Australian Securities and Investments Commission v Atlantic 3 Financial (Aust) Pty Ltd & Ors [2008] QSC 53

SUPREME COURT OF QUEENSLAND CITATION: ASIC v Atlantic 3 Financial (Aust) Pty Ltd & Ors [2008] QSC 53 PARTIES: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION (applicant) v ATLANTIC 3 FINANCIAL (AUST) PTY LTD ACN 056 262 723 (first respondent) FREDRIC MICHAEL ACKER (second respondent) GERILYN MARIE POLANSKI (third respondent) FILE NO: BS4426 of 2003 DIVISION: Trial Division PROCEEDING: Application for costs DELIVERED ON: 20 March 2008 DELIVERED AT: Brisbane HEARING DATE: 20 February 2008 JUDGE: Mullins J ORDER: 1. The second and third respondents pay the costs of GM Moloney and PIF Geroff (the applicants) of the application filed on 16 November 2007 to be assessed. 2. The second and third respondents pay the costs of the applicants of the assessment of the costs statement filed on 26 November 2004 that was undertaken before Senior Deputy Registrar McNamara between 25 and 31 July 2007 to be assessed. 3. The second and third respondents pay the costs of the hearing before Mullins J on 20 February 2008 to be assessed. CATCHWORDS: PROCEDURE – COSTS – JURISDICTION – OTHER CASES – where respondent ordered to pay the applicant’s costs of an application – where applicant filed costs statement – where assessment of the costs statement commenced but not completed before the registrar – where applicant obtained an order fixing the costs of the application – whether court had power to include the costs of the incomplete assessment as part of the costs of the application to obtain the fixed costs -- 1 of 6 -- 2 order – where oral application made by applicant for order for costs of the incomplete assessment UCPR, r 684 Dunstan v Seymour [2006] FCA 917, considered Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2005] QSC 389, considered Gibbs Holdings Pty Ltd v Mercantile Mutual Insurance (Australia) Ltd [2000] QCA 524, considered Merrin v Cairns Port Authority [2003] QCA 176, considered COUNSEL: DA Savage SC for GM Moloney & PIF Geroff PG Lynch (Sol) for the second and third respondents SOLICITORS: Gadens Lawyers for GM Moloney and PIF Geroff Lynch & Company for the second and third respondents [1] MULLINS J: I gave judgment on 8 February 2008 in respect of the application filed on 16 November 2007 by Messrs GM Moloney & PIF Geroff (the applicants) for costs to be fixed under the order made on 7 September 2004 in this proceeding: ASIC v Atlantic 3 Financial (Aust) Pty Ltd & Ors [2008] QSC 9 (the reasons for fixed costs). I adjourned the hearing on the question of costs of the application filed on 16 November 2007 to 20 February 2008. [2] There are two issues raised in respect of the costs sought by the applicants. The first is the costs of the application for the order fixing costs that was heard on 29 November 2007. The applicants were successful in having costs fixed in the amount of $84,000. Both the applicants and the second and third respondents (the respondents) are agreed that the respondents should pay the applicants’ costs of that application to be assessed on the standard basis. The second issue is the costs of the assessment of the costs which were the subject of the order made on 7 September 2004. The application for assessment of the costs and the costs statement were filed on 26 November 2004. The assessment was conducted over a period of five days before Senior Deputy Registrar McNamara (the Registrar) between 25 and 31 July 2007, but not completed. The applicants seek an order for the costs of the assessment of the costs statement undertaken between 25 and 31 July 2007 as a matter that can be disposed of in connection with the costs of the application filed on 16 November 2007 or, alternatively, make an oral application for those costs of the assessment. Does the court have the power to dispose of the costs of the assessment before the Registrar? [3] The steps undertaken in pursuing the assessment of the costs ordered on 7 September 2004 are set out at [7] to [12] of the reasons for fixed costs. [4] The applicants referred to authorities in support of their submission that the court had power to make the order sought by them in respect of the costs of the assessment. These were Gibbs Holdings Pty Ltd v Mercantile Mutual Insurance (Australia) Ltd [2000] QCA 524 (Gibbs); Merrin v Cairns Port Authority [2003] QCA 176 (Merrin); Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2005] QSC 389 (Equuscorp). -- 2 of 6 -- 3 [5] In Gibbs the appellant had been unsuccessful against the second respondent at trial. Pending appeal, there was an assessment of the second respondent’s costs. On appeal, the appellant succeeded against the second respondent. The Court of Appeal ordered that the second respondent pay the respondent’s costs of the trial, including the costs of the assessment of the second respondent’s costs of trial as a consequence of the appellant’s successful appeal. The court therefore treated the appellant’s costs incurred in respect of the assessment of the second respondent’s costs as part of the appellant’s costs of the trial. The scope for the Court to dispose of a party’s costs of an assessment of costs in the course of a proceeding where the entire costs of the proceeding are before the court is different to that found by the Court in this matter. [6] Merrin was also a decision of the Court of Appeal. The plaintiffs had sued the defendant and the trial Judge directed the jury to return a verdict for the defendant and gave judgment. The plaintiffs appealed successfully to the Court of Appeal, a new trial was ordered and the defendant was ordered to pay the costs of the plaintiffs of the wasted trial. The plaintiffs and the defendant agreed on the quantum of those costs, but the solicitors who had acted for the plaintiffs at the trial gave a notice claiming an equitable interest in those costs. The Supreme Court then ordered that the quantum of the costs payable to the plaintiffs by the defendant be paid into court. The plaintiffs unsuccessfully appealed to the Court of Appeal against that order, but the Court of Appeal did order that there be an assessment of the bill of costs submitted by the plaintiffs’ solicitors for the costs of the trial, in order to determine that amount properly claimable by those solicitors from the plaintiffs in respect of the trial. This was done by the Court of Appeal in the exercise of its inherent jurisdiction to regulate the charges of solicitors as officers of the court. Because that assessment was carried out under an order made in the exercise of the inherent jurisdiction of the Court and the plaintiffs had success on that assessment, the Court indicated at [9] that the plaintiffs were entitled to an order for their costs of the assessment. The circumstances in which the court’s inherent jurisdiction was relied on in Merrin to deal with costs of an assessment of a party’s solicitor and client costs distinguish it from the current matter. [7] The defendant in Equuscorp in proceeding 1688 of 1991 was successful before the primary judge and obtained an order for costs against the first plaintiff. After the defendant’s unsuccessful appeal to the Court of Appeal, the assessment of the defendant’s costs of the proceeding commenced and lasted for some two weeks, before it was adjourned. Special leave to appeal to the High Court was granted and the assessment was then suspended. Ultimately the first plaintiff was successful on appeal in the High Court, the orders of the primary judge were set aside and the matter of costs of the proceeding was remitted to the Supreme Court. One of the issues that had to be determined in relation to the costs of the proceeding was whether the defendant in proceeding 1688 of 1991 should be ordered to pay to the first plaintiff the costs which the first plaintiff incurred in respect of the costs of the assessment of the defendant’s costs of the proceeding. It was held at [16] that the first plaintiff was endeavouring to establish, by appearing at the assessment, its case on issues of costs arising from the orders made against it and that fell within its costs of the proceeding. The defendant was therefore ordered to pay to the first plaintiff its costs of the assessment of costs. The question of the costs of the incomplete assessment was therefore determined in the context of the court disposing of the costs of an entire proceeding. -- 3 of 6 -- 4 [8] The respondents rely on the doubt expressed in Dunstan v Seymour [2006] FCA 917 at [43] about whether the Federal Court had power to make an order for costs in respect of a taxation of costs that was incomplete, but would not be completed as a result of the decision of the court to fix costs in a gross sum, in lieu of the taxation proceeding to completion. The party that had sought the order for the gross sum costs order had also sought that the costs of the taxation be included in the gross sum. Mansfield J adjourned the question of the costs of the taxation to enable the parties to make submissions on the question of the power of the court to deal with the question of the costs of the taxation of costs to date and the power to make a gross sum costs order in respect of those costs. Mr Lynch on behalf of the respondents was unable to find any subsequent decision in that matter. The reservation expressed by Mansfield J was directly related to the relevant provision in the Federal Court Rules and does not suggest any objection in principle that is relevant to this matter. [9] Although the costs statement itself, the progress of the assessment of the costs statement (particularly the lack of satisfactory progress that was made over the five days of hearing before the Registrar) and the evidence that was adduced on the hearing before the Registrar were relevant to the determination of the application seeking fixed costs in respect of the order for costs made on 7 September 2004, the application filed on 16 November 2007 was directed at obtaining a specific order that was separate and distinct from and cannot embrace the costs of the assessment of the costs statement. This can be contrasted with the situation in Gibbs and in Equuscorp where the costs of an entire proceeding was the focus of the court that was making the costs order. [10] The costs of the assessment before the Registrar must therefore be the subject of a separate application to that filed on 16 November 2007. In anticipation of such a conclusion, during the hearing on 20 February 2008 Mr Savage of Senior Counsel made oral application on behalf of the applicants for the costs of the assessment. It is necessary to source the jurisdiction of the court to deal with such application for the costs of the incomplete assessment of the costs statement. Because of the introduction of a new ch 17A by the Uniform Civil Procedure Amendment Rule (No 4) 2007, Mr Savage provided a supplementary note (that Mr Lynch agreed with) that confirmed there was nothing in the new rules regarding costs and/or the transitional arrangements regarding the new rules that affected the court’s power to order that a party pay the costs of an assessment. The assessment of the costs statement was undertaken by the applicants in an endeavour to gain the benefit of the order for costs made in their favour on 7 September 2004. Even without the assessment being completed, the pursuit of the assessment was in furtherance of the proceeding. If it is necessary to point to a specific provision as conferring jurisdiction on the court to deal with the applicants’ oral application r 684(1) of the UCPR is relevant. That permits the court to make an order for costs in relation to a particular part of a proceeding. An incomplete assessment of a costs statement comprises a part of a proceeding. [11] Although the court does not have the power to dispose of the costs of the assessment before the Registrar as part of the application filed on 16 November 2007, the court has the power to deal with the costs of that assessment on the application in relation to those costs that was made on 20 February 2008. -- 4 of 6 -- 5 What order should be made in respect of the costs of the assessment before the Registrar [12] The applicants seek an order for costs in their favour of the assessment before the Registrar. As it was put in argument, the applicants seek those costs because of the fundamental lack of success of the respondents compared with the enormous costs involved with a five day assessment (Transcript p 18). The applicants submit that the success which the respondents had before the Registrar on items of costs that were being assessed on a standard basis was minor and should not diminish the applicants’ entitlement to recover the costs of the assessment in respect of costs for which the applicants were ultimately substantially successful in obtaining the fixed costs order. [13] The respondents submit that any order covering the costs of the assessment before the Registrar should reflect the success that the respondents had in reducing some of the items claimed on a standard basis. The respondents also rely on the protraction of the hearing before the Registrar because of the applicants’ inability to support items claimed in the costs statement without further oral evidence from Mr Pennicott and the time taken before the Registrar with the oral evidence of Mr Pennicott. On a broad brush approach, the respondents submit that the applicants should bear the costs of three days of the assessment and the respondents one day. [14] I referred to a number of aspects of the assessment before the Registrar at [17] to [20] of the reasons for fixed costs. The hearing before the Registrar was an appropriate step for the applicants to take in the light of what I characterised in the reasons for fixed costs at [53] as the respondents’ “unrelenting opposition to the quantification of the applicants’ costs of the approval application”. The respondents have attempted to dress up the rulings the Registrar made in their favour as indicating a measure of success which closer analysis of the assessment in the context of the entire costs statement does not warrant. The costs statement, as filed, claimed an amount of $91,387.45. The limited success before the Registrar did not have a significant effect on the amount for which the costs were ultimately fixed which was the sum of $84,000. The protraction of the hearing before the Registrar was directly related to the approach taken by the respondents to the items claimed in the costs statement. It is also relevant that most of the costs statement concerned costs which were ordered on an indemnity basis and, as was noted at [61] of the reasons for fixed costs, the respondents could not have realistically expected much by way of deductions to the claim for indemnity costs. As the assessment was a step that the applicants were required to take, in order to gain the benefit of the costs order made on 7 September 2004, and the applicants have been substantially successful in recovering over 90% of the costs that were the subject of that assessment, the degree of success of the applicants warrants ordering the respondents to pay the costs of the assessment before the Registrar. In the circumstances, no diminution of those costs should be made to reflect the limited success of the respondents as a result of the assessment. [15] The hearing on 20 February 2008 was primarily concerned with the power of the court to make an order for the costs of the assessment. It is appropriate that the second and third respondents also bear the costs of that hearing. -- 5 of 6 -- 6 Orders [16] I propose to make the following orders: 1. The second and third respondents pay the costs of GM Moloney and PIF Geroff (the applicants) of the application filed on 16 November 2007 to be assessed. 2. The second and third respondents pay the costs of the applicants of the assessment of the costs statement filed on 26 November 2004 that was undertaken before Senior Deputy Registrar McNamara between 25 and 31 July 2007 to be assessed. 3. The second and third respondents pay the costs of the hearing before Mullins J on 20 February 2008 to be assessed. -- 6 of 6 --