FEDERAL COURT OF AUSTRALIA Lashansky v Bruvecchis Pty Ltd [2006] FCA 793 COSTS – review of taxation by judge – whether counsel's fees properly incurred – whether an amount allowable for care and attention Trade Practices Act 1974 (Cth) ss 52, 82, 87 Federal Court Rules O 20 r 2, O 62 rr 19, 19(a), 36, 36(2), 43(1), 44 Cachia v Westpac Financial Services Limited [2003] FCA 817 cited Schweppes' Ltd v Archer (1934) 34 SR (NSW) 178 cited ROBERT JAMES LASHANSKY v BRUVECCHIS PTY LTD (ACN 054 177 427) and JOSEPH BRUNI WAD 79 OF 2004 SIOPIS J 26 JUNE 2006 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 79 OF 2004 BETWEEN: ROBERT JAMES LASHANSKY Applicant AND: BRUVECCHIS PTY LTD (ACN 054 177 427) First Respondent JOSEPH BRUNI Second Respondent JUDGE: SIOPIS J DATE OF ORDER: 26 JUNE 2006 WHERE MADE: PERTH THE COURT ORDERS THAT: 1 The motion dated 18 January 2006 for review of the taxing officer's decision on reconsideration is dismissed. 2 The applicant is to pay the respondents' costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 79 OF 2004 BETWEEN: ROBERT JAMES LASHANSKY Applicant AND: BRUVECCHIS PTY LTD (ACN 054 177 427) First Respondent JOSEPH BRUNI Second Respondent JUDGE: SIOPIS J DATE: 26 JUNE 2006 PLACE: PERTH REASONS FOR JUDGMENT 1 This is an application for the review of a decision of a taxing officer under O 62 r 44 of the Federal Court Rules ('the Rules'). The procedural background 2 On 21 April 2004 the applicant, a legal practitioner, commenced an application against the respondents. The application was founded on an alleged contravention of s 52 of the Trade Practices Act 1974 (Cth) ('the Act') and the applicant claimed damages against the respondents under s 82 of the Act and other orders under s 87 of the Act. 3 In general terms, the applicant alleged that the first respondent was one of a number of tenants at The Colonnade Shopping Centre in Subiaco who had retained him as their solicitor to conduct an action in the Supreme Court of Western Australia against their common landlord. It was alleged that the second respondent, a director of the first respondent, had represented that the respondents would provide financial assistance to the other tenants in the group who may face financial difficulty in supporting the conduct of the action. The applicant alleged further that the respondents, far from supporting the conduct of the action, privately negotiated a settlement of their claim against the landlord, and that this led to the other tenants also settling their claims against the landlord. The result was that the action did not go to trial. The applicant pleaded that he thereby suffered a loss because he had given up opportunities to take on other work. The applicant's pleaded claim is more fully described in the reasons of French J in Lashansky v Bruvecchis Pty Ltd [2004] FCA 837. 4 On 26 May 2004, the respondents filed a notice of motion under O 20 r 2 of the Rules to strike out the applicant's statement of claim as disclosing no reasonable cause of action and to dismiss the application. At the hearing of the motion before French J the respondents were represented by senior counsel. The applicant appeared on his own behalf. On 11 June 2004, French J struck out the statement of claim and dismissed the applicant's application with costs. 5 On 20 August 2004, the respondents filed a bill of costs for taxation. It consisted of 68 items. The amount claimed in the bill of costs, including disbursements, was $7753.70. On 27 July 2005, Deputy District Registrar Stanley ('the taxing officer') taxed the bill of costs. The taxing officer disallowed a number of items of costs claimed by the respondents' instructing solicitor including items relating to the preparation for the first directions hearing, conferring with the respondents and attending Court for the hearing of the strike out application as instructing solicitor. The taxing officer allowed the sum of $5254.60 including disbursements. The major component of the amount allowed was the sum of $2600 for counsel's fees. 6 On 10 August 2005, the applicant filed a motion for the taxing officer to reconsider four items of the bill of costs which had been accepted by the taxing officer. On 20 December 2005, the taxing officer issued a Certificate of Taxation on reconsideration pursuant to O 62 r 43(1) of the Rules in the amount allowed at the original taxation. The taxing officer delivered written reasons on 20 December 2005. 7 At the hearing, the parties referred to the debate, recorded in various decisions of this Court, as to the appropriate approach that the Court should take to the question of reviewing a taxing officer's decision under O 62 r 44 of the Rules. The debate is well described in the decision of Hely J in Cachia v Westpac Financial Services Limited [2003] FCA 817 ('Cachia'). On one view, an applicant is entitled to a review de novo by the Court. On the other view, the Court is to apply the approach set out in the observations of Jordan CJ in the case of Schweppes' Ltd v Archer (1934) 34 SR (NSW) 178 at 183. Under that approach, the Court is reluctant to interfere unless the applicant shows that there was an error of principle by the taxing officer or, in respect of a matter involving the taxing officer's discretion, it appears that the taxing officer has not exercised his or her discretion at all or exercised it in a manner which is manifestly wrong; and where the question is one of amount only, the Court will only interfere in extreme cases. 8 It is not necessary to contribute to the debate because the respondents said that they were prepared to deal with the application on the basis that the applicant was entitled to a review de novo. I will proceed on that basis. 9 The applicant referred specifically to O 62 r 19 and O 62 r 36 of the Rules. 10 Order 62 r 19 of the Rules provides: 'On every taxation the taxing officer shall allow all such costs, charges and expenses as appear to him to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party, but, except as against the party who incurred them, costs shall not be allowed which appear to the taxing officer to have been incurred or increased: (a) through over‑caution, negligence or misconduct; (b) by payment of special fees to counsel or special charges or expenses to witnesses or other persons; or (c) by other unusual expenses.' 11 Order 62 r 36 of the Rules provides: '(1) The Court or Judge may, at a trial or hearing or upon any application and whether or not objection is taken ‑ (a) direct that any costs which have been improperly, unreasonably or negligently incurred be disallowed; (b) direct the taxing officer to examine the costs incurred, and to disallow such costs as he shall find to have been improperly, unreasonably or negligently incurred; or (c) direct that a party whose costs are so disallowed shall pay to the other parties the costs incurred by those parties in relation to the proceeding in respect of which his costs have been disallowed. (2) Where the question of costs having been improperly, unreasonably or negligently incurred has not been raised before and dealt with by the Court or Judge, it is the duty of the taxing officer to look into that question, and thereupon the same consequences shall ensue as if he had been specially directed under paragraph (1)(b) of this rule to examine the costs incurred, and to disallow such costs as he finds to have been improperly, unreasonably or negligently incurred.' 12 There are four items of the bill of costs to which the applicant objects. These are: (i) telephone call on counsel – sum allowed ‑ $33.00; (ii) preparing Brief to Counsel – sum allowed ‑ $459.00; (iii) counsel fee – sum allowed ‑ $2600.00; (iv) care and attention – sum allowed – $233.30. 13 I will deal with each of the items. Telephone call on counsel 14 This item reflected costs charged by the instructing solicitor for making a telephone call to senior counsel shortly after the application and the statement of claim had been served. The instructing solicitor discussed with senior counsel the merits of the application and senior counsel's role in responding to the application. The item was claimed pursuant to Item 31 of the Scale of Costs ('the Scale') – an attendance that requires an attendance of a solicitor or managing clerk and involves skill and legal knowledge and is charged in quarter hour increments. 15 The applicant submitted that the item was not properly recoverable as a party and party cost. The item could not be viewed as a 'necessary or proper' expense that ought to be recoverable from an unsuccessful party. The applicant submitted that: '…at a stretch the item should only be recoverable as a telephone attendance that should have been made by a practitioner's secretary – and is hardly requiring the attendance of a solicitor.' 16 The applicant also submitted that the item should not be allowed because senior counsel had not charged for the item. 17 In my view, the applicant's submission is not to be accepted. The discussion of the response to an application and role that senior counsel will play in that response is a matter which entails the use of skill and legal knowledge. It is properly to be characterised as a telephone call which is assessable under Item 31 of the Scale. The fact that senior counsel did not charge for the telephone call does not mean that the other party to the telephone call is thereby disabled from rendering a charge in relation to the telephone call. Briefing counsel 18 The amount of $459 which was allowed by the taxing officer comprises an aggregation of Items 5‑15 in the bill of costs. The taxing officer has grouped these items under the heading of 'Preparing Brief to Counsel'. The applicant objects to the aggregation, because it includes some items not related to the briefing of counsel. It is true that there are items included within the aggregated category which do not relate directly to the briefing of counsel. These items comprise a telephone call, perusing a copy facsimile from the Federal Court and taking instructions. The total sum claimed in relation to those three items is $77. There is also an amount of $68 which is claimed in relation to the filing of a notice of appearance. The amounts claimed in relation to those items are proper. I would allow those items. 19 As to the other items which are directly related to briefing of counsel, the applicant contends that the amount is excessive because it was not necessary to brief senior counsel. This was, said the applicant, because it should have been obvious that his claim was so 'hopeless', that it was not necessary to brief senior counsel to appear on the notice of motion. The applicant submitted that in briefing senior counsel the respondents were being 'overcautious'. 20 I do not accept the submission by the applicant that the matters at hand did not justify engaging senior counsel. This was a claim which was described as follows by French J at [18]: 'I should add that much of the pleading in the statement of claim is irrelevant to any cause of action and appears rather designed to communicate Mr Lashansky's moral dissatisfaction that his former clients sought to pursue their own interests which were not coincident with his interests or those of the other tenants. The statement of claim will be struck out in its entirety.' 21 In refusing the applicant leaving to replead French J said at [21]: '…In my opinion, having regard to the statement of claim and what Mr Lashansky has said about his intentions in respect of repleading, the action has no prospect of success. In my opinion, the respondents should not be exposed to the further cost and inconvenience that would inevitably arise if I were to permit Mr Lashansky to replead. I propose therefore to dismiss the application with costs.' 22 The claim had the potential to cause financial detriment, as well as a good deal of inconvenience and aggravation to the second respondent. The respondents were justified in briefing senior counsel to try and terminate at an early stage a claim which has had such menacing potential. The applicant's view that his application was 'hopeless' was not a view which the applicant held at the time of commencing the proceeding and resisting the strike out application. The respondents cannot be criticised for taking the claim seriously and taking proper steps to seek to bring the claim to an early end. 23 The applicant also submitted that the brief included work on the question of whether the application was statute barred. The applicant submitted that par 17 of the judgment of French J showed that the work undertaken on the limitation point fell within the purview of O 62 r 19(a) and O 62 r 36(2) of the Rules. 24 At [17] of his reasons French J said: 'Counsel for the respondents also sought to raise a limitation point. It is neither necessary nor appropriate to deal with that point as the pleading is simply too confused to enable any reasonable assessment of how a limitation issue would arise.' 25 I do not read the judgment of French J to be to the effect that it was neither necessary nor appropriate for the respondents to have raised the limitation point. I read French J to be saying that it is neither necessary nor appropriate for him to deal with the limitation point in his judgment, in light of the poor quality of the statement of claim and the conclusions he had reached in relation thereto. In any event, the limitation point was not at the forefront of the respondents' case before French J. It was contained as one and a half pages of a supplementary written submission, and senior counsel's argument on the point occupied half a page of transcript. 26 In my view, the respondents were justified in seeking to resist the applicant's application by taking proper steps in the circumstances of the case. This included briefing senior counsel to try and strike out the statement of claim and the application, and to get up an argument in relation to limitation. The justification lay in the substantial savings in costs and inconvenience to the respondents if their application was successful. It follows that I do not find that the briefing of senior counsel, nor the raising of the limitation point in the manner in which it was done, was conduct which was over‑cautious; or improper, unreasonable or negligent. I would not make any adjustment to the amount allowed under this heading. Counsel's fees 27 The fee note rendered by senior counsel to the instructing solicitor was for the sum of $3256. Senior counsel's fee included considering the brief, reviewing the statement of claim and submissions, preparing for the hearing and attending the hearing of the application to strike out the statement of claim and telephone attendances upon the respondents' instructing solicitors. The taxing officer reduced that fee to $2600. 28 The applicant submitted that the fees were excessive because they did not follow the National Guide to Counsel's fees ('the National Guide'). The applicant submitted that the sum allowed of $2600 was 'particularly irksome' when compared to the scale provided for in the National Guide of $250‑$1500 for junior counsel's fees for short interlocutory motions that last for less than two hours. The motion, so the applicant says, was no more than a 'simple interlocutory application' that lasted no more than an hour. The applicant also repeated his argument as to the raising of the limitation point by senior counsel referred to above. 29 In my view, the applicant's submission should be rejected. The applicant's submission as to the National Guide is based on the premise that the respondents were not justified in engaging senior counsel to appear at the hearing of the notice of motion. I have already found that the respondents were justified, in engaging senior counsel, given the importance of an early termination of the litigation to the respondents. Further, and in any event, I would not accept the description of the strike out application as being a 'simple interlocutory application'. It does not follow from the fact that a court may have struck out a statement of claim, as not disclosing a reasonable cause of action, that the preparation for the hearing of the strike out application is a simple matter. The pleadings were confused and the claim made was unusual. The National Guide in relation to senior counsel's fee provides a scale of $350–$2500 for an appearance at the hearing of motions of less than two hours duration. It also provides an hourly rate of between $350‑$600 per hour in relation to matters such as preparation time, settling submissions and other matters not provided for. In my view, the hearing of the strike out motion was of such significance to the parties as to warrant allowance of senior counsel's fee at the upper end of the scale. However, even if one was to treat the hearing of the strike out motion as only warranting an allowance at the mid range of the scale of, say $1500, it would leave the amount of $1100 of counsel's fees to cover settling of written submissions and preparation. This would reflect about three hours of work by senior counsel ‑ based on the fee that senior counsel charged of $400 per hour – which is at the low end of the scale. In my view, this amount of time spent in settling submissions and preparing for the hearing would be very reasonable. It is apparent from these calculations that the fees allowed in respect of counsel's fees were well within the range of the National Guide. 30 I have already set out my findings in relation to the raising by senior counsel of the limitation point. 31 I would not make any adjustment to the amount allowed for counsel's fees. Care and attention 32 The applicant submitted that the matter required very little by way of care and attention because it lasted for such a short period of time. The period from the filing of the application to dismissal was two months and one week. 33 Item 41 of the Second Schedule provides as follows: 'General Care and Conduct If the case or circumstances warrant it, an allowance may be claimed under this item, in addition to any item which appears in this scale, for general care and conduct (if appropriate) including the following: (a) the complexity of the matter and difficulty and novelty of questions raised; (b) the importance of the matter to the party and the amount involved; (c) the skill, labour, specialised knowledge and responsibility involved in the matter on the part of the solicitor; 34 In the reasons for her decision, the taxing officer said: 'Item 41 of the scale describes the factors which influence whether or not a loading should be applied and the amount is described in terms of a percentage of the total amount of the allowed costs including disbursements. It is generally accepted that unless a matter is so routine and straightforward as to not merit a loading, an amount for care and attention is appropriate.' 35 I agree with the observations made by the taxing officer. This matter, albeit that it did not last long, could not be described as routine. The allegations made, insofar as they claim a loss caused to a solicitor by a client settling litigation, were unusual. The pleadings were confused. Further, as I have previously said, the application was of importance to the respondents because it afforded them the opportunity to terminate litigation which had the potential to cause considerable cost and inconvenience. I also take into account that the strike out application resulted in the application itself being dismissed and that the taxing officer disallowed a number of specific items of the instructing solicitor's bill of costs which went to the care and attention which a solicitor should be expected to give to a matter, including attending Court for the hearing of the application. In my view, it is appropriate to recognise these factors by applying the loading of 15 per cent which was allowed by the taxing officer. 36 I, accordingly, dismiss the applicant's application for review with costs. I certify that the preceding thirty‑six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate: Dated: 26 June 2006 Counsel for the Applicant: The applicant appeared in person Counsel for the First and Second Respondents: Mr D Garnsworthy Solicitor for the First and Second Respondents: Dean & Rowick Date of Hearing: 14 March 2006 Date of Judgment: 26 June 2006