FEDERAL COURT OF AUSTRALIA Thompson v Department of Environment and Conservation (No 2) [2011] FCA 970 Citation: Thompson v Department of Environment and Conservation (No 2) [2011] FCA 970 Parties: MATT WILLIS THOMPSON and JANET HUFNAGEL THOMPSON v DEPARTMENT OF ENVIRONMENT AND CONSERVATION, STATE OF WESTERN AUSTRALIA, PAUL BYRNES, NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937), MARTIN JONES, ANDREW SAKER AND DANIEL WEAVER and NARROGIN BEEF PRODUCERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 100 851 376) File number: NSD 1383 of 2010 Judge: BARKER J Date of judgment: 24 August 2011 Catchwords: COSTS - assessment of gross sum of costs pursuant to Federal Court Rules O 62 r 4(2)(c) - principles applicable to the fixing of a gross sum of costs - discount to be applied to the costs incurred and disbursements made by representatives of parties awarded costs Legislation: Federal Court Rules O 62 r 4 Cases cited: Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051 Seven Network Limited v News Limited [2007] FCA 2059 Thompson v Department of Environment and Conservation [2011] FCA 617 Date of hearing: 26 July 2011 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 32 Counsel for the Applicants: Mr EJ Forrester Solicitor for the Applicants: Ranger Legal Counsel for the First, Second and Third Respondents: Ms MJ Paterson Solicitor for the First, Second and Third Respondents: State Solicitor's Office Counsel for the Fifth Respondent: Dr J O'Donovan Solicitor for the Fifth Respondent: Lavan Legal IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION NSD 1383 of 2010 BETWEEN: MATT WILLIS THOMPSON First Applicant JANET HUFNAGEL THOMPSON Second Applicant AND: DEPARTMENT OF ENVIRONMENT AND CONSERVATION First Respondent STATE OF WESTERN AUSTRALIA Second Respondent PAUL BYRNES Third Respondent NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937) Fourth Respondent MARTIN JONES, ANDREW SAKER AND DANIEL WEAVER Fifth Respondent NARROGIN BEEF PRODUCERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 100 851 376) Sixth Respondent JUDGE: BARKER J DATE OF ORDER: 24 AUGUST 2011 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Pursuant to the order for costs made in this proceeding made 3 June 2011 in order 8, the gross sum costs be fixed in the sum of $45,000. 2. Pursuant to the order for costs in this proceeding made 3 June 2011 in orders 6 and 7, the gross sum costs be fixed in the sum of $85,319.87. 3. There be no further order for costs in respect of the hearing and determination of the gross sum issue and the parties shall bear their own costs in respect of the determination of gross costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION NSD 1383 of 2010 BETWEEN: MATT WILLIS THOMPSON First Applicant JANET HUFNAGEL THOMPSON Second Applicant AND: DEPARTMENT OF ENVIRONMENT AND CONSERVATION First Respondent STATE OF WESTERN AUSTRALIA Second Respondent PAUL BYRNES Third Respondent NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937) Fourth Respondent MARTIN JONES, ANDREW SAKER AND DANIEL WEAVER Fifth Respondent NARROGIN BEEF PRODUCERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 100 851 376) Sixth Respondent JUDGE: BARKER J DATE: 24 AUGUST 2011 PLACE: PERTH REASONS FOR JUDGMENT ASSESSMENT OF A GROSS SUM OF COSTS 1 On 1 and 4 April 2011 various notices of motion taken out by the parties in these proceedings were listed for hearing and determination. For present purposes, this included the notice of motion of the fifth respondents filed 24 November 2010 to set aside the originating process issued against the fifth respondents or to permanently stay it, the applicants' notice of motion filed 16 February 2011 for leave to bring proceedings on behalf of the sixth respondent under s 237 of the Corporations Act 2001 (Cth) (Corporations Act) and the notice of motion of the first, second and third respondents filed 28 March 2011 for orders that paras 44(b)(iii) and 44(c)(iii) and, in so far as they refer to the TP Act, para 45(a), (b) and (c) of the statement of claim be struck out on the grounds that they disclose no reasonable cause of action, or are frivolous or vexatious, or have no reasonable prospects of success. 2 On 3 June 2011 the Court delivered its decision on the notices of motion before the Court on 1 and 4 April 2011: see Thompson v Department of Environment and Conservation [2011] FCA 617. The Court made orders that on the fifth respondents' notice of motion dated 24 November 2010, [86(b)] of the applicants' statement of claim be struck out. The Court also made orders dismissing the applicants' notice of motion filed 16 February 2011 and granting the orders sought by the first, second and third respondents on their notice of motion filed 28 March 2011. 3 The Court made the following orders as to costs: 6. The applicants pay the costs of the fifth respondent in respect of the fifth respondents' notice of motion filed 24 November 2010 to be fixed at a gross sum, in any event. 7. The applicants pay the costs of the respondents in respect of the applicants' notice of motion filed 16 February 2011 to be fixed at a gross sum, in any event. 8. The applicants pay the costs of the first, second and third respondents' notice of motion dated 25 March 2011 to be fixed at a gross sum, in any event. 9. The respondents file and serve and affidavits and submissions in support of the assessment of the gross sum within 21 days. 10. The applicants file and serve any affidavits and submissions in response to the respondents' affidavits within 21 days thereafter. 11. The matter be listed for further hearing on costs on Tuesday 26 July 2011 at 10.15am. 4 I adopt the same references to the parties as I did in the judgment delivered 3 June 2011 and refer to the first, second and third respondents as the State parties, and the fourth, fifth and sixth respondents as NAB and the receivers. 5 The State parties filed submissions on 24 June 2011 and an affidavit of Ms Lise Helene Semeniuk the same day. NAB and the receivers filed an affidavit of Ms Alison Jane Robertson on 1 July 2011 and the applicants filed submissions and an affidavit of Mr Erin Joshua Forrester on 25 July 2011. 6 On 26 July 2011 the parties made further oral submissions to the Court in relation to the assessment of a gross sum of costs in conjunction with the documents filed above. PRINCIPLES APPLICABLE TO THE FIXING OF A GROSS SUM OF COSTS 7 I accept, as do the State parties with whom the applicants agree, that the principles applicable to a claim for a gross sum costs order under O 62, r 4(2)(c) are those enumerated by Sackville J in Seven Network Limited v News Limited [2007] FCA 2059 at [25], as follows: [25] The authorities establish a number of principles applicable to a claim for a gross sum costs order to be made pursuant to FCR, O 62 r 4(2)(c): (i) The purpose of the subrule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum v Johnson (No 2), at 120, per von Doussa J, applying Leary v Leary [1987] 1 All ER 261; Harrison v Schipp (2002) 54 NSWLR 738, at 742 [21] per Giles JA. (ii) An order that costs be assessed as a gross sum does not envisage that any process similar to that involved in taxation should take place. On the contrary, the Court applies a much broader brush than would be used on a taxation of costs pursuant to O 62: Beach Petroleum v Johnson (No 2), at 120, 124, per von Doussa J; Harrison v Schipp, at 743 [22], per Giles JA. (iii) The Court should be confident that the approach taken to the estimate of costs is logical, fair and reasonable. The Court should be astute to avoid both overestimating the recoverable costs and underestimating the appropriate amount, for example by applying an arbitrary discount to the amounts claimed: Beach Petroleum v Johnson (No 2), at 123, per von Doussa J. (iv) Although the power to assess a gross sum for costs involves the exercise of a discretion, it is necessary to bear in mind fundamental principles applicable to an assessment of costs on a party and party basis. These include the principles contained in O 62 r 19 (embodying the 'necessary or proper' test) and those stated in Stanley v Phillips (1966) 115 CLR 470, at 478, per Barwick CJ (on a party and party taxation the emphasis is upon obtaining adequate representation to enable justice to be done, not upon the propriety of steps taken to ensure maximum success in the cause): Auspine Ltd v Australian Newsprint Mills Ltd (1999) 93 FCR 1, at 4-5 [12]-[15], per O'Loughlin J; Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629, at [6]-[8], per Mansfield J. (v) Although the methodology permitted by O 62 r 4(2)(c) initially involves a broader approach than on a normal taxation, the provisions of O 62 and Schedule 2 provide assistance in fixing an appropriate gross sum: Charlick Trading Pty Ltd v ANRC, at [10], per Mansfield J. 8 I also accept that it is appropriate in the circumstances to take as a starting point the evidence of the charges for professional costs incurred and disbursements made by the lawyers of the party awarded costs, consistent with the decision of this Court in Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051 (Ginos Engineers) at [24]. That figure is then adjusted to produce a sum which as a matter of judgment is neither overcompensatory nor prejudicial to the successful party, an adjustment which ordinarily is effected through the application of a discount to the figure accepted by the court on the available evidence as appropriately reflecting actual professional costs charged and disbursements made: see Ginos Engineers at [24]. DISCOUNT TO BE APPLIED TO THE STATE PARTIES 9 The State parties' costs are estimated at $67,665.79, and the basis for their calculation are set out at [32]-[39] of the affidavit of Ms Semeniuk. The State parties submit that a discount of 33.5%, resulting in a sum of $45,000.00, is logical, fair and reasonable in circumstances where: the starting figure is based upon hourly rates that are at the low end of the scale for counsel and lower than the scale rate for the instructing solicitor; the first, second and third respondents responded to the applicants' notice of motion and brought their notice of motion dated 25 March 2011 based only upon discrete, confined grounds; and the first, second and third respondents succeeded entirely in relation to those grounds. 10 The applicants do not oppose the percentage discount proposed by the State parties. I order that costs assessed in the gross sum of $45,000.00 be awarded accordingly in favour of the State parties. DISCOUNT TO BE APPLIED TO NAB AND THE RECEIVERS 11 The primary issue then becomes what discount, if any, should be applied to NAB and the receivers on its collective costs and disbursements, which are calculated as being $127,979.80: see the affidavit of Alison Jane Robertson filed 1 July 2011 at [58]. NAB and the receivers agree with the State parties' submission that it is appropriate for a discount of 33.5% to be applied to its costs, resulting in a sum of $85,319.87, which NAB and the receivers consider to be a fair and reasonable sum in the circumstances. 12 The applicants oppose the application of a 33.5% discount and contend that a higher discount of 55% should be applied for the following reasons as set out in the written submissions: Unlike the State, NAB and the receivers were not successful in their application dated 24 November 2011 and no orders were made permanently staying or dismissing the proceedings against the receivers. Unlike the State, it appears that the solicitors for NAB and the receivers do not appear to have charged at the lower end of the Court scale. The State and Mr and Mrs Thompson both used one counsel assisted by one solicitor. By contrast, NAB and the receivers used one counsel assisted by 3 solicitors. This was despite: (1) The State having a workload equivalent to NAB and the receivers. Like NAB and the receivers, the State opposed Mr and Mrs Thompson's application under s 237 of the Corporations Act, objected to Mr and Mrs Thompson's affidavit evidence and brought its own application. (2) Mr and Mrs Thompson had a greater workload than NAB and the receivers. Mr and Mrs Thompson brought the application under s 237 of the Corporations Act and opposed the applications brought by both the State and NAB and the receivers. (3) In light of sub-paragraphs (1) and (2), there is an element of over-servicing in the cost estimate of NAB and the receivers for which the Court should discount. On 4 April 2011, the parties spent time unnecessarily on Dr O'Donovan's objection to a line of questioning based on breach of confidence when: (1) Le Miere J made no finding concerning the cause of action for breach of confidence in either Martin Bruce Jones and Darren Gordon Weaver and Andrew John Saker as Receivers and Managers of Narrogin Beef Producers Pty Ltd (Receivers and Managers Appointed) v Narrogin Beef Producers Pty Ltd (Receivers And Managers Appointed) [2010] WASC 327 or Martin Bruce Jones and Darren Gordon Weaver and Andrew John Saker as Receivers And Managers of Narrogin Beef Producers Pty Ltd (Receivers and Managers Appointed) v Narrogin Beef Producers Pty Ltd (Receivers and Managers Appointed) [No 2] [2010] WASC 365; and (2) The cause of action for breach of confidence formed no part of Barker J's decision dated 3 June 2010 in NSD 1383 of 2010. 13 Counsel for NAB and the receivers made the following submissions in reply at the hearing on 26 July 2011. OVER-SERVICING 14 Counsel for NAB and the receivers contend that there is no element of over-servicing as asserted in circumstances where its barristers and solicitors were representing three sets of respondents, at least two of whom had a burden to discharge in the proceedings, namely, the fourth and fifth respondents. 15 NAB and the receivers further say that while the State parties' contribution was very valuable, it cannot be compared with the workload of the solicitors for the fourth, fifth and sixth respondents. Counsel for the State parties was invited by the Court to withdraw at the end of the first day and elected to stay for the second day. NAB and the receivers contend that effectively Lavan Legal carried the burden of both days, a burden which was increased by the way the applicants conducted the proceedings, in particular, by raising untenable arguments that exposed Lavan Legal to more work than normally required. 16 Counsel for the applicants say in reply that the applicants had the most work of all of the parties because they had to carry a section 237 application, as well as respond to the application of the State and NAB and the receivers. The applicants also dispute that its legal arguments were untenable and are presently seeking leave to appeal on the decision delivered by the Court on 3 June 2011. OBJECTION MADE during the hearing on 4 april 2011 17 On 4 April 2011, counsel for NAB and the receivers objected to a line of questioning during the cross examination of the witness Mr Darren Weaver by applicants' counsel, on the basis that it related to the duty of confidence, a matter which had already been determined by Le Miere J in his judgment in Martin Bruce Jones and Darren Gordon Weaver and Andrew John Saker as Receivers and Managers of Narrogin Beef Producers Pty Ltd (Receivers and Managers Appointed) v Narrogin Beef Producers Pty Ltd (Receivers and Managers Appointed) [No 2] [2010] WASC 365 at [22] and [23]. Counsel for NAB and the receivers contend this was a legitimate objection in light of Le Miere J's findings that there was no breach of a duty of confidence by the applicants in the proceedings because the applicants were required by the loan facility documents to disclose the information to Ferrier Hodgson (the , and through Ferrier Hodgson, to the NAB. 18 The applicants contend that it is an overstatement to say that [22] and [23] of Le Miere J's judgment covered a breach of confidence argument because it was a separate issue to what was argued on 4 April. The applicants say the breach of confidence argument in the present proceedings centres upon the contractual obligations that Ferrier Hodgson had to NAB to preserve the information that was supplied to it, which is a conceptually different aspect of the breach of confidence argument, and therefore the objection constitutes an unnecessary distraction. EXCLUSION OF COSTS INCURRED PRIOR TO 14 DECEMBER 2010 19 In its assessment of costs, the State parties exclude work done prior to the first directions hearing on 14 December 2010. The reasons for doing so are set out in [33] of Ms Semeniuk's affidavit filed 24 June 2011, where Ms Semeniuk deposes to the fact that costs were not claimed because most of the work done on the s 237 application and all of the work done on the first to third respondents' strike out application was done after this date. 20 The applicants support the State parties' submission to exclude work done prior to the first directions and therefore say it is not appropriate to incorporate amounts incurred by NAB and the receivers for the months of October, November and fees incurred for the month of December 2010 prior to 14 December 2010 in its assessment of costs. The applicants contend that the costs incurred by NAB and the receivers during these times were either: better considered part of the main proceedings in NSD 1383 of 2010; better dealt with by costs orders in COR 174 of 2010, in which proceedings the receivers; (1) applied in the Supreme Court of Western Australia on 14 October 2010 under s 418A of the Corporations Act for a declaration of validity of appointment; (2) successfully opposed a motion seeking to cross-vest COR 174 of 2010 with NSD 1383 of 2010 on 10 November 2010; (3) obtained a declaration of validity of appointment on 9 December 2011; or part of an unsuccessful application made by the receivers in NSD 1383 of 2010 on 24 November 2011 to stay or permanently dismiss proceedings against them. 21 NAB and the receivers oppose the exclusion of these costs on the basis that Lavan Legal conducted substantial legal work during these months in relation to the applications before the Federal Court. NAB and the receivers further say that their involvement in the proceedings in the Federal Court are more complicated than that of the State parties, and it was necessary for Lavan Legal to conduct exhaustive preparation in advance of the directions hearing in December. 22 During the course of oral submissions in the hearing on 26 July 2011, counsel for the applicants did not deny that Lavan Legal conducted work during these times, however, counsel contends that this work was done in relation to the application of 24 November, which had to do with the proceedings being stayed or dismissed as against the fifth respondents, and that this application was ultimately unsuccessful and no orders were made permanently staying or dismissing the proceedings against the receivers. 23 NAB and the receivers say in reply that relief was claimed in the alternative, and they were successful on one of these two alternatives. CONSIDERATION of discount on costs of nab and receivers 24 NAB and the receivers put forward a bill of costs and disbursements in the total sum of $127,979.80. 25 In considering what the gross costs should be, as set out above, the Court takes a broader brush approach than the view of a taxation of costs. Just the same an arbitrary discount is something the Court must caution against when making the gross estimate. 26 While NAB and the receivers were not successful on the application that there be a permanent stay or dismissal of the proceedings against the receivers, I consider they had a measure of success on that application, nonetheless, including a finding that the pleadings in certain respects were defective. 27 Generally speaking, I consider that the implied charge of over servicing made by the applicants against NAB and the receivers and their solicitors and counsel are not justified. No doubt these parties took seriously the claims made against them. They have previously been pursued in proceedings in the Supreme Court of Western Australia. It was appropriate that counsel experienced in the subject matter of the claims should be briefed. I have no doubt that the work set out as done by the solicitors and counsel was done. 28 It does not seem to me to be helpful to compare how many solicitors and counsel were engaged on behalf of the NAB and the receivers, compared with the number engaged by the State parties in this particular case as the issues were different for the different parties. To the extent that any comparison is appropriate, I accept, broadly speaking, the submissions of NAB and the receivers that they carried the whole of the burden during the hearing, save that they were relieved of part of it in that the State parties substantially dealt with the proposed competition actions against the State parties. 29 So far as the contention of the applicants is concerned that undue attention was given to breach of confidence issues, I consider it was appropriate for that issue to be canvassed. The extent to which what had occurred before LeMiere J in the Supreme Court and what his Honour's rulings entailed and what was raised in this proceeding, required appropriate attention. In any event, I do not consider the submission made about those matters on behalf of NAB and the receivers materially added to the expense or time taken to hear and dispose of these proceedings. 30 I also accept the submission made on behalf of NAB and the receivers that the s 237 application under the Corporations Act necessarily engaged work prior to 14 December 2010. The State did not claim for work prior to that date, because they did not do it. I accept, however, that fees were incurred in October and November and prior to 14 December 2010 by NAB and the receivers. 31 The situation is that both the State parties and NAB and the receivers propose that a healthy discount in the order of 33.5% is appropriate. Such a discount, in my view, is appropriate as it is generous and takes account of the sorts of concerns raised by the applicants in suggesting that a higher discount should be applied in respect of NAB and the receivers' costs, than the State parties' costs. I think the approach in this case of applying a global discount of 33.5% is a safe one to adopt and it should apply to each set of costs. orders 32 The Court orders: 1. Pursuant to the order for costs made in this proceeding made 3 June 2011 in order 8, the gross sum costs be fixed in the sum of $45,000. 2. Pursuant to the order for costs in this proceeding made 3 June 2011 in orders 6 and 7, the gross sum costs be fixed in the sum of $85,319.87. 3. There be no further order for costs in respect of the hearing and determination of the gross sum issue and the parties shall bear their own costs in respect of the determination of gross costs. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. Associate: Dated: