FEDERAL COURT OF AUSTRALIA Novamaze Pty Ltd v Cut Price Deli Pty Ltd [2000] FCA 313 PRACTICE AND PROCEDURE – costs – where orders sought reviewing taxation officer's decisions to allow and tax amendments to a Bill of Costs – whether discretion to allow amendments was erroneous or miscarried – consideration of relevance of prejudice to a party who had compromised proceedings on the basis of an estimate of costs made prior to the amendments Federal Court Rules O 62 r 11, O 62 r 42 Queensland v J L Holdings (1997) 189 CLR 146 House v The King (1936) 55 CLR 499 NOVAMAZE PTY LTD and DARRYL PAUL WEEDMAN and ELAINE MARGARET WEEDMAN v CUT PRICE DELI PTY LIMITED and ENZO SGAMBELLONE and LUZETTE McKENZIE and BERNE NO 7 PTY LTD and RUSSELL GORDON DONALD and VIVIAN ANNE DONALD QG 149 OF 1994 SPENDER 28 FEBRUARY 2000 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG240 OF 1994 BETWEEN: NOVAMAZE PTY LTD First Applicant DARRYL PAUL WEEDMAN and ELAINE MARGARET WEEDMAN Second Applicant AND: CUT PRICE DELI PTY LIMITED First Respondent ENZO SGAMBELLONE Second Respondent LUZETTE McKENZIE Third Respondent BERNE NO 7 PTY LTD Fourth Respondent RUSSELL GORDON DONALD and VIVIAN ANNE DONALD Fifth Respondent JUDGE: SPENDER DATE OF ORDER: 28 FEBRUARY 2000 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The relief sought in the notice of motion be refused. 2. The applicants on the motion pay the costs of the respondents on the motion to be taxed if not agreed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG240 OF 1994 BETWEEN: NOVAMAZE PTY LTD First Applicant DARRYL PAUL WEEDMAN and ELAINE MARGARET WEEDMAN Second Applicant AND: CUT PRICE DELI PTY LTD First Respondent ENZO SGAMBELLONE Second Respondent LUZETTE McKENZIE Third Respondent BERNE NO 7 PTY LTD Fourth Respondent RUSSELL GORDON DONALD and VIVIAN ANNE DONALD Fifth Respondent JUDGE: SPENDER DATE: 28 FEBRUARY 2000 PLACE: BRISBANE EX TEMPORE REASONS FOR JUDGMENT 1 This is a notice of motion, filed on 8 December 1999, by the fourth and fifth respondents - respectively Berne No 7 Pty Ltd and Mr and Mrs Donald, in relation to principal proceedings where Novamaze Pty Ltd was first applicant and Mr and Mrs Weedman were the second applicants. For convenience the fourth and fifth respondents, although the applicants on this motion, will be referred to herein as "the respondents"; similarly, the first and second applicants, although respondents here, will be referred to as "the applicants" throughout. 2 The respondents' notice of motion seeks orders: "1. To review the decision of the Taxing Officer to tax the amendments to the Bill of Costs delivered by the Applicants pursuant to the order of Dowsett J made on 30 October 1998 and the further decision of the said Taxing Officer to permit the Applicants to amend such Bill of Costs. 2. Such further or other order as to the Court may seem meet. 3. Costs." 3 In terms of chronology, it is probable that the notice of motion seeks review first of the taxing officer's decision to permit the applicants to amend the bill of costs, and then of his decision to tax the amendments. 4 It is necessary first to have regard to the history of events in this matter. On 30 October 1998, Dowsett J ordered the respondents to pay the costs of the applicants in the principal proceedings. On 12 December 1998, there was a discussion between the parties concerning that bill of costs and, on 17 December 1998, a plaint was issued in the District Court by the respondents against their former accountants, claiming that it was the negligence of the accountants that had caused them to compromise the Federal Court proceedings. On 17 June 1999, solicitors for the applicants in the Federal Court proceedings delivered a bill of costs in the sum of $104,030.73. On 13 July 1999, as a result of mediation, the District Court proceedings were settled in an amount that was agreed between the parties to remain confidential. 5 In a telephone call on 12 December 1998, Mr Brown (solicitor for the respondents) had indicated to Mr Lynch (for the applicants) that it was his clients' desire to settle the question of costs as expeditiously as possible, as they were commencing negligence proceedings against their accountants. Mr Brown deposes that he formed a certain view as to the amount that the applicants would succeed in obtaining of the amount claimed in the bill of costs delivered on 17 June 1999, and says: "In formulating the quantum of the compromise an important factor was the anticipated costs of the Applicants in the Federal Court proceedings." 6 The taxation of the bill of costs commenced on 7 September 1999, although the matter had been earlier set down for hearing on 29 July 1999. It continued on 8, 13 and 14 September and 7 October 1999. On 8 October 1999 the taxation was adjourned to a date to be fixed. On 14 September 1999, directions were made for the applicants to deliver a schedule of amendments to the bill of costs by 4 p.m. on 4 October 1999, with the response of the respondents thereto, and any affidavit material, to be delivered by 6 October 1999. 7 In fact, no amendments were delivered in accordance with that timetable, and on 7 October 1999 the taxation resumed in relation to the remaining aspects of the original bill. Amendments to the bill were collected by the cost assessor for the respondents from the office of the solicitors for the applicants on 15 October 1999. The amendments were extensive, totalling some 27 pages, and claiming additional costs of the order of $146,471. Mr Brown deposes: "If I had been aware that the total Bill would have been of the magnitude referred to above I would not have advised my clients to compromise the District Court action in the manner which they did. At no time prior to the mediation conference [in relation to the District Court proceedings] was it communicated to either my clients or myself that amendments to the Bill would be delivered." 8 On 21 October 1999, the applicants made an application to formally amend their bill of costs before Deputy Registrar Segal, the taxing officer. That application was opposed by the respondents. 9 I have the benefit of the written submissions that were made to the taxing officer on behalf of the parties in relation to the proposed amendment, but I do not have the oral submissions of either party. The first of two written submissions provided on behalf of the respondents indicated that there is no express general power in the Federal Court Rules allowing amendment of a party and party bill of costs, but authority was referred to for the proposition that the quantum of an item in a bill may be amended. 10 It was further submitted that if a taxing officer does have power to amend a bill of costs, it should not be exercised where the amendment (even if arguable) would cause prejudice which can not be rectified by an order for adjournment or costs: Queensland v J L Holdings (1997) 189 CLR 146 at 154. The submissions continued: "In the present case the fourth and fifth respondents settled their claim for an indemnity from their accountants (which arose from the present claim by the applicants) on the basis of the original bill of costs. An important factor in that compromise was the anticipated costs of the applicants. No real explanation has been provided for the amendments. The amended bill doubles the quantum of the bill of costs claimed by the applicants. It is lengthy. It arrives at a time when the taxation (which has already been lengthy) is close to concluding: see J L Holdings at 170-1. In the exercise of the discretion to allow an amendment (if it exists) the amendment should be refused." 11 In further written submissions to the taxing officer on behalf of the respondents, in response to oral submissions that had been made for the applicants, it was said: "The quantum of the amendments sought is an important factor in refusing those amendments being made. A quantum difference of a few thousand may not be significant." 12 It was also submitted that: "The evidence of prejudice is compelling: instead of discounting the sum of $258,000 (which is the combined total of the two bills), the discounting was made only from the sum claimed in the original bill of $104,030.73." 13 Further: "There is sworn evidence that the magnitude of the costs now claimed were important factors in the settlement. It is not suggested that the costs were the only factor. It is obvious that the quantum of the damages (costs) claimed would be important in calculating a reasonable settlement figure as between the fourth and fifth respondents and their accountants." 14 On the question of surprise, it was said: "The fourth and fifth respondents are not saying they were surprised by the claim for amendments for work undertaken by Nicol Robinson & Kidd, nor the obvious word processing error in the bill, which omitted items between 1636 and 1799. The fourth and fifth respondents do say, however, that the perusals claimed for the documents, the number of items missing between items number 1636 and 1799 (in fact 411 items, not 145) and the attendances/correspondence with Brown and Brown are new." 15 On 22 October 1999, Deputy Registrar Segal advised the parties that, in determining whether or not to amend the bill of costs, he should determine whether or not any prejudice involved should be confined to prejudice in the above action, and if any such prejudice need not be so confined whether or not any such prejudice had in fact been sustained by the respondents. He advised the parties that, in his opinion, any prejudice suffered need not be confined to the above action, but that on the basis of the evidence before him he could not be satisfied that the respondents had, in fact, sustained any prejudice. Accordingly, he granted leave to amend. 16 The respondents then requested Deputy Registrar Segal to make an order that they be granted their costs of the application to amend and costs thrown away by the amendment, and he advised them that he would deal with such application at the conclusion of his taxation. The taxation proceeded on 21 and 22 October and 5 November 1999. On 25 November 1999, Deputy Registrar Segal allowed the amendments in the amount of $55,915.98 and ruled that the applicants be allowed the costs of the application to amend. 17 This motion was then filed, on 8 December 1999. It was submitted by the applicants (respondents to the motion) on the hearing of the motion that there was no jurisdiction to entertain it, having regard to what was said to be the scheme constituted by O 62 r 41 (and following) of the Federal Court Rules. 18 As against that, it was submitted by Mr Hastie, counsel for the respondents that O 62 r 11 "confers ample power on the court to review a decision of the taxing officer", including the decision here to permit the applicants to amend their bill of costs, and then to tax those amendments. He submitted that the challenge to those decisions was made as a matter of principle, rather than in relation to what was said by Mr Lynch (for the applicants) to be the subject of the scheme – namely, that O 62 r 42 is directed at the allowance or disallowance wholly or in part of any item in a bill, or the allowance of some amount in respect of any item, and not at the matters of principle which the respondents wish to challenge. 19 It seems to me that it is not necessary to resolve that question, at least initially, and that if the position is that the review which the respondents wish to make (of the decision of the taxing officer) failed on the application of the well known principles in House v The King (1936) 55 CLR 499, then the further argument would be academic. I turn, therefore, to consider whether it has been shown on the material before the court that the discretion to permit the amendment sought by the applicants on the taxation was erroneous or miscarried. 20 On analysis, there are really only two matters which are said to demonstrate manifest error in the exercise of the taxing officer's discretion. The first is the absence of a satisfactory explanation for the delay in making the amendments, and it seems to me that this factor is not relevant to the question of whether the discretion miscarried. 21 The second factor is the more substantial point relied on by the respondents, and that is that obvious and unchallenged prejudice was caused to them by the amendments, in that they had compromised their District Court proceedings on the basis of the assessment by their solicitors that the quantum of taxation to which they were exposed in the Federal Court was lower than the $104,000 in the original bill of costs. 22 I accept that the District Court settlement proceeded on that basis, but that consideration, in my opinion, did not require the taxing officer to reject the application for amendment of the bill of costs. There does not seem to me to have been any indication given to the respondents that the bill of costs would not be the subject of any amendment, or, more particularly, would not be the subject of very extensive amendment. 23 That Mr Brown (as solicitor for the respondents) believed that to be the case was no doubt a compelling reason for settling the District Court proceedings at the figure agreed, but the fact that that assessment turned out to be wrong, because the taxing officer permitted the amendment of the original bill of costs, does not mean that the process of permitting that amendment was unfair. 24 In short, I do not see any reason why the taxing officer, conscious of the reason that the District Court proceedings settled at the figure they did, would be compelled by that reason not to permit the amendments which, it is conceded, would otherwise be allowed on a taxation, subject to any costs order that might be made because of the amendment. 25 I am not satisfied that the discretion of the taxing officer to allow and tax the amendments miscarried, and for that reason the relief sought in the notice of motion is refused. 26 As to costs, the respondents on the motion should have their costs paid by the applicants on the motion, to be taxed if not agreed. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. Associate: Dated: 28 February 2000 Solicitor for the First and Second Applicants: Mr P Lynch of Lynch & Co., Solicitors Counsel for the Fourth and Fifth Respondents: Mr P Hastie Solicitor for the Fourth and Fifth Respondents: O'Brien & Brown, Lawyers Date of Hearing: 28 February 2000 Date of Judgment: 28 February 2000