Australian Securities and Investments Commission v Atlantic 3 Financial (Aust) Pty Ltd (No 3) [2008] QSC 9 [2008] 2 Qd R 298

SUPREME COURT OF QUEENSLAND CITATION: ASIC v Atlantic 3 Financial (Aust) Pty Ltd & Ors [2008] QSC 9 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 DELIVERED ON: 8 February 2008 DELIVERED AT: Brisbane HEARING DATE: 29 November 2007 JUDGE: Mullins J ORDER: That the costs the respondents were ordered to pay to GM Moloney and PIF Geroff by order made on 7 September 2004 in this proceeding be fixed in the amount of $84,000 CATCHWORDS: PROCEDURE – COSTS – POWERS OF THE COURT – where respondent ordered to pay the costs of the applicant of an application to be assessed, partly on a standard basis and partly on an indemnity basis – where applicant filed costs statement – where respondent made a large number of objections to the items in the costs statement – where little progress made on the assessment of the costs statement after a hearing over five days – where applicant applied under r 687 Uniform Civil Procedure Rules 1999 (Q) for an order that the court fix the costs of the application – whether respondent’s conduct that resulted in the order for indemnity costs was relevant – whether there was any substance in the respondent’s objections to the costs – where quantum of costs fixed UCPR, r 687, r 703 Amos v Monsour Legal Costs Pty Ltd [2007] QCA 235, considered -- 1 of 15 -- 2 Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119, followed Bottoms v Reser & Anor, unreported, de Jersey CJ, Cairns SC No 28 of 1998, 29 November 2000, followed ChongHerr Investments Ltd v Titan Sandstone Pty Ltd [2007] QCA 278, considered Hadid v Lenfest Communications Inc [2000] FCA 628, considered Harrison v Schipp (2002) 54 NSWLR 738, considered Keen v Telstra Corporation Limited (No 2) [2006] FCA 930 Leary v Leary [1987] 1 WLR 72, considered Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788, considered COUNSEL: DA Savage SC and S Gray for GM Moloney and 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: In this proceeding Messrs GM Moloney and PIF Geroff (the applicants) obtained an order against the second and third respondents (the respondents) in respect of the costs of their application filed on 11 September 2003. By application filed on 16 November 2007 the applicants seek an order that their costs of that application be fixed in the amount of $89,260.70 or such other amount as may be decided by the Court. Events leading to the application [2] By order made on 27 May 2003 Philip McMurdo J appointed the applicants as investigative accountants in relation to 15 unregistered managed investment schemes conducted by corporations under the control of the respondents and to provide a report to the Court on the assets, liabilities and other matters relating to the schemes. Under paragraph 9 of that order the respondents undertook to pay the applicants’ costs and remuneration of preparing their report and any supervision of the schemes in accordance with the order, such costs and remuneration to be agreed or determined by the Court. [3] Pursuant to the terms of the order the applicants filed a report in the Court setting out the results of their investigations into the schemes. [4] On 11 September 2003 the applicants applied to the Court for approval of their remuneration and disbursements for acting as investigative accountants in an amount of $204,287.91. The respondents delivered a notice of objection on 30 December 2003 which comprised 696 separate objections. [5] The hearing of the application for approval of the remuneration and disbursements of the applicants took place before me between 2 and 4 February 2004. By reasons for judgment delivered on 7 May 2004 I determined the costs and remuneration and reimbursement of expenses and disbursements incurred by the applicants as investigative accountants pursuant to the order made on 27 May 2003 in an amount totalling $201,193.61: ASIC v Atlantic 3 Financial (Aust) Pty Ltd [2004] QSC 133 (the reasons for approval of the applicants’ remuneration). -- 2 of 15 -- 3 [6] I made a further order on 7 September 2004 (the costs order) that the respondents pay the costs of the applicants, including reserved costs, of the application filed on 11 September 2003 to be assessed on a standard basis up to (but not including) the service on the applicants of the respondents’ notice of objection and thereafter (from and including the service on the applicants of the notice of objection) to be assessed on an indemnity basis: ASIC v Atlantic 3 Financial (Aust) Pty Ltd [2004] QSC 284. The indemnity costs were ordered as a result of the approach of the respondents reflected in the notice of objection to the applicants’ application for approval of remuneration and disbursements. I refer to [15] of the reasons for making the costs order: “The nature and extent of the objections in the notice of objection had an immense effect on the work required on the part of the accountants to respond and prepare for the hearing of the application for the approval of their remuneration and disbursements. The accountants were required to go to great lengths to support their claim for fair and reasonable remuneration that was far beyond what the material which they filed in support of the application should reasonably have required. Having regard to all the circumstances pertaining to the work for which the accountants were seeking approval of their remuneration and disbursements of which the respondents were aware, the notice of objection was not what should have been expected from the respondents. The notice of objection was so oppressive and speculative, that it warrants a departure from the usual order for costs, as from the service of the notice of objection on the accountants.” [7] Pursuant to the costs order, the applicants filed a costs statement on 25 November 2004 in which they claimed a total amount for costs and disbursements of $91,387.45 for 766 items. The items in the costs statement drawn on the standard basis (items 1 to 282) total $13,206.55 which comprises $4,258.75 in disbursements and $8,947.80 in professional fees. The items in the costs statements drawn on the indemnity basis (items 283 to 766) total $78,180.90 which comprises $22,697.50 in disbursements and $55,483.40 in professional fees. The disbursements include counsel’s fees. [8] The respondents served a notice of objections on 24 December 2004 that set out 648 objections. [9] One of the respondents’ objections was that the client agreement between the applicants’ solicitors and the applicants was not a costs agreement pursuant to r 704(3)(b) of the UCPR . That objection was argued as a preliminary point before a Senior Deputy Registrar. On 13 October 2005 the Registrar decided that the client agreement was not a costs agreement pursuant to r 704(3)(b) of the UCPR. [10] The applicants then filed an application seeking that directions be given by the Court to the Registrar to assess the costs statement on the basis that the client agreement between the applicants and their solicitors applied to such assessment. That application was heard by me and I held on 23 June 2006 that the client agreement was a costs agreement for the purpose of r 704(3)(b) of the UCPR in respect of the assessment of the costs statement: ASIC v Atlantic 3 - Financial (Aust) Pty Ltd & Ors [2006] QSC 152. The respondents appealed against that -- 3 of 15 -- 4 decision to the Court of Appeal which on 15 December 2006 dismissed the appeal: ASIC v Atlantic 3 Financial (Aust) Pty Ltd [2006] QCA 540. [11] In February 2007 the applicants sought the relisting of the assessment of the costs statement. The assessment of the costs statement then took place over five days commencing on 25 July 2007 before another Senior Deputy Registrar. The assessment was adjourned part heard on 31 July 2007. The Registrar discussed with the parties listing the assessment for another five days and that it was unlikely that he would have dates before March 2008. [12] The Chief Justice made Practice Direction No 3 of 2007 on 8 May 2007 which was intended to encourage parties to agree on the amount of costs otherwise to be assessed. It was also intended (in reliance on then r 685(2) of the UCPR) to signal the authority of the Court, in an appropriate case, to fix costs, and to ensure parties were in a position to inform that process. The Chief Justice made a further practice direction on 28 June 2007 concerning interim arrangements for costs assessment: Practice Direction No 7 of 2007. The Chief Justice then issued a notification on 3 October 2007 confirming that amendments to the UCPR that were in the process of preparation contemplated that assessments of costs in relation to both party and party costs and solicitor and client costs would be carried out by a costs assessor drawn from a panel established by the Court of Australian lawyers with at least five years’ experience in practice and/or the assessment of costs. The notification therefore confirmed that the intent was that assessments would be carried out by Australian lawyers and not by a Registrar and that the procedure set out in Practice Direction No 7 of 2007 should be followed in respect of all matters for assessment currently within the Registry, including those part heard and those for which hearing dates have been set into the future. Because of these anticipated amendments to the UCPR and the Chief Justice’s notification issued on 3 October 2007, the Registrar vacated the dates allocated for a directions hearing about assessment of costs in respect of the applicants’ costs of the application filed on 11 September 2003. [13] On 10 December 2007 (while my decision on the application was reserved) relevant provisions of the Uniform Civil Procedure Amendment Rule (No 4) 2007 (the Amendment Rule) commenced. [14] When the application was filed on 16 November 2007, the order was sought by the applicants in reliance on r 685 of the UCPR. As the Amendment Rule replaced the existing Part 2 of ch 17 and ch 17A of the UCPR with a new ch 17A, the relevant rule covering the applicants’ application is the current r 687 which is in identical terms to the former r 685. It was common ground between the parties that the former r 685(2) confers power on the Court to order costs fixed in a specified amount. The position has not changed under the current r 687(2). [15] The assessment by the Registrar dealt with some items up to item 227. The Registrar assessed off, or the applicants conceded during the assessment, items totalling $1,545.25. For the purpose of this application the applicants concede the items disallowed by or conceded before the Registrar and like items. Issues [16] The first issue that arises on the application is whether the Court should fix the costs ordered to be paid by the respondents to the applicants pursuant to the costs order. -- 4 of 15 -- 5 If so, the next step is to determine the amount of those fixed costs. If the Court does not exercise the discretion to order fixed costs, the issue then is what orders should be made on the application. Evidence [17] The applicants rely on two affidavits of Mr Pennicott filed respectively on 19 and 27 November 2007. Mr Pennicott is a member of the firm of Gadens Lawyers that acts for the applicants and has been a solicitor for 25 years. The exhibits to the first affidavit Mr Pennicott include the costs statement, the respondents’ notice of objections and the transcript of each of the five days of hearing of the assessment before the Registrar between 25 and 31 July 2007. Mr Gray of counsel appeared on behalf of the applicants on the assessment. Mr Gray prepared a schedule of the items on the costs statement that records the outcome before the Registrar. The schedule is an exhibit to Mr Pennicott’s second affidavit. It is this schedule that shows that the total of the amounts assessed by or conceded by the applicants before the Registrar was $1,545.25. That schedule also shows that in respect of items 1 to 227, the Registrar stood over items that totalled $5,138, he allowed $2,109.80 and the respondents conceded $2,607.50. Of items totalling $6,262.55 that were dealt with by the Registrar about 25% therefore was assessed, or conceded. [18] Mr Pennicott sets out in paragraph 7 of his second affidavit details of additional items in the costs statement which the applicants will not persist with as a result of a review of the costs statement after the assessment. Those items total a further $581.50. The respective amounts of $1,545.25 and $581.50 have been deducted from the total amount of the costs statement. This results in the amount of $89,260.70 that is pursued on this application. [19] On 25 July 2007 the hearing before the Registrar lasted about three hours. The assessment proceeded up to about item 71. A number of items were stood over pending evidence from Mr Pennicott in respect of his diary notes. The duration of the assessment on 26 July 2007 was about two and one-half hours. Again, a number of items were stood over and the assessment proceeded to item 227. Mr Pennicott attended before the Registrar to give evidence in relation to the costs statement on 27 July 2007. He had arranged for copies of the diary notes of his attendances from his file records to be produced and proceeded to give evidence-in-chief in relation to his method of recording attendances upon clients and to give greater detail of the events recorded in the diary notes. The diary notes related to work that was covered by the order for indemnity costs, as well as work that was covered by the order for standard costs. Mr Pennicott’s evidence-in-chief lasted for about three and one-half hours. Mr Lynch then commenced his cross-examination which lasted for about one hour 20 minutes on that day. The assessment then resumed on 30 July 2007. The duration of the further cross-examination of Mr Pennicott on that day was about three and one-half hours. Cross-examination of Mr Pennicott continued on 31 July 2007 for about another one and three-quarter hours. The cross-examination of Mr Pennicott extended to areas that are relevant to items claimed on an indemnity basis, even though the Registrar never assessed any items after item 227. After Mr Pennicott’s evidence was completed, the Registrar heard submissions from Mr Gray and Mr Lynch for a further 20 minutes before adjourning the assessment as part heard. The Registrar did not assess any of the items that had been stood over earlier in the assessment. -- 5 of 15 -- 6 [20] Mr Pennicott gave evidence that the file went to an independent costs assessor to prepare the costs statement and that Mr Pennicott did not personally check it (Assessment Transcript (AT) p 157). Mr Pennicott also said that he did not read the costs statement before attending to give evidence before the Registrar (AT p 168). Mr Pennicott stated that it was the practice of his firm to have a costs statement that had been prepared by an independent costs assessor reviewed by a solicitor in the firm before it was signed on behalf of the firm, although he could not say that was done in this matter (AT p 170). On the hearing of this application, the respondents seek to draw conclusions from this evidence about Mr Pennicott’s credit which I do not consider follow from this evidence. [21] The respondents object to numerous parts of Mr Pennicott’s second affidavit. The affidavit was sworn by Mr Pennicott as the solicitor who had the conduct of the proceeding on behalf of the applicants including the application that resulted in the costs order and the ensuing steps taken by or on behalf of the applicants in an attempt to obtain the benefit of that costs order. Many of the objections to the affidavit assert that identified paragraphs of the affidavit constitute unqualified opinion evidence, swear the issue or constitute secondary evidence of the contents of the costs statement and the notice of objections. Mr Lynch makes much of Mr Pennicott’s evidence before the Registrar that he had never personally appeared on a taxation or assessment of costs during his career as a solicitor (AT p 157). Although in many of the authorities, the Court receives expert opinion on the quantum of the costs sought in a fixed costs order, that does not preclude the Court from receiving evidence in the nature of explanations of work undertaken from the solicitor who acts for the party seeking to pursue a costs order. [22] It is helpful that Mr Pennicott’s second affidavit summarises the outcome of the part heard assessment of the costs statement and the subsequent actions of the applicants in relation to the pursuit of their costs. It is relevant in considering the ambit of the legal work for which costs are claimed to understand the constraints on the applicants’ solicitors that had a direct consequence on the manner in which the legal work was carried out (eg paragraphs 36 and 37 of Mr Pennicott’s second affidavit). Mr Pennicott explains in paragraph 11 of his second affidavit that prior to issuing the memorandum of fees to the applicants, he generally reviewed the amount recorded on his firm’s file and deducted the amount of $5,000 which was about 7.5% of the charges recorded to take account of any inefficiencies in the time charged or in the rendering of the services the subject of the memorandum of fees. That is objected to by the respondents on the basis of irrelevance because the application is concerned only with the claims contained in the costs statement. Information on any adjustments of charges by the applicants’ solicitors is relevant to the issue of whether the Court should exercise its discretion to fix costs. Some of the paragraphs in Mr Pennicott’s second affidavit in respect of the respondents’ objections are in the nature of commentary or submissions. To the extent that they are not evidence, they did not need to be in the affidavit, but the affidavit nevertheless provides a comprehensive, but precise, response to objections made by the respondents to the costs statement and to some matters flagged by Mr Lynch during the cross-examination of Mr Pennicott. I disallow the respondents’ objections to Mr Pennicott’s second affidavit. [23] In making this response to the respondents’ objections to the costs statement, Mr Pennicott categorises the respondents’ objections into 14 categories. Mr Pennicott’s experience as a solicitor qualifies him to do so. It is absurd that the respondents -- 6 of 15 -- 7 object to Mr Pennicott doing so on the basis that it is unqualified opinion evidence. The 14 categories used by Mr Pennicott are: 1. Quantum of counsel’s fees 2. Correspondence of a formal or ordinary nature; alternatively, unit claim excessive 3. Claim is administrative in nature and should be allowed as an unskilled attendance; alternatively, unit claim excessive 4. Perusals of notice of objection and costs incurred in preparing a response, including conferences with counsel, drawing and settling documents 5. Obtaining instructions on a piecemeal basis; alternatively, no need to obtain instructions from the client 6. Photocopy rate to be applied and/or documents not required to be copied 7. Urgency to justify the use of facsimile or email 8. Telephone attendance and other attendances upon counsel or correspondence with counsel 9. Perusal of documents not necessary 10. Time spent in Court is excessive 11. Costs claimed are not costs of the proceeding 12. Claim for photocopying instead of printing and other copy of the document for service 13. Claim for research of case law should not be allowed 14 Miscellaneous [24] The respondents did not file any evidence in connection with the application. The respondents were represented on the application, however, by their solicitor Mr Lynch who also acted as their solicitor and advocate in respect of the application that resulted in the making of the costs order. Mr Lynch has continued to act as the respondents’ solicitor in preparing the notice of objections to the costs statement and on the assessment before the Registrar. Mr Lynch therefore has a detailed knowledge of the application that resulted in the costs order and it is reasonable to infer that Mr Lynch has a good appreciation of the scope of the legal work undertaken on behalf of the applicants that is reflected in the costs order. [25] Mr Pennicott notes in paragraph 78 of the second affidavit that the applicants have never received any offer from the respondents to settle the costs claimed in the costs statement. This application was heard about four months after the assessment before the Registrar adjourned. During the course of the hearing of this application, I inquired of Mr Lynch as to what amount of the costs statement was truly in issue. I had in mind that the respondents would have some idea of the anticipated costs of a three day hotly contested Supreme Court hearing that was prepared over a relatively short period and involved not insignificant documents. Mr Lynch was unable to say what amount the respondents were prepared to pay, as he stated: “But, your Honour, the problem is the evidence of Mr Pennicott doesn’t just go to the standard part of the costs that have been dealt with. It actually goes to some of the indemnity – the balance of the indemnity part of the bill and I must say we have not yet done that exercise in relation to what the effect of that evidence is ----- … but I cannot tell your Honour with confidence as to a figure that my side would say is appropriate. -- 7 of 15 -- 8 I could tell your Honour that once I sought instructions and went through the exercise having looked at Mr Pennicott’s evidence but I haven’t done that, I haven’t had the opportunity to do that so I apologise to that extent but – but there’s no doubt that whilst it’s said that you know few items have been assessed the best evidence before your Honour as to what the likely result of the assessment would be – best evidence or the significant evidence – is what’s happened so far. Now, I do make it plain that we don’t suggest that the same amount of reductions will necessarily be achieved on the indemnity basis but I can’t really do better than that at the present time and the cases are – you know, are divided as to whether a – for instance, a discretionary discount should be applied but certainly, I would agree with your Honour that it would be expedient if some other method were found-----.” (Transcript p 23, 24) [26] Later in the hearing when I expressed disappointment to Mr Lynch that he was unable to tell me what he thought the respondents should be prepared to pay out of the costs claimed of $89,260.70, Mr Lynch responded: “What they’re expecting to pay at the start of the assessment might be slightly different now given what’s occurred. It might be slightly different again given the bringing of this application. So there really is some relevant matters to consider.” (Transcript p37) Applicants’ submissions [27] The applicants rely on what they describe as “the lamentable history of the matter” and compare the respondents’ approach to the assessment of these costs as analogous to the tactics and procedures unsuccessfully adopted by the respondents in meeting their obligations under the order made on 27 May 2003 to pay the applicants’ costs of the tasks given to them by the Court. The applicants summarise the respondents’ tactics in these terms: (a) numerous merely speculative objections are made; (b) no alternative proper quantification is suggested; (c) procedural tactics designed to delay or defeat the proper determination are adopted. [28] Using language found in ChongHerr Investments Ltd v Titan Sandstone Pty Ltd [2007] QCA 278 (ChongHerr) at [6], the applicants describe the issues relating to the assessment of the costs under the costs order as being “of relatively short compass, should require no further trial of evidentiary issues and depend upon matters of broad principle”. [29] The applicants rely on the approach to the assessment for indemnity costs that was taken by the Chief Justice in Bottoms v Reser & Anor (unreported, Cairns SC No 28 of 1998, 29 November 2000) (Bottoms). For the purpose of an assessment of costs on an indemnity basis under r 704 (which is now r 703 after the commencement of the Amendment Rule), the Chief Justice gave the following directions to the Registrar at page 5: “In approaching such an assessment, the Registrar ought to be conscious of the caution of the Vice-Chancellor in EMI that in determining reasonableness, ‘the receiving party will be given the benefit of any doubt’ (see page 74). In other words, considerable -- 8 of 15 -- 9 liberality should ordinarily be extended in assessing reasonableness. That is indeed implicitly recognised by the reference in para B of sub-rule 3 to any costs agreement between a client and the client’s solicitor. It would perhaps be an unusual case where, costs having been agreed in that way, they were then, on this process of assessment, to be excluded as ‘unreasonable.’ Plainly however if they warranted characterisation as outlandish, they ought no doubt nevertheless to be excluded. I emphasise my view that in such an assessment, no niggardly or unduly narrow approach would be warranted. The expectation of parties adopting such a formulation, ‘solicitor and own client’, to be equated with ‘indemnity’, is plainly reflected in those very words. It would be odd, in short, if parties, having agreed upon an indemnity assessment, contemplated the possibility of a Registrar’s substantially cutting back upon the costs to be allowed, thereby leaving the donee of the order bereft of the indemnity envisaged. That is why the ultimate limitation is itself restricted to the unreasonable, but ‘unreasonable’ viewed in the overall context – which invites consideration expressly of the terms of the agreement between the client and the solicitor.” [30] The applicants rely on the Court of Appeal decision in Amos v Monsour Legal Costs Pty Ltd [2007] QCA 235 (Amos) which at [29] referred with approval to the approach of the Chief Justice in Bottoms to the assessment of indemnity costs: “A determination of whether indemnity costs are ‘reasonably incurred’ and ‘of a reasonable amount’ within the meaning of those terms in UCPR r 704(3) will involve a consideration, at the time of the assessment of the costs, of all relevant circumstances pertaining in the particular case. As de Jersey CJ noted in Bottoms v Reser ‘…In such an assessment, no niggardly or unduly narrow approach would be warranted.’ That is because indemnity costs are exceptional and are awarded only for good reason…” (footnotes omitted) [31] The applicants submit that the 14 categories of objection put forward by the respondent could not reasonably be considered serious objections. The applicants rely on the failure of the respondents to promote any contrary estimation of the relevant costs. Ultimately the applicants submit the approach should be to fix the costs on the basis of the costs statement without undue deliberation or evidence about each individual item. Respondents’ submissions [32] The respondents extract from authorities, particularly from the Federal Court of Australia and the New South Wales Supreme Court, a number of statements or matters that they submit may be considered relevant to the exercise of the discretion given to the Court to make a fixed costs or gross sum order. Some of those set out in the respondents’ submissions take their meaning from the context of the particular case. The statements or matters relied on by the respondents of more general application include that: -- 9 of 15 -- 10 (a) the purpose of making a gross sum order is to save the parties the time, trouble, delay and expense and aggravation in protracted litigation arising out of taxation: Leary v Leary [1987] 1 WLR 72, 76 (Leary) and Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 (Beach Petroleum); (b) the specification of a gross sum order is not the result of a process of taxation or assessment of costs: Harrison v Schipp (2002) 54 NSWLR 738, 743, [22] (Harrison); (c) the power to make a gross sum order should be exercised only when the Court considers that it can do so fairly between the parties, and that includes sufficient evidence in arriving at an appropriate sum on the materials available: Wentworth v Wentworth (Court of Appeal (NSW), 21 February 1996, unreported) per Clarke JA and referred to in Harrison at [22]; (d) the gross sum can only be fixed broadly having regard to the information before the Court: Beach Petroleum at 124 and Harrison at [22]; (e) expert evidence analysing the bills of costs and/or giving an opinion about the likely outcome of the taxation has been utilised by the Court in making the gross sum order: Beach Petroleum at 121; (f) the Court should be confident in fixing the amount of the gross fee that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at 123; (g) the power to order gross sum amounts is appropriate to be used in complex cases: Beach Petroleum at 120; (h) the Court must be astute to prevent prejudice to the party ordered to pay the costs by overestimating the costs, but must also be astute not to cause an injustice to the successful party by an arbitrary “failsafe” discount on the cost estimates submitted to the Court: Beach Petroleum at 124; (i) the power to order a gross sum may appropriately be exercised where the assessment of costs would be protracted and expensive, and in particular if it appears that the party obliged to pay the costs would not be able to meet a liability of the order likely to result from the assessment: Hadid v Lenfest Communications Inc [2000] FCA 628 at [25] and Harrison at [21]. [33] Mr Lynch submits that Bottoms does not assist the Court in considering whether to exercise the discretion to order fixed costs on the basis that the statements made by the Chief Justice were as a reference from the Registrar who had embarked upon an assessment of costs where one party had been ordered to pay the other party’s “solicitor and own client” costs. Similarly, Mr Lynch submits that Amos offers no guidance in this matter as that case was concerned with the assessment of indemnity costs undertaken by a Magistrate, rather than the exercise of the power to order fixed costs. Mr Lynch points out that in ChongHerr the Court of Appeal fixed costs after the parties had complied with the regime prescribed by Practice Direction No 3 of 2007 and the parties proposed different amounts for the costs. What was to be resolved was one main dispute about whether the costs of two counsel should be allowed and far less significant issues. It was also a case where the amount claimed by the appellants had been quantified on a standard basis by a qualified costs assessor whose assessment was largely unchallenged. -- 10 of 15 -- 11 [34] The reasons advanced by the respondents to support the refusal to make a fixed costs order can be summarised as: (a) a fixed costs order would deprive the respondents of the benefits accrued by the steps already taken in respect of the assessment of the costs statement; (b) the matters in dispute between the parties on the assessment are not of short compass; (c) there is no independent evidence or analysis to support the costs statement. [35] The respondents rely on the fact that the applicants bear the onus of satisfying the Court that the discretion to make a fixed costs order should be exercised in their favour. The respondents specifically put in issue the reliability of Mr Pennicott’s evidence and opinions for the purpose of assisting the Court in deciding whether or not to exercise the discretion to make a fixed costs order. (As already indicated, however, I found value in Mr Pennicott’s evidence (including that before the Registrar) on the basis that Mr Pennicott was the solicitor who acted on behalf of the applicants on the application that resulted in the costs order.) The law [36] The statements from the authorities that I have taken from the respondents’ submissions and set out above provide guidance on the circumstances where it may be appropriate for the Court to award fixed costs and the process that should be undertaken in doing so. The authorities relied on by the respondents, however, provide many different examples of when the power to order fixed costs is exercised. Beach Petroleum was an extremely complex matter. After a trial lasting nine months, judgment for $44.45m was entered against each of ten respondents. One respondent was ordered to pay the applicants’ costs on a party and party basis and other respondents were ordered to pay costs on an indemnity basis. An expert in costs was retained to draw the bill of costs. After spending eight weeks familiarising himself with the matter, he spent seven weeks dictating a bill of costs, but it covered only the first two months of the trial. The expert then formed the view that the task of drawing a bill for the whole action in taxable form was too great a task. The expert put evidence before the Court to support an estimate for the costs for the balance of the trial. Counsel who appeared in that case for the parties liable for the costs made submissions that pointed to a number of areas where there was a risk of inclusion of excessive items in the bill as prepared and the method of estimation used for the period after the first two months of the trial. Most of those submissions were accepted and had the effect of reducing the sum claimed for indemnity costs by 7½ percent to give a gross fee sum of $8.12m for indemnity costs. Independent evidence of the estimated costs after the first two months of the trial was essential in Beach Petroleum as it was impossible for a bill of costs to be prepared. [37] At the other end of the spectrum are extremely simple cases. In Keen v Telstra Corporation Limited (No 2) [2006] FCA 930 an applicant for judicial review who had been successful before the Federal Court in the review of a decision of the Administrative Appeals Tribunal obtained a fixed costs order. Rares J referred to the statement in Beach Petroleum about the power to order fixed costs being appropriately used in complex cases and then stated at [6] – [7]: -- 11 of 15 -- 12 “6 In my opinion it is also appropriate to be used in cases which are simple and in which there would be utility in the court cutting the Gordian knot of protracted fights about costs which is the hallmark of this particular piece of litigation. It is a commonplace for the court to fix in administrative appeals under the Migration Act 1958 (Cth) and amount of costs for a successful party. 7 In my opinion, it is appropriate that an amount of costs be fixed by the court so as to prevent yet further argument and delay in finalising this matter.” [38] Giles JA in Harrison reviewed a number of authorities and concluded at [21] that the relevant power to order a gross sum for costs was “not confined, and may be exercised whenever the circumstances warrant its exercise.” See also Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788, 812-813 [189]-[199]. The statement made in ChongHerr which is relied on by the applicants does not necessarily apply to the exercise of the discretion to order fixed costs. [39] It is a relevant consideration in determining whether to exercise the power to fix costs that the relevant costs order is substantially for indemnity costs. Even though the statements in Bottoms and Amos that are relied on by the applicants were made in the context of assessing, rather than fixing costs, the principle that there is greater latitude in determining reasonableness of costs on an indemnity basis than on a standard basis and usually only costs that can be characterised as outlandish should be excluded on an indemnity basis may result in the Court being more inclined to fix costs that are claimed on an indemnity basis where it is apparent the costs are not outlandish. The objections [40] In order to determine whether the matters covered by the objections are an impediment to ordering fixed costs, it is necessary to refer in a little more detail to the objections. [41] With respect to category 1, most of counsel’s fees are to be recovered on an indemnity basis. Consistent with Bottoms these fees should be allowed unless a finding can be made that the fees are outlandish. Mr Lynch wishes to inquire into whether it was appropriate in the circumstances for counsel to be briefed and to consider whether there is any evidence that would affect an assessor’s approach to the recoverability of these fees. I have the advantage of having heard the application for which the fees were incurred and do not demur from Mr Pennicott’s selection of a barrister of Mr Sullivan’s experience to appear and do the ancillary work. All the attendances and preparation for which counsel’s fees claimed are itemised by counsel. There is nothing in the material before me that suggests that the applicants’ claim for counsel’s fees that are sought on an indemnity basis is outlandish. The applicants seek counsel’s fees of $3,750 plus GST on a standard basis. The respondents concede $1,800 plus GST. There is an error of $125 in item 21 in the claim for GST on counsel’s fees. [42] Category 2 involves items of correspondence totalling $3,015, of which all but $45 is claimed on an indemnity basis. Category 3 involves attendances which total $583, of which all but $40 is claimed on an indemnity basis. -- 12 of 15 -- 13 [43] In relation to categories 4 and 5, the steps that preceded the hearing of the application for the approval of the applicants’ remuneration and expenses are set out at [11] of the reasons for judgment for the approval of the applicants’ remuneration and expenses. They are expanded upon at [8]-[11] of the reasons for judgment for the costs order. The oppressive and speculative approach of the respondents in that approval application contributed to the manner in which the applicants’ solicitors had to take instructions from the applicants to prepare a response to the notice of objection in order to comply with the directions made by the Court, so that the hearing of the application could commence as scheduled on 2 February 2004. See paragraphs 32, 33, 36 and 37 of Mr Pennicott’s second affidavit. In the circumstances, the complaint by the respondents about the perusals of the notice of objection, the manner in which the applicants gave instructions to their solicitors and the costs incurred in preparing the response to the notice of objection are unsustainable. [44] Category 6 covers photocopying of $1, 102.50 on a standard basis. It is claimed on the Supreme Court Scale which provides for a professional cost and not an outlay. Under the costs agreement which the applicants had with their solicitors, photocopying was to be charged at 20 cents per page. That is an outlay and not a professional cost. I therefore do not see any difficulty with photocopying claimed on a standard basis by the applicants being included in the costs statement at the Supreme Court Scale of Costs rate. [45] Category 7 involves amounts of $136.80. Category 8 covers $3,706.50 claimed for attendances on and correspondence with counsel of which $3,218 is claimed on an indemnity basis. The bulk of those attendances took place in the month preceding and including the hearing of the approval application when the time constraints between the receipt of the notice of objections by the applicants and the hearing of the approval application affected the manner in which the legal work was carried out. [46] Category 9 covers items totalling $433.60 for perusals of documents which the respondents claim were not necessary. The sum of $175 is claimed on the indemnity basis. Category 10 concerns claims for attendances totalling $7,560 in court (including conferences), all of which is claimed on an indemnity basis and much of which was explained during the cross-examination of Mr Pennicott on the assessment. [47] Category 11 covers items totalling $1,142 which are items claimed on the indemnity basis (and which would not be recoverable on the standard basis), but concern work such as drafting a chronology the day before trial for use by counsel which could not be characterised as outlandish. Category 12 concerns a claim for photocopying, rather than printing, another copy of a document which was claimed at 20 cents per page pursuant to the costs agreement, as the claim is on an indemnity basis. Mr Pennicott makes the point in his second affidavit that his firm uses machines which are combined photocopiers and printers. [48] Category 13 covers amounts totalling $1,580 for items for research of case law. These items are claimed on an indemnity basis and do not necessarily relate to aspects of the law that are within the usual knowledge of a solicitor. -- 13 of 15 -- 14 [49] Category 14 covers miscellaneous items totalling $4,987.80. In relation to the items totalling $2,460.40 claimed on the standard basis, one item of $2,000 is for care and consideration. This is always a moot issue on assessments. This application is not an assessment, but items of this nature can easily be dealt with in fixing costs by being subject to an overall discount. [50] The reasons for which the Registrar disallowed or reduced items on the assessment suggest that a consideration of the balance of the items claimed on a standard basis would result in a similar rate of disallowance or reduction or, alternatively, suggest that application of a similar rate of disallowance or reduction would not, on a broad brush approach, be particularly unfair to either party. The objections, however, are primarily directed at costs sought on an indemnity basis. It is not apparent from an overview of the categories of objections, as they relate to costs claimed on an indemnity basis, that the respondents would achieve substantial deductions to that part of the claim for costs. Whether history of the application that resulted in the costs order is relevant [51] Whereas the applicants sought to rely on the conduct of the respondents in the application that resulted in the costs order, in addition to the respondents’ approach to the assessment of the costs under the costs order, the respondents submitted that the only relevant evidence was the history of the assessment. The respondents are wrong in this submission. The Court is entitled to consider all the circumstances that could have a bearing on whether or not the discretion to fix costs should be exercised: Harrison at [21]. The Court is not restricted to material that would be relied on at an assessment of costs. It is not irrelevant that there are similarities between the approach of the respondents on the application for approval of the applicants’ costs and remuneration which was largely unsuccessful and the approach of the respondents to the calculations of the costs under the costs order. Whether the discretion to order fixed costs should be exercised [52] The respondents rely on the fact that there is no evidence before the Court that the respondents are unable to meet their liability under the costs order. Although such inability may favour the fixing of costs to avoid the incurring of further costs that will prove unrecoverable on an assessment, it is not a factor that must be present before the discretion to order fixed costs can be exercised. [53] The applicants were appointed by the Court on 27 May 2003 as independent accountants to perform a task which was likely to be the basis for further action concerning the managed investment schemes that were the subject of the order. The applicants were required by the Court to perform that task in a relatively short period of time. The order appointing the applicants was made on the basis of an undertaking by the respondents to meet the costs and expenses of the applicants in carrying out that task. The applicants had to pursue the approval of their remuneration and expenses against unreasonable objections from the respondents. The respondents are putting up the same unrelenting opposition to the quantification of the applicants’ costs of the approval application. This is a compelling factor for exercising the discretion to fix the costs. [54] In the circumstances, even though the respondents were not required by any practice direction or rule of court to disclose or offer an amount they were prepared to pay under the costs order, the failure of the respondents to do so adds weight to the -- 14 of 15 -- 15 desirability of the Court bringing to an immediate conclusion the quantification of the costs under the costs order. [55] Although the objections are numerous, the above survey of the categories of objection does not suggest that they should prevent the fixing of the costs. [56] Although the assessment commenced before the Registrar, its progress was far from satisfactory in that very little progress was made over the five days of hearing. To the extent that the Registrar ruled on particular items, those are conceded by the applicants (as are like items) and the respondents will not lose the small benefit obtained from this aspect of the assessment hearing. [57] I am satisfied that the costs statement and the evidence of Mr Pennicott (given at the assessment before the Registrar and in his second affidavit) provide sufficient information for fixing the costs, particularly as the substantial proportion of the costs are on an indemnity basis, and that the costs can be fixed fairly between the parties. In the circumstances, it is appropriate to proceed without any expert evidence from an independent costs expert. [58] The factors overwhelmingly favour exercising the discretion to fix the costs under the costs order. Quantum of fixed costs [59] The items in the claim for standard costs remaining to be assessed total $6,944 (after deducting from the total standard costs claim of $13,206.55 the disallowed and conceded costs of $1,545.25, the allowed costs of $2,109.80 and the costs not objected to of $2,607.50). It is reasonable and logical to apply the same factor that reflects the proportionate amount of deductions made by the Registrar on the assessment, ie 25% ($1,736). That notionally makes the figure for standard costs an amount of $9,925. [60] The reasons for which the Registrar disallowed items in assessing the costs on a standard basis do not apply to those items claimed as indemnity costs. [61] Applying Bottoms, the respondents could not have realistically expected much by way of deductions to the claim for indemnity costs, even considering the large number of objections. The hearing before the Registrar suggests the prudence of allowing a small margin for the occasional error. I will therefore round down the claim for indemnity costs which stand at $77,599.40 to an amount of $74,000. In round terms, that results in fixing the combined amount of standard and indemnity costs at $84,000. Orders [62] The order that I will make is: That the costs the respondents were ordered to pay to GM Moloney and PIF Geroff by order made on 7 September 2004 in this proceeding be fixed in the amount of $84,000. [63] It now remains to deal with the costs of this application. Both parties foreshadowed that submissions would be made on the appropriate order to dispose of the costs of this application, after the outcome of the application was known. I will therefore deal with costs after those submissions. -- 15 of 15 --