miles recovered its costs of the action in full against Canvas. In the cross-claim in this action by Canvas against Heidelberg, Canvas recovered judgment for a small portion of the amount claimed by it and was ordered to pay Heidelberg 25 per cent of its costs of the action. In the related matter Canvas recovered a judgment against Kodak together with an order that Kodak pay two thirds of the costs of Canvas. In the event that Heidelberg lodges a bill of costs for taxation it may be presumed that it will include a claim for 25 per cent of its share of the costs of the transcript paid to Fisher Jeffries under the sharing arrangement that operated from 28 June 1993 together with 25 per cent of its one third of the costs of the transcript which it paid to White Berman prior to that date. Kodak, as it has not recovered an order for costs, cannot recover any part of its share of the transcript costs paid to Fisher Jeffries. An obvious unfairness arises if Canvas is required to pay in full the transcript costs of Miles, Heidelberg and Kodak under the Miles order for costs. In these circumstances, particularly as Miles has already effected a recovery of the agreed contributions towards the transcript costs from Heidelberg and Kodak, I consider it is appropriate that the Court exercise its power under O.62, r.12 to order that in relation to the disbursements for transcript costs Item 48 of the Second Schedule should not apply, and that the total amount recoverable as a disbursement by Miles be $23,451.42. In the event that a further bill of costs is lodged by Miles for taxation, the additional amount already allowed as a disbursement can be off-set against the further costs. At this point the matter is academic in these proceedings as execution on the costs' orders is stayed, and it is common knowledge that Canvas is hopelessly insolvent. However I publish these reasons at the request of the parties, and for the reasons earlier stated. I certify that this and the 12 preceding pages are a true copy of the Reasons for Judgment of Justice von Doussa Associate: Dated: Counsel for the cross-claimant : Mr N W Morcombe QC Solicitor for the cross-claimant : Messrs White Berman Counsel for the 2nd cross-respondent : Mr M F Blue Solicitor for the 2nd cross-respondent: Messrs Fisher Jeffries Date of hearing : 8 March 1995