Federal Court of Australia Sackl v Auslink Investment Co. Associates Pty Ltd [2022] FCA 402 Appeal from: B Pty Ltd v Sutton [2020] FCCA 3068 File number(s): NSD 1337 of 2020 Judgment of: ABRAHAM J Date of judgment: 21 April 2022 Catchwords: COSTS – whether lump sum costs should be awarded – where first respondent sought a lump sum and appellant sought taxation – where appellant bankrupt – appellant to pay costs of first respondent to be agreed or taxed Legislation: Federal Court of Australia Act 1976 (Cth) s 35A(1)(h) Federal Court Rules 2011 (Cth) rr 3.01(1)(b), 40.02(b), Schedule 2, Item 221 Cases cited: Auslink Investment Co Associates Pty Ltd v Sackl [2019] NSWSC 1227 Auslink Investment Co Associates Pty Ltd v Sackl [2020] NSWSC 640 Billingsley v Napoli [2021] FCA 526 Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 14 Date of last submission/s: 25 March 2022 Date of hearing: Determined on the papers Solicitor for the Appellant: Mr C Dale of Christopher Dale Solicitor Counsel for the First Respondent: Mr C D Freeman Solicitor for the First Respondent: Goodwin & Co Lawyers ORDERS NSD 1337 of 2020 BETWEEN: JAMES SACKL Appellant AND: AUSLINK INVESTMENT CO. ASSOCIATES PTY LTD ACN 168 833 109 First Respondent PERPETUAL CORPRATE TRUST LTD ACN 000 341 533 Second Respondent order made by: ABRAHAM J DATE OF ORDER: 21 April 2022 THE COURT ORDERS BY CONSENT THAT: 1. The Notice of Appeal from the Federal Circuit Court filed on 16 December 2020 be dismissed. THE COURT FURTHER ORDERS: 2. The appellant is to pay the costs of the first respondent, to be agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT ABRAHAM J: 1 This Court has been informed by Mr Sackl that the appeal the subject of these proceedings is abandoned. The parties seek an order by consent that the proceedings be dismissed. There is no dispute, in that context, that Mr Sackl must pay the respondents' costs. Indeed, Mr Sackl has no objection to an order that he pay the costs of the first respondent, Auslink Investments Co. Associates Pty Ltd (Auslink), as taxed. However, an issue has arisen regarding the nature of the order to be made, as Auslink makes an application pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth) for a lump sum costs order. The amount sought is $51,714.09 (which excludes GST). Mr Sackl opposes the making of that order. 2 The parties agree that this matter can be determined on the papers, and to that end, each has filed written submissions, and affidavit evidence in support. 3 Auslink relies on two affidavits of Shenghai Mo, affirmed 8 March 2022 and 15 March 2022 respectively, which set out the basis for the amount of the lump sum sought. Mr Sackl relies on an affidavit of Christopher Antony Dale sworn 15 March 2022, which addresses the basis of the amount claimed. 4 In summary, Auslink contends that in light of the history of the proceedings, it is an injustice to Auslink to now have to spend more time and costs to tax a bill of costs, even more so where Mr Sackl is a bankrupt. 5 That history was detailed as follows: (1) On 17 September 2019, judgment was entered against Mr Sackl for $361,000 plus interest of $23,445.22, as a result of misleading and deceptive conduct found to have been engaged in by him: Auslink Investment Co Associates Pty Ltd v Sackl [2019] NSWSC 1227. Costs in favour of Auslink were awarded against Mr Sackl. (2) Mr Sackl sought unsuccessfully to set aside the judgment: Auslink Investment Co Associates Pty Ltd v Sackl [2020] NSWSC 640, with Mr Sackl's claim that he was not the person served with the Statement of Claim being rejected: at [15] and [20]. (3) On 5 November 2019, a Bankruptcy Notice was issued against Mr Sackl based on the judgment. There was no application to set aside the Bankruptcy Notice. (4) The Creditor's Petition was filed on 10 January 2020 and listed for hearing on 12 March 2020. The Creditor's Petition was adjourned on eight occasions. (5) The hearing took place on 5 November 2020 and judgment was delivered on 13 November 2020, at which time a sequestration order was made against Mr Sackl with costs in favour of Auslink: [2020] FCCA 3068. An application for a stay was heard on 18 November 2020 and rejected on 24 November 2020: [2020] FCCA 3156. (6) The appeal in these proceedings was filed on 11 December 2020 and disposed of in practical terms in the week commencing 7 March 2022, with the appellant, Mr Sackl, abandoning it. 6 Auslink submitted that given this history, and given that Mr Sackl is now a bankrupt, there is no utility in requiring a taxation of costs and exposing Auslink to further costs in circumstances where Mr Sackl was found to have engaged in misleading and deceptive conduct. Auslink posed the question of why it should be exposed to further "expense, delay and aggravation", citing Billingsley v Napoli [2021] FCA 526 at [85(1)]. 7 It submitted that the criticisms from Mr Sackl's solicitor are unfounded. It submitted that the approach of the Court to fix a lump sum is a "broad brush approach", rather than the approach of carrying out a taxation of costs, and that the Court can take into account the Judge's own experience and form a view about the sum: Billingsley v Napoli at [85(4)]-[85(5)]. It submitted that anything other than the order sought would delay the proceedings further. 8 Mr Sackl objected to that course. He contended that the cases referred to by Auslink involved an order for costs which had not been pursued by it. He submitted that it is unlikely that a taxation will ever occur, which is the premise of the application and the additional cost Auslink wishes to avoid. The only additional cost is of preparing a bill of costs in taxable form, which would provide a proper basis to determine the costs, as opposed to the "broad brush approach" Auslink seeks. It was submitted that that was not an additional burden and nor would it involve significant "expense, delay and aggravation". Mr Sackl also relied on the shortcomings of Auslink's evidence, as identified by Mr Dale. Consideration 9 In Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 (Paciocco) at [13]–[20], the Full Court (Allsop CJ, Besanko and Middleton JJ) set out the principles to be applied in relation to the decision whether to make a lump sum costs order as follows: [13] The Court has a general discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) (the 'Federal Court Act'). Under s 43(3), the Court may, among other things: (a) make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial; … (d) award a party costs in a specified sum;… [14] Section 43 of the Federal Court Act is supported by r 40.02(b) of the Federal Court Rules 2011 (Cth) (the 'Rules'), which provides: A party or a person who is entitled to costs may apply to the court for an order that costs: … (b) be awarded in a lump sum, instead of, or in addition to, any taxed costs;… [15] The purpose of such a rule is "to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation": see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 ('Beach Petroleum') at 120. [16] On 25 October 2016 the Chief Justice issued the Central Practice Note: National Court Framework and Case Management (CPN-1) ('Central Practice Note') and the Costs Practice Note (GPN COSTS) ('Costs Practice Note'). The Central Practice Note states that the determination of the quantum of costs of a successful party (in a proceeding) should not be delayed and, to this end, the Court will, where appropriate, facilitate the making of lump sum costs orders. The Costs Practice Note provides that the Court's preference, wherever it is practicable and appropriate to do so, is to make a lump sum costs order so as to finalise costs and avoid potentially expensive and lengthy taxation hearings. It makes clear that the Court should now proceed on the basis that taxation "should be the exception" and confined to matters which are unable to be determined otherwise: Costs Practice Note at [3.3]. The guiding principles are to reduce delay and cost when quantifying costs: Costs Practice Note at [3.1]. [17] The Costs Practice Note provides for the Court to make use of sophisticated costs orders and procedures, and to take such steps as it considers necessary to ensure that it has the requisite level of detail to make a costs determination that is fair, logical and reasonable and to avoid orders that lead to potentially expensive and lengthy taxation hearings: Costs Practice Note at [3.3]. [18] We emphasise that in making a lump sum award of costs, the Court in undertaking the task of assessing costs is not precluded from undertaking a close inquiry of costs relating to a particular issue or category of costs, should the Court consider it appropriate to do so: see e.g. Hudson v Sigalla (No 2) [2017] FCA 339 at [30] ('Sigalla'). The Court is able to adopt its own procedures in inquiring into costs, is able to be flexible in how it conducts that inquiry, including by the obtaining of suitable assistance whether by referee's report or other reporting, and is able to acquire the level of detail needed to make a determination that is fair, logical and reasonable. [19] Whilst the Costs Practice Note now suggests that most cases should have a lump sum costs order approach applied unless there is some characteristic that would make it unsuitable, a lump sum costs order is not mandated in all instances. In all cases it is a matter for the Court to exercise the discretion given to the Court by the Federal Court Act and the Rules as appropriate: see Sigalla at [18]-[19]. [20] There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality. 10 The challenge to the lump sum order is based primarily on the amount sought. This in turn is based on what are said to be deficiencies in the evidence relied on, such as the amount sought not being able to be established as appropriate in the circumstances. I do not accept Mr Sackl's submission that if the order he seeks is made, the matter is unlikely to go to taxation. 11 On the other hand, Auslink does not address what is said by Mr Sackl to be deficiencies in the evidence, save for submitting that the criticisms are unfounded. In this context Auslink submitted that the nature of the exercise is a broad brush one, citing Billingsley v Napoli at [85(4)]-[85(5)] which is as follows: [85] In relation to the discretion to make costs orders on a lump sum basis: … (4) The approach to be taken by the Court in deciding whether to make such an order and in arriving at the quantum thereof should be a broad brush approach. It is one of estimation or assessment and not of arithmetic. The Court should avoid, in effect, carrying out a taxation under the guise of performing a lump sum costs assessment: Bayley & Associates at [17(e)]; Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051; (2008) 249 ALR 371 at [23] (Finn J); Sony Entertainment (Australia) Limited v Smith [2005] FCA 228; (2005) 215 ALR 788 at [197]-[200] (Jacobson J). That would defeat the entire purpose of the lump sum costs procedure as set out in the Costs Practice Note: Coshott v Burke (No 2) [2018] FCAFC 81 (Coshott v Burke (No 2)) at [27] (Logan, Kerr and Farrell JJ); (5) In assessing quantum the Court is entitled to take into account the evidence that is before it, its own observations of the proceeding and the Judge's own experience: see Innes v AAL Aviation Limited (No 2) [2018] FCAFC 130 [18] (Tracey, Bromberg and White JJ). The evidence of an expert costs assessor is both relevant to and probative of whether a lump sum costs order ought to be made and the quantum of any such order: Bayley & Associates at [17(g)] 12 This matter has a history although it is not clear what the relevance is of the preceding judgments which are annexed to the affidavit of Shenghai Mo affirmed 8 March 2022. The costs relate to these proceedings. I accept there ought not to be any unnecessary delay. That said, there are issues that have been pointed to as to the sufficiency of the evidence which are not simply addressed by Auslink's submission that this assessment is a broad brush exercise. Moreover, Auslink relies on evidence which claims an entitlement to $56,855.50 which includes GST, only to concede in written submissions that the GST is not recoverable. That is, the affidavit on which it relies, on its own submission, contains an error as to the amount claimed. The draft orders sought reflect the error. Furthermore, it is difficult to see why an order that costs be agreed or assessed would cause significant delay. 13 Considering the relevant principles, the submissions and the material relied on in this application, I am not prepared to make the order sought by the first respondent. Rather, in the circumstances, the appellant should pay the costs of the first respondent to be agreed or taxed. Conclusion 14 The order for costs in favour of the first respondent is to be agreed or taxed. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Abraham. Associate: Dated: 21 April 2022