Wednesday, 23 July 2008

Federal Court: Federal Magistrates Court CAN order lump sum costs

Whenever costs are ordered in the Federal Magistrates Court, the most common way in which they are ordered is by way of a lump sum- for example: "The respondent pay to the applicant the sum of $1000 costs."

The Federal Court in Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd had to decide whether or not the Federal Magistrates Court had the power to make lump sum costs orders.

The good news is that the Federal Court said that the Federal Magistrates Court did have the power to make lump sum costs orders.

In Ginos Engineers v Autodesk, an intellectual property case, Justice Finn said that it was appropriate in that case to have awarded costs on a lump sum instead of a taxed basis and that:

Rules of Court such as r 21.02(2)(a) of the FMC Rules and O 62 r 4(2)(c) of the Federal Court Rules, which empower a court to order a gross amount in costs instead of an amount determined after taxation, are well accepted as being directed to the avoidance of expense, delay and the protraction of litigation, whether the case be a complex or a simple one...

It is not uncommon, particularly, but not only, in intellectual property cases, for the court to take as its starting point the evidence of the charges for professional costs incurred and disbursements made by the lawyers of the party awarded costs – and this irrespective of whether the costs are to be estimated on an indemnity basis: cf Beach Petroleum NL at 120; or on a party and party basis: cf Universal Music Australia Pty Ltd v Miyamoto [2003] FCA 812 at [29] ff. That figure is then characteristically adjusted to take account of the acceptability of the charges made, the conduct of the proceeding, the measure of success on issues etc, to produce a sum which as a matter of judgment is neither overcompensatory nor prejudicial to the successful party. Consistent with the broad brush approach, that adjustment ordinarily is effected through the application of a discount to the figure accepted by the court on the available evidence as appropriately reflecting actual professional costs charged and disbursements made. The case law evidences wide variations in the percentages of discount sought and/or applied to reflect the exigencies of the matter in question: cf Sony Entertainment (Australia), 60%; Beach Petroleum NL, 39%, Nine Films & Television, 23%. What is clear is that a lump sum award may be in an amount that is greater or smaller than would have been the taxed costs payable...

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