FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v The IMB Group Pty Ltd (In Liquidation) [2004] FCA 1592 COSTS – specified costs without taxation – litigants in person – whether acting as agents – whether entitled to recover monies for work in preparation of and presentation of defence or appeal – whether entitled to recover out of pocket expenses Corporation Law s 601AD(1) Cachia v Hanes (1994) 179 CLR 403 followed Cachia v Hanes (1991) 23 NSWLR 304 considered Cachia v Isaacs (1989) NSWCA BC8902724 cited AUSTRALIAN COMPETITION AND CONSUMER COMMISSION V THE IMB GROUP PTY LTD (In Liquidation), LOGAN LIONS LIMITED (In Liquidation), SAMSON NEALE BACKO, DAVID JOHN IVERS, LUKE VINCENT IVERS, JOHN LINSAY IVERS, LANCE THOMAS STONE, MICHAEL JOHN McLEAN, WILLIAM ANTHONY MUSGRAVE, ROBERT CROWLEY, GLENN JAMES IVERS QG175 OF 1993 KIEFEL J BRISBANE 3 DECEMBER 2004 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG175 OF 1993 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: THE IMB GROUP PTY LTD (In Liquidation) (ACN 050 411 946) FIRST RESPONDENT LOGAN LIONS LIMITED (In Liquidation) (ACN 060 338 758) THIRD RESPONDENT SAMSON NEALE BACKO FOURTH RESPONDENT DAVID JOHN IVERS FIFTH RESPONDENT LUKE VINCENT IVERS SIXTH RESPONDENT JOHN LINSAY IVERS SEVENTH RESPONDENT LANCE THOMAS STONE EIGHTH RESPONDENT MICHAEL JOHN McLEAN NINTH RESPONDENT WILLIAM ANTHONY MUSGRAVE TENTH RESPONDENT ROBERT COWLEY ELEVENTH RESPONDENT GLENN JAMES IVERS TWELFTH RESPONDENT JUDGE: KIEFEL J DATE OF ORDER: 3 DECEMBER 2004 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application is dismissed. 2. The fifth and twelfth respondents pay the applicant's costs of the motion. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG175 OF 1993 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: THE IMB GROUP PTY LTD (In Liquidation) (ACN 050 411 946) FIRST RESPONDENT LOGAN LIONS LIMITED (In Liquidation) (ACN 060 338 758) THIRD RESPONDENT SAMSON NEALE BACKO FOURTH RESPONDENT DAVID JOHN IVERS FIFTH RESPONDENT LUKE VINCENT IVERS SIXTH RESPONDENT JOHN LINSAY IVERS SEVENTH RESPONDENT LANCE THOMAS STONE EIGHTH RESPONDENT MICHAEL JOHN McLEAN NINTH RESPONDENT WILLIAM ANTHONY MUSGRAVE TENTH RESPONDENT ROBERT COWLEY ELEVENTH RESPONDENT GLENN JAMES IVERS TWELFTH RESPONDENT JUDGE: KIEFEL J DATE: 3 DECEMBER 2004 PLACE: BRISBANE REASONS FOR JUDGMENT 1 On 20 February 2003 a Full Court ([2003] FCAFC 17) ordered that the proceedings brought against the respondents be dismissed with costs and that the Applicant ('the ACCC') pay the costs of the appeals and the cross appeals 'with any such costs limited to those incurred for legal services and associated expenses'. 2 Although the motion now to be considered was filed by the fifth respondent I understand the application to be made by both the fifth and twelfth respondents. They seek orders under Order 62 Rule 4 of the Federal Court Rules for payment of sums specified as their costs, and the costs incurred by some other respondents, without taxation. 3 On the hearing of the motion the solicitor for the Liquidator for the first and third respondents appeared and advised the Court that those companies have no interest in claims for costs. The fifth and twelfth respondents produced 'authorisations' by the fourth and sixth to ninth respondents permitting them to bring the claims and appear on their behalf. None of those respondents themselves appeared on the application. 4 The claims are brought by the fifth and twelfth respondents for the purpose of obtaining monies to support other litigation against the ACCC and others. This explains in part the width of the claim. It would seem to me that the Full Court had intended that they be limited in the way that I shall discuss. 5 The claims for costs now fall into two categories, a third claim having been settled: 1. The sum of six hundred and thirty thousand dollars ($630 000.00) to the fourth and sixth to ninth respondents for fees owed to the fifth and twelfth respondents, 'for acting as their agents in defence of the matter'. 2. The sum of four hundred and sixty four thousand three hundred and sixty three dollars ($464 363.00) which is said to be required to be paid to the first to tenth and twelfth respondents for 'out of pocket expenses' incurred in the defence. CLAIM ONE 6 The fifth and twelfth respondents rely upon Deeds of Acknowledgement by the respondents in question for whom they claim to have acted. The acknowledgements were executed recently. The claim made is calculated at $50 000.00 per annum for each of the fifth and twelfth respondents for the preparation of the fourth and sixth to ninth respondents' ('the other respondents') defence for trial between 1994 and 1999 and $30 000.00 for the preparation and presentation of their appeals by the twelfth respondent. The basis for the calculation is not provided. The ACCC also points out that the respondents had lawyers acting for them between June 1995 and February 1996. 7 In Cachia v Hanes (1994) 179 CLR 403 a litigant in person sought to charge the time which he had given to the preparation and presentation of his case. The majority of the Court said (at 409) : 'The "costs" provided for the in Rules do not include time spent by a litigant who is not a lawyer in preparing and conducting his case. They are confined to money paid or liabilities incurred for professional legal services. It is only in that sense that the Rules speak of "costs".' 8 The Rule there under consideration was that of the New South Wales Supreme Court which is equivalent to Order 62 Rule 19 of the Federal Court Rules. The majority also pointed out that the schedule to the Rules provided only for costs in the conventional sense, that is to say for remuneration for work performed by a solicitor or a solicitor's clerk. The same considerations apply here. And, as was pointed out in the New South Wales Court of Appeal in Cachia v Hanes (1991) 23 NSWLR 304 at 317 by Handley JA the right of a litigant to appear in person was never intended to be a means by which litigants could earn fees or charge for remuneration. It enables them to save, not to make, money. 9 His Honour also went on to say that a litigant in person is entitled to recover reasonable 'out of pocket' expenses incurred in the conduct of litigation including those for the employment of agents to perform necessary work. See also Cachia v Isaacs (1989) NSWCA BC8902724 at 15. I do not understand the ACCC to dispute this entitlement. 10 There is, as the ACCC points out, a procedural difficulty in the way of this claim. The fifth and twelfth respondents cannot be authorised to make the claim on the other respondents' behalf. In any event the claims are ill-founded, as I shall shortly discuss. 11 It follows from the decision of the High Court in Cachia v Hanes that the fourth and sixth to ninth respondents would not be entitled to recover monies for their own work in preparation of and presentation of their defence or their appeal. They are not legal professional costs. It was never intended that litigants be compensated for time they spend in preparation of their claim. The rule in Cachia v Hanes is not avoided by a respondent employing someone else to do the same work, if they too are unqualified. Nor does labelling the alleged liability 'out of pocket' expenses convert them to something other than the preparation and conduct of a case by a non-lawyer. Moreover they do not seem to me to come within the meaning of 'out of pocket' expenses which, in the context of claims for costs, refer to those expenses paid or incurred other than those for the actual preparation and presentation of the case. Out of pocket expenses may extend to an agent performing some functions, for example attending to file documents in Court, but they could not extend to the performance of professional functions for which a fee is then required to be paid. 12 The claim is not made out. CLAIM TWO 13 This claim includes the following components : a. Salaries and wages paid for secretarial services $ 72 038 b. Telephone hire and expenses $ 24 464 c. Rent paid at 99 Ewing Road Woodridge $ 40 728 d. Office and meeting costs $ 8 862 e. Court document, statement preparation and photocopying $134 176 f. Parking $ 2 538 g. Electricity $ 15 092 h. Printing, stationery and postage $ 16 107 i. Rent at 29 Diamentina Drive and 23 Elaroo St Marsden $ 14 400 j. Interest on funds borrowed to meet expenses of defence $135 958 14 Although the Notice of Motion refers to a large number of respondents interested in this claim the fifth and twelfth respondents say that they are the only persons seeking orders. If that were the only matter affecting the success of the fifth and twelfth respondents on the claim they would seek to file further material. It may be noted that some, if not the larger proportion, of the costs have been incurred with respect to the defence of the first and third respondents and some of the other respondents. The principal claim was made against the corporate respondents. The other respondents were sought to be made liable by way of accessorial liability. 15 It may first be observed that costs orders generally do not extend to full compensation of any party's losses suffered in the conduct of or because of the litigation: Cachia v Hanes (1994) 179 CLR 403 at 410-411. For that reason, as their Honours ruled, costs and expenses of travel and a party's loss of time are not recoverable. It would seem to me therefore that the items listed at (a), (b), (c), (d), (f), (g), (i) and (j) are irrecoverable as costs. 16 Of the two remaining items that which is referred to as 'court documents, statement preparation and photocopying' relate principally to the time spent by the fifth and twelfth respondents in preparing 1 340 witness statements ($109 888.00). The balance is for photocopying court exhibits and other documents. But no charges were made and no liability was incurred with respect to the photocopying undertaken. The fifth and twelfth respondents cannot indicate the true costs of preparing the statements, which include travelling, so they have nominated a figure of $1.00 per page. I would not be prepared to act upon this if the claim was otherwise maintainable. The costs would need to be assessed. But they are not recoverable for the reason referred to by the High Court in Cachia v Hanes. Costs do not include a litigant's time spent in preparation of their case. Preparation of witness statements clearly falls within this category. And costs do not extend to travelling expenses. 17 There is a further fundamental objection to each of the claims for out of pocket expenses. The fifth and twelfth respondents set up a company, Logan Lions Holdings Pty Ltd, as the vehicle through which the proceedings would be funded and paid for. The company received about $500 000.00 by way of loans of $10 000.00 from 50 or more persons. It was this company which paid each of the expenses listed. The company was deregistered on 11 October 2000 and has therefore ceased to exist: s 601AD(1) of the Corporations Law. 18 There is no evidence of any obligation on the part of the fifth and twelfth respondents, or any other respondent, to repay the company. I had considered whether such an obligation might be imputed to the respondents but the evidence does not allow such an approach. There is for example no suggestion that the company was acting contrary to the interests of its shareholders, to the respondents' knowledge, or that any of their funds were used other than those which had been provided by way of loan to the company for the very purpose of funding the litigation. In any event no payment can now be made to the company and a costs order would be nugatory. 19 The fifth and twelfth respondents submitted that the arrangements with the persons providing the funds was, informally, that they personally would repay the loans. A claim for repayment of the sums provided by way of capital is not however made. The reference to a personal liability can only have relevance to the claim for interest on the loan and this is not recoverable in any event. Any such informal arrangement does not make the fifth and twelfth respondents liable in any way for repayment of the costs. 20 I add, although it is strictly not relevant to the claims, that the arrangements with the various persons providing funds do not support the proposition that the fifth and twelfth respondents are liable to repay them. The written agreements by the lenders was with the company. Pursuant to it they were to be entitled to a full refund if an out of court settlement was reached or if a number of actions were successfully completed and 'all associated costs' obtained. It is not clear that all those actions were commenced. The lenders were also to receive a bonus of $50 000.00 in the event of success and some shares in the company. Some, but not all, of the lenders have provided affidavits. They say that it was made clear to them by the twelfth respondent that when his family was in a position to repay the loans they would do so and that they believed that to be the case. 21 Regard should be had to the terms of the written agreement. In any event, to the extent that there was a further oral representation, it is not inconsistent with repayment being made if and when funds became available from litigation. It does not amount to a guarantee on the part of the fifth and twelfth respondents to repay themselves. There is no suggestion that the persons believed that the fifth and twelfth respondents had funds other than what might be received as a result of the litigation. 22 Because of the view I have taken of the matter it has not been necessary for me to deal with two outstanding matters. I observe however that some of the items claimed could not be allowed in any event because they are simply not evidenced in any way and no sufficient basis is provided for their estimation. Further, if any of these claims were allowed in principle, some of them would be subject to substantial discounting, particularly those relating to the preparation of the witness statements. The discounting rates for which the ACCC contend, down to 20 per cent of the claim, would appear to me to be appropriate. 23 I should add that the ACCC has made one concession which affects the ninth respondent. The affidavit material discloses that he paid secretarial wages of $5 010.00. Subject to a substantial discount, to say 20 per cent, out of the claim the ACCC considers the ninth respondent may be entitled to an order. I do not regard the ninth respondent as presently having an application for this sum before the Court but he may bring such an application. Any determination of the appropriate discounting can be made if application is made. 24 The application will be dismissed with costs. I certify that the preceding twenty four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel. Associate: Dated: 3 December 2004 Counsel for the Applicant: Mr KN Wilson SC Solicitor for the Applicant: Australian Government Solicitor Solicitor for the First and Third Respondent: Shand Taylor Lawyers Counsel for the Fifth Respondent: The Fifth Respondent appeared in person Counsel for the Twelfth Respondent: The Twelfth Respondent appeared in person Date of Hearing: 30 November 2004 Date of Judgment: 3 December 2004