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An example of when the Federal Court awards costs on a lump sum basis

Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2014] FCA 346 (4 April 2014) is a recent case in which our own costs lawyer, Mike Dudman, provided expert evidence.

The Applicant sought a lump sum costs order in the amount arrived at by Blackstone Legal Costing, in the amount of $729,223.98. Foster J stated that:

In his affidavit, which is comprehensive and very detailed, Mr Dudman explained his approach to the assessment which he made. It appears to me to be fair, logical, rational and reasonable… I see no reason not to accept it.

A lump sum order was made in the present case pursuant to a consideration of the following factors:

(a) Rule 40.02(b) of the Federal Court Rules 2011 provides for the award of a lump sum costs order in appropriate circumstances. That rule gives to the Court a broad discretion which should be exercised whenever the circumstances warrant it (see Dunstan v Human Rights and Equal Opportunity Commission (No. 3) [2006] FCA 916 at [23]; Black and Decker Inc v GMCA Pty Limited (No. 4) (2008) FCA 1737 at [3]; and Playcorp Group of Companies Pty Limited v Peter Bodum A/S (No. 2) (2010) FCA 455 at [3]).

(b) The Court should not be slow to exercise the relevant discretion in an appropriate case.

(c) Any exercise of the discretion to make a lump sum costs order should reflect the overarching principle embodied in s 37M and s 37N of the Federal Court of Australia Act 1976 (Cth). The discretion should be exercised logically, fairly and reasonably (see Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 at 120F and 123C; Ginos Engineers Pty Limited v Autodesk Australia Pty Limited[2008] FCA 1051; (2008) 249 ALR 371 at 377 [22]; and Sony Entertainment (Australia) Limited v Smith [2005] FCA 228; (2005) 215 ALR 788 at 813 [198]and [199]).

(d) The rule serves to avoid the expense, delay and aggravation involved in a formal taxation of costs and associated litigation. In particular, in cases where the incurring of additional costs in taxing bills would result in an additional burden on the successful party, there is strong reason for making a lump sum costs order. A relevant factor in favour of a lump sum costs order will often be that the party against whom the order is sought is in financial difficulties with the consequence that the prospects of the successful party recovering its costs of taxation are poor (Bitek Pty Limited v IConnect Pty Limited [2012] FCA 506; (2012) 290 ALR 288 at 292 [15] per Kenny J).

(e) 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.

(f) The fact that the making of such an order may cause hardship on the party against whom the order is made is not relevant.

(g) 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.

After excluding costs associated with the Applicant’s earlier unsuccessful Mareva application, acknowledged by Mr Dudman in his affidavit as being costs of the Applicant payable to the Second and Fourth Respondents, costs of the proceedings were awarded in a lump sum, instead of being taxed, in the amount of $715,000.00.

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