Re Dalrymple Holdings Pty Ltd and Milglade Pty Ltd v Martin Andrew Gohl; Wendy Gohl; O'Kelly Holdings Pty Ltd; Clive Vincent O'Kelly; and Sandra O'Kelly [1991] FCA 489; (1991) 34 FCR 397 (24 October 1991)

FEDERAL COURT OF AUSTRALIA

Re: DALRYMPLE HOLDINGS PTY LTD and MILGLADE PTY LTD
And: MARTIN ANDREW GOHL; WENDY GOHL; O'KELLY HOLDINGS PTY LTD; CLIVE VINCENT
O'KELLY; and SANDRA O'KELLY
No. Q G290 of 1988
FED No. 922
Costs
[1991] FCA 489; (1991) 34 FCR 397

COURT

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Spender J.(1)

CATCHWORDS

Costs - determination by taxing master that applicant could not be heard on taxation as applicant did not object to bill of costs as required by O. 62 r. 41 - bill patently excessive - decision to allow bill as filed without exercising discretion - whether interlocutory proceeding or final - recommendation to Attorney-General to grant ex gratia payment of applicant's costs of the review.

Federal Court Rules O. 62, rr. 3, 11, 19. 21, 22, 36, 41, 42, 43, 44.

HEARING

BRISBANE
24:10:1991

Counsel for the Applicant: Mr A.J.H. Morris instructed by

Feez Ruthning

Counsel for the Respondent: Mr P. E. Hack instructed by Lees
Marshall and Warnick

ORDER

1. The decisions of Deputy District Registrar Allen of 17 September that the second, third and fourth respondents could not be heard on a taxation of the applicant's costs and that the bill of costs be allowed as filed be set aside.

2. The second, third and fourth respondents pay the costs of the proceedings before Deputy District Registrar Allen.

3. There be no order as to the costs of the notice of motion.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

There is before me a notice of motion which seeks orders that the decisions of Deputy District Registrar Allen ("the taxing officer") made on 17 September 1991 (wherein he determined that the second, third and fourth respondents in the principal proceedings could not be heard on a taxation of the applicant's costs on the ground that they had not objected on notice to the bill of costs filed by the applicants and that the bill of costs filed by the applicants be allowed as filed) be reviewed pursuant to O.62 r.11 of the Federal Court Rules, that the respondents be granted leave nunc pro tunc to file and serve notice of objections to the bill of costs delivered by the applicants, that the decision of Deputy District Registrar Allen to allow the bill of costs as delivered be set aside, and that the matter be remitted to the taxing officer to hear and determine the respondents' objections to the applicant's bill of costs.

2. The notice of motion raises a point as to the proper course to be followed by a Registrar on a taxation in the absence of written notices of objection.

3. In the principal proceedings, which were instituted on 26 August 1988, the applicants seek orders for damages against all respondents pursuant, inter alia, to s.52 of the Trade Practices Act 1974, or for fraudulent or negligent misrepresentation.

4. The claim arises from the sale of a boarding house, known as "Linden Lodge", by the first respondents to the first applicant in April 1987. The applicants assert that they entered into the contract to purchase the boarding house and land for a consideration of $170,000 on the basis of certain oral and written representations made by the second respondent, which was the real estate agent in respect of the sale, and its alleged agents, the third and fourth respondents.

5. Initial pleadings were filed and served in late 1988 and substantial discovery was given in early 1989. Affidavits of evidence were provided by the applicants in May and June 1989, and by the second, third and fourth respondents in August 1989 and further affidavits in response were provided by the applicants in late 1989.

6. On 13 August 1990 by consent of the parties a "without prejudice" mediation conference was held before Pincus J. It emerged at the mediation conference that the property "Linden Lodge" was now the subject of a contract of sale, which was due to settle in November 1990 for a consideration of $410,000. It was said by Mr Neil Sadler, a member of the firm of Lees Marshall and Warnick, the solicitors for the second, third and fourth respondents, that his firm had not been advised of the sale by the solicitors for the applicants and no discovery had been given in relation to the sale.

7. On the same date a directions hearing was held and Pincus J. ordered that there should be a preliminary determination of two issues relevant to the proceedings and he ordered that discovery should be given of documents relating to the sale. The two issues which his Honour ordered to be determined were whether a document which was provided to the agents for the first applicant at the time of the contract included projections as to income as well as a summary of expenses and whether the document was provided to the first applicant's representatives prior to or after the execution of the contract.

8. The hearing of the preliminary issues proceeded before me on 1 November 1990, and I determined the preliminary issues in favour of the applicants and published my reasons for judgment on 22 November 1990. On that day I ordered that:

"(1) The applicants' costs thrown away by the amendments
to the defence of the second, third and fourth
respondents be paid by the second, third and fourth
respondents on a solicitor/client basis.
(2) Otherwise the second, third and fourth respondents
are to pay the costs of the applicants in respect of
the hearing and determination of the preliminary
issues, including the costs reserved by Pincus J. on
13 August 1990."

9. A bill of costs was delivered by the applicant's solicitors on 18 June 1991, and on 9 July 1991 Mr Sadler was given notice of the date fixed for taxation of the bill.

10. I should interpolate at this stage to say that no attention was given in the notice of motion, nor indeed before the taxing officer to the significance of O.62 r.3. Rule 3 provides:

"(1) The court may in any proceeding exercise its powers
and discretions as to costs at any stage of the
proceeding or after the conclusion of the
proceeding.
(2) Where the Court makes an order in any proceeding for
the payment of costs the Court may require that the
costs be paid forthwith notwithstanding that the
proceeding is not concluded.
(3) An order for costs of an interlocutory proceeding
shall not, unless the Court otherwise orders,
entitle a party to have a bill of costs taxed until
the principal proceeding in which the interlocutory
order was made is concluded or further order."

11. My present impression is that the proceedings before me for the hearing of the preliminary issues were interlocutory: that is, the order made did not finally dispose of the rights of the parties. In Licul v. Corney [1976] HCA 6; (1976) 50 ALJR 439 at 443 Mr Justice Gibbs said:

"The distinction between final and interlocutory judgments
is not always easy to draw and there has been disagreement
as to the test by which the question whether a judgment is
final or interlocutory is to be determined. One view which
was preferred by the Court of Appeal in Salter Rex and Co. v.
Ghosh, (1971) 2 QB 597 is that the test depends on the
nature of the application made to the Court. The other view
which, since Hall v. Nominal Defendant [1966] HCA 36; (1966), 117 CLR
423, should, I think, be regarded as established in
Australia, depends on the nature of the order made; the test
is: Does the judgment or order, as made, finally dispose of
the rights of the parties?"

(And see also Port of Melbourne Authority v. Anshkun Proprietary Limited (1980) 147 CLR 35 and Carr v. Finance Corporation of Australia Limited [1981] HCA 20; (1981) 147 CLR 246.)

12. However, the matter not having been adverted to in the notice of motion, nor before the Registrar, nor, it appears, in correspondence or communications between the solicitors prior to this matter, counsel for the respondents to the motion was not in a position to make submissions in respect of the question of whether there was jurisdiction in the Registrar to entertain the taxation of the bill of costs.

13. While my tentative view, in the absence of submissions from the respondents to the motion, is that there was no entitlement in the applicants in the principal proceedings to have a bill of costs taxed in respect of the hearing of the preliminary issues, it is unnecessary to decide that question of jurisdiction.

14. On 9 July 1991, the solicitors for the second, third and fourth respondents were advised that the date fixed for the taxation of the bill was 23 August 1991 at 10.15 a.m. On 22 August 1991 Mr Sadler received a phone call from the District Registrar who advised him that the taxation had to be adjourned. In a later telephone conversation with a solicitor of the firm of Feez Ruthning, the solicitors for the applicants, Mr Sadler was advised that the taxation had been adjourned to 9 September 1991. That date was inconvenient to Mr Sadler and he sought the consent of Feez Ruthning for an adjournment and wrote to the District Registrar on 23 August seeking an adjournment. The Registrar subsequently advised that the matter would be listed for 10.30 a.m. on 12 September 1991 and he would notify Feez Ruthning of that adjournment. A further letter of 6 September 1991 from the District Registrar advised of a further adjournment of the taxation until 10.30 a.m. on 17 September 1991.

15. Mr Sadler says that after being served with the bill of costs, prior to the initial date for taxation, he had perused the bill of costs and was concerned with the number of items which had been claimed for the period prior to 23 August 1990, which was the date on which Mr Justice Pincus had made an order for determination of the preliminary issues. Mr Sadler says that the bill contained a number of categories of items which appear to be improperly claimed, and his affidavit lists a large number of items which appear to relate substantially to aspects of the litigation other than the determination of the preliminary issues and the costs reserved by Mr Justice Pincus. Mr Sadler discussed the matter with Mr Fred Monsour of Monsour Legal Costing and formed the intention to apply to have the bill of costs struck out at the time of taxation as an abuse of process and for the applicants to deliver a proper bill of costs.

16. Mr Sadler says he was not aware of any rule of the Federal Court requiring written notice of objection to be served prior to taxation. The requirement for written objections is provided for in O.62 r.41, which provides:

"(1) An appointment to tax a bill of costs shall be given
to a party filing a bill of costs for taxation and
such appointment shall be endorsed on the bill prior
to it being served on all parties to the taxation.
(2) Service of the bill shall be effected in accordance
with Order 7 rule 4 at least 10 days prior to the
date of taxation.
(3) A party on whom a bill is served may by notice
object to any item in the bill.
(4) The notice shall list each item or part thereof in
the bill which is objected to and shall also state
shortly but specifically the nature and grounds of
objection to each item or part objected to.
(5) The notice shall be filed and served on the party in
whose favour the bill is to be taxed and on any
other interested party not less than 2 clear days
before the day appointed for taxing the bill.
(6) On taxation of the bill any item not objected to
may, at the discretion of the taxing officer, be
allowed.
(7) The taxing officer may tax the costs of the
objections and add them to, or deduct them from, any
sum payable by or to a party to the taxation."

17. Of primary significance in the present notice of motion is O.62 r.41(6) which clearly gives a discretion to the taxing officer, in respect of an item to which no objection has been made, to allow that item.

18. Order 62 r. 42, provides a mechanism by which a party may object to a decision of the taxing officer to allow or disallow any item in a bill of costs. I am told from the bar table that objections based on O.62 r.42, have been lodged with the taxing officer and reconsideration has been sought.

19. Order 62 r.19 provides:

"On every taxation the taxing officer shall allow all such
costs charges and expenses as appear to him to have been
necessary or proper for the attainment of justice or for
maintaining or defending the rights of a party, but, except
as against the party who incurred them, costs shall not be
allowed which appear to the taxing officer to have been
incurred or increased -
(a) through over-caution, negligence or misconduct;
(b) by payment of special fees to counsel or special
charges or expenses to witnesses or other persons;
or
(c) by other unusual expenses."

20. It is necessary to turn in some detail to what occurred before the taxing officer on 17 September 1991. An account of those events is deposed to by Mr Sadler in his affidavit and no challenge has been made to that affidavit, nor any affidavit material filed in contradiction to it.

21. Mr Sadler says that he attended at the taxation on 17 September 1991 on behalf of the respondents to the principal proceedings and a Ms Harrip attended, together with a Mr Murphy, for the applicant. As to what then occurred, Mr Sadler deposes:

"28. Mr Allen did not ask for appearances. He asked who
was opposing the bill and I told him I was. He then
said words to the effect that as no Notice of
Objection had been filed I was not entitled to be
heard on the bill. He asked me why I considered I
was entitled to be heard and I told him that if
there was a requirement to file Notices of Objection
prior to the taxation this was a procedural
requirement only and the Applicant's Solicitors were
well aware that the bill was objected to. (Ms.
Harrip arrived at the taxation with 3 large boxes
which I assume contained her clients' file). Indeed
I pointed out to Mr Allen that the taxation had
already been adjourned twice and when I had spoken
to the Registrar previously he had not stated that
any Notices of Objection needed to be filed.
29. Mr Allen then indicated that notwithstanding what I
had said he intended to allow the bill in full and
proceeded to sign the back of the bill endorsing it
for the full amount. It appeared to me that the
Bill did not have attached to it any computer slips,
adding machine slips, working papers, or original or
copy receipts or accounts. I was unable to see
whether the Bill contained an endorsement by way of
a Certificate by a Solicitor verifying the additions
in it.
30. I then stated that I had a preliminary objection to
the bill in any event as the only costs recoverable
were those relating to the hearing determination of
the preliminary issues. No costs prior to the date
when Justice Pincus made the order for the
preliminary hearing could possibly be allowed as
either costs of the hearing or costs thrown away by
the need to re-plead. I told him that these costs
amounted to about 80% of the bill.
31. Ms. Harrip then conceded that there were no costs
thrown away by the need to re-plead but stated that
there was ample authority to the effect that where
orders are made that the costs of determination of
issues be paid by one party it was possible to
dissect items of work that had been done and to
claim part of those costs.
32. At this point Mr Allen suggested the matter be
adjourned at my client's cost.
33. I said that, in the circumstances, I would have to
agree to this course.
34. After obtaining instructions from her client Ms.
Harrip objected to any adjournment on the basis of
the length of time it had taken to bring the bill to
taxation and the costs and expense to which her
client had been put in the action. Mr Allen then
indicated that he would not allow an adjournment.
35. I then requested a short abridgment of time to
enable me to prepare written Notices of Objection.
He stated that he might be prepared to allow me to
do this but only in relation to those items before
the Order had been made for the hearing of the
preliminary issues.
36. Mr Allen said either at this point or earlier that
he had not read the file and did not really
understand what the action was about.
37. I then attempted to explain to him the reasons why
Mr. Justice Pincus thought it was necessary to have
the preliminary hearing and why the costs of the
preliminary hearing were distinct from the costs of
the action as a whole.
38. Ms. Harrip then reiterated her opposition to any
adjournment or standing down of the matter stating
that fraud had been proved against my client and
that the issue of liability had effectively been
determined. She also again reiterated the expense
and trouble her client had been put to in
instituting and conducting the proceedings.
39. I then attempted to explain to Mr Allen that I did
not accept what Ms. Harrip had said. I told him
that the issue of liability had not been determined
and that our case had always been that leaving aside
the question of whether the representations had been
made, no loss could be proved having regard to the
fact that the property was subsequently resold for
$410,000.00 or, alternatively, that there was no
causation between the representations and any
alleged loss. At this point Mr Allen said he was
not interested in hearing from me further and
confirmed that he intended to allow the bill in
full. He stated that there had already been enough
delay and if we wished to object to the bill we
should take it up by way of review of the taxation.
He then left the room."

22. The review is sought under O.62 r.11 which provides:

"Every taxation of costs and every decision of a taxing
officer shall be subject to review by a judge."

This rule confers ample power upon the court to review a decision of a taxing officer. (Jet Corporation of Australia Pty Limited v. Petras Proprietary Limited (1985) 10 FCR 289 at 293).

23. While the facts of Jet Corporation are quite different from the present, that case does emphasise the duty of the taxing officer to attend to the requirements of natural justice. The present review, like Jet Corporation, is not brought pursuant to the provisions of O.62 rr.42-44, but is brought pursuant to O.62 r.11. I do not have the benefit of any reasons in writing by the Registrar, but what occurred before him is the subject of affidavit material to which no objection has been taken.

24. I have already expressed my tentative view that there was no jurisdiction in the taxation officer to embark on the taxation of the time which he did, having regard to the provisions of O.62 r.3(3). But, if there was an entitlement to have the bill taxed, it seems to me that there are two errors of principle which have been demonstrated.

25. Firstly, the taxing officer seems to have taken the view that without written objection he has no option but to allow the bill as delivered. In my opinion, this is plainly wrong as there remains a discretion to be exercised by him and I refer in particular to O.62 rr.19, 21, 22 and 36(2). In the absence of objection a taxing officer is in error if he proceeds on the basis that in the absence of a written objection the proper course is to allow the bill in full without turning his mind to the bill or any of the component items at all.

26. The error of such an approach is made plain in the present case by the fact that the taxing officer allowed in full item 1183 in the bill of costs in the sum of $790, which was an estimate of ten hours for attending on taxation when in fact the taxation appointment on 17 September 1991 occupied no more than 15 minutes.

27. Secondly, it seems to me that the taxing officer is obliged to observe the principles of natural justice and in refusing to hear from Mr Sadler he failed to accord natural justice to the second, third, and fourth respondents. If there was any embarrassment by the want of written objections, it may be that the proper course would have been to grant an adjournment on terms as to costs. But, pre-emptorily to deny a party the right to be heard offends the requirements of natural justice.

28. If there were jurisdiction in the taxation officer to entertain the bill for taxation, I would set aside the decisions by Deputy Registrar Allen that in the absence of written notice of objection a party cannot be heard on taxation, and in the absence of written objection there was no alternative to the taxing officer but to allow the bill of taxation in full.

29. On the hearing of this notice of motion Mr Morris, counsel for the respondents to the motion (the applicants in the principal proceedings), did not seek to maintain the validity of the approach by the taxing officer and indicated that it was not his clients' present intention to proceed further at this stage to tax the costs that I ordered to be paid to his clients on 22 November 1990. He indicated that it was his clients' wish that the principal proceedings proceed as quickly as possible, and to that end sought directions from me. In the light of that course, Mr Hack, counsel for the applicants on the motion (the second, third and fourth respondents in the principal proceedings) agreed that from his clients' point of view, accepting the intimation by Mr Morris as to the question of taxation, that the matter could be set down for trial. Having heard counsel, I direct the Registrar to set the principal proceedings down for trial for three days, after consulting with the solicitors for the parties as to the availability of witnesses and counsel.

30. It seems to me that the second, third and fourth respondents should pay the costs of the proceedings before Deputy District Registrar Allen.

31. The question of the costs of the review before me is more difficult. The second, third and fourth respondents in the principal proceedings have been successful in that review. The respondents to the motion did not, before me, seek to uphold the correctness of the course adopted by the taxing officer. However that attitude was not communicated to the solicitors for the applicants on the motion until this morning. The question of the jurisdiction of the taxing officer to entertain the taxation of a bill of costs, having regard to the provisions of O.62 r.3(3) appears to have been raised for the first time between the parties shortly before the matter was called on this morning, and in those circumstances counsel for the respondents to the motion indicated that he was not able to make submissions in that regard in the absence of an adjournment. The matter was not adjourned and the question of jurisdiction is academic.

32. It is true that the solicitors for the respondents to the motion opposed the adjournment of the taxation which was sought by solicitors for the second, third and fourth respondents, but it does not appear that the solicitors for the applicants adopted the view of the taxing officer that in the absence of written objections they were entitled to the bill of taxation allowed in full. It seems to me that the costs of the review have been occasioned by error on the part of the taxing officer.

33. A review pursuant to O.62 r.11 is not a Federal appeal within the meaning of the Federal Proceedings (Costs) Act 1981 and there is no power to grant a costs certificate in respect of the appeal. I have considered what would be a fair order in respect of costs, and it seems to me that I ought make no order as to costs on the hearing of the notice of motion.

34. However, I earnestly urge the Attorney-General for the Commonwealth of Australia to consider the grant of an ex gratia payment to the applicants on the motion for the costs incurred by them on the notice of motion. The review of decisions made by the taxing officer involve matters of importance which touch upon the way the court and its taxing function should properly operate and extends well beyond the subjective interests of the parties to the present litigation and the review was a matter which has a wide public interest aspect. It would not be right if the applicants on the notice of motion were left to pay their costs of the motion whose principal object has been the correction of an erroneous approach adopted by the taxing officer.

35. I set aside the decisions of Deputy District Registrar Allen made on 17 September wherein he determined that the second, third and fourth respondents could not be heard on the taxation of the applicant's costs and his decision that the bill of costs filed by the applicants be allowed as filed.

36. It is unnecessary to deal with the further orders sought by the notice of motion in the light of the indication by counsel for the applicants that the taxation of the costs ordered by me on 22 November 1990 to be paid will not be prosecuted until the conclusion of the principal proceedings.