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What wording in a costs order is required to ensure costs are not taxed via the Federal Court, but under the jurisdiction of a state or territory under Part 40 of the Federal Court Rules 2011?

Hypoct Pty Ltd v Mesh & Bar Pty Ltd [2013] FCA 207 (12 March 2013)

Justice Edmonds

The Applicant, Hypoct Pty Ltd, had sought to rely on a costs order obtained in Federal Court to have its costs assessed by the costs assessment regime under the law of New South Wales under the auspices of the Supreme Court of NSW.

When the Manager Costs Assessments of the Supreme Court of NSW refused to assess the party/party bill of costs, the applicant made an interlocutory application to vary a costs order (made by consent on 29 February 2012 and entered on 1 March 2012) which simply prescribed that:

The Respondent/Cross-Claimant pay the costs of the Applicant/Cross-Respondent on the party/party basis as agreed or assessed

The variation sought was the addition of the following words after the word “assessed”:

…by reference to the cost assessment scheme operating under the law of New South Wales.

 

 

Reason variation sought

 

Manager Costs Assessments within the Supreme Court of New South Wales refused to assess the party/party bill of costs lodged by the applicant for assessment unless a “more specific order” warranting the assessment was provided.

While the Applicant relied on Note 2 to Federal Court Rules 2011 r 40.02 noting: “The Court may order that the costs be determined by reference to a cost assessment scheme operating under the law of a State or Territory”, the Manager Costs Assessments reasoned that the Federal Court costs order did not specify that costs are to be assessed under the NSW scheme or legislation.

 

 

Reasons for dismissal of variation application

 

The interlocutory application to vary the costs order was dismissed for the following reasons:

  • None of the heads of power under Rule 39.05, allowing variation of an order after it has been entered, seemed to support the variation sought.

  • The Applicant was aware from at least 28 February 2012 that the Respondent believed that the matter had settled on the basis that the costs would be determined in accordance with the Federal Court’s taxation scheme and not by the NSW costs assessment scheme.

  • The Applicant did not disclose to the Respondents its intention (to execute the Costs Order, in default of agreement as to costs, by lodging a party/party bill of costs for assessment under the NSW cost assessment scheme rather than having a party/party bill of costs taxed in accordance with Part 40 of the Federal Court Rules) until 25 June 2012 when the Applicant’s solicitors delivered to the Respondent’s solicitors a copy of an application for  costs assessment under the scheme operating under the law of NSW.

  • In communications with the Respondents, the Applicants did not:
  • refer to the NSW  costs assessment scheme either explicitly or implicitly;
  • indicate to the Respondent that the latter’s proposed orders of 28 February 2012 were unsuitable because they referred to the costs being “taxed…in accordance with Division 40.2 of the Federal Court Rules” as opposed to “costs…as assessed”; or
  • inform the Respondent that the intention of the Applicant’s proposed order (which was consented to by the Respondent on 29 February 2012) was to invoke the Supreme Court  costs assessment scheme noted in Note 2 to Rule 40.02 of the Federal Court Rules.

  • Edmonds J emphasised that had the Applicant disclosed its intention prior to the time the Costs Order was made,
  • the Respondent would likely not have consented to the Costs Order being made, and
  • the Court would not have made the Costs Order; or any order other than one which made it clear that, in default of agreement as to costs, the applicant’s costs be taxed in accordance with the Court’s scheme of taxation, particularly as both parties are Queensland based.

  • The conduct of the Applicant was found to be not misleading or deceptive but “devoid of the transparency that one should expect to be present in dealings and communications with the respondent and its solicitors, particularly where the Court was subsequently asked to make consensual orders to give effect to the parties’ agreement.”

Importance of this case from a costs perspective

Justice Edmonds explained the following:

A Federal Court Order that simply states that costs are to be paid on a party/party basis as agreed or assessed, “does not authorise or require, in default of agreement of the parties, that the costs … should be determined otherwise than by taxation in accordance with Division 40.2 of the Federal Court Rules”.

“More is required than the mere use of the word “assessed” if the order is to mandate a determination of costs otherwise than by the system of taxation provided for under those Rules.”

“One would expect recourse, in the text of the order, to the provisions of the Federal Court Rules, in particular Rule 40.02(c), such that the order read:

…as agreed or determined otherwise than by taxation namely, as assessed under the cost assessment scheme operating under the law of the State of New South Wales.”

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