BC Galleries (Vic) Pty Ltd v Commonwealth of Australia
[2013] FMCA 44
•31 January 2013
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BC GALLERIES (VIC) PTY LTD v COMMONWEALTH OF AUSTRALIA | [2013] FMCA 44 |
| ADMINISTRATIVE LAW – Protection of Movable Cultural Heritage Act 1986 – forfeiture – costs ordered in favour of Applicant – Calderbank letters – indemnity costs refused – party/party costs calculated as lump sum under Sch.1 to Federal Magistrates Court Rules as agreed. |
| Federal Court Rules 2011, rr. 25.01, 25.14 Federal Magistrates Court Rules 2001, rr.1.05, 21.10, Sched. 1, Sched.3 Protection of Movable Cultural Heritage Act 1986, s.37 |
| BC Galleries (Vic) Pty Ltd v Commonwealth of Australia [2012] FMCA 742 Brymount Pty Limited t/a Watson Toyota v Cummins & Anor Young Shire Council v Cummins & Anor (No 2) [2005] NSWCA 69 Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd (No 2) [2004] FCA 1212 John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 Piersons Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No.3) [2010] FMCA 250 Pirrotta v Citibank Ltd (1998) SASC 6922 Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1987) 62 ALJR 148 Ritter v Godfrey [1920] 2 KB 47 Staples Waste Removals Pty Ltd v Arev Computer Centre Pty Ltd & Ors (No.3) [2012] FMCA 418 |
| Applicant: | BC GALLERIES (VIC) PTY LTD (ACN 126 415 865) |
| Respondent: | COMMONWEALTH OF AUSTRALIA |
| File Number: | MLG 1481 of 2010 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 1 June 2012 |
| Date of Last Submission: | 21 September 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 31 January 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr M Gronow |
| Solicitors for the Applicant: | Logie-Smith Lanyon Lawyers |
| Counsel for the Respondent: | Mr Dillon |
| Solicitors for the Respondent: | Australian Government Solicitor |
ORDERS
The Respondent pay the Applicant’s costs in accordance with Schedule 1 of the Federal Magistrates Court Rules 2001 as agreed, and failing agreement, as assessed by the Court.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1481 of 2010
| BC GALLERIES (VIC) PTY LTD (ACN 126 415 865) |
Applicant
And
| COMMONWEALTH OF AUSTRALIA |
Respondent
REASONS FOR JUDGMENT
The Applicant seeks orders for costs following its successful proceedings leading to the judgment in BC Galleries (Vic) Pty Ltd v Commonwealth of Australia [2012] FMCA 742.
As is accepted by the parties it is settled practice that in the ordinary course costs should follow the event, as was said by Toohey J in Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1987) 62 ALJR 148 at 152, relying upon the decision in Ritter v Godfrey [1920] 2 KB 47 at 52 and 60.
The general rule is subject to any considerations which would warrant a departure from the usual order.
For the reasons set out in the principle judgment in this matter the Applicants were successful in their application in respect of the return of a number of objects ceased by the Respondent pursuant to the Protection of Moveable Cultural Heritage Act 1986. During the course of the litigation the parties exchanged offers to settle. On 16 May 2012 the Respondent made an offer to return two of the objects, the Chinese Stone Columns and the Ifugao Trophy skull on the basis that the Applicant consent to Orders for the forfeiture of the remaining objects and that the Applicant pay 70% of the Commonwealth’s party and party costs as agreed “or taxed”.
The Applicant responded with a counter-offer. The counter-offer suggested that the Commonwealth retain the Chinese Stone Columns, the Ifugao Trophy Skull, and return all of the other items that had been seized, as well as each party bearing their own costs of the proceedings.
The Commonwealth had stated in their letter of offer:
11. … the Commonwealth accepts that the expert evidence it has filed is that
a. Chinese Stone Columns (LJB003 LJB004) were manufactured after 1911
b. it has not been demonstrated that the Ifugao Trophy Skill contains an Ifugao skull.
The nature of the response from the Applicant in their counter-offer is reminiscent of the Respondent’s inflammatory conduct in Ritter v Godfrey. Whilst this is not conduct that would be such as to impact on the ordinary rule that costs should follow the event it is relevant to the consideration of whether or not costs should be awarded on a party/party basis or an indemnity basis.
In the course of reasoning set out in the letter from the Commonwealth explaining their offer to return two of the objects, on the basis that they may not have sufficient evidence to prove their case with respect to those objects, but that they do with respect to the balance of the objects. It is difficult to see how the Commonwealth could consider that an offer in precisely the opposite terms, resulting in them retaining the objects that they appear to have accepted they are unlikely to prove were liable to forfeiture, and returning the others could be attractive to the Commonwealth.
However the Applicant’s offer represented a genuine compromise in that it agreed to settle the matter on the basis not only of each party bearing their own costs, but also the Commonwealth retaining some of the objects. It also appears clear that at the time the offer was made there was sufficient evidence and material that was to hand to enable a proper assessment to be made by the Commonwealth. Indeed as much is apparent from the reasoning set out in the Commonwealth’s letter offering to compromise on the basis of the return of the stone columns and the Ifugao trophy skull.
Importantly, in this case, Rule 25.01 of the Federal Court Rules 2011 was not utilised. Schedule 3 of the Federal Magistrates Court Rules 2001 incorporates Rule 25.01 of the Federal Court Rules (see Rule 1.05 of the Federal Magistrates Court Rules 2001). That Rule provides as follows:
25.01 Offer to compromise
(1) A party (the offeror) may make an offer to compromise by serving a notice, in accordance with Form 45, on another party (the offeree).
(2) The notice must not be filed in the Court.
The Federal Magistrates Court Rules 2001 also incorporates Rule 25.14 of the Federal Court Rules, which provides as follows:
25.14 Costs where offer not accepted
(1) If an offer is made by a respondent and not accepted by an applicant, and the applicant obtains a judgment that is less favourable than the terms of the offer:
(a) the applicant is not entitled to any costs after 11.00 am on the second business day after the offer was served; and
(b) the respondent is entitled to an order that the applicant pay the respondent’s costs after that time on an indemnity basis.
(2) If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant’s proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent’s costs:
(a) before 11.00 am on the second business day after the offer was served — on a party and party basis; and
(b) after the time mentioned in paragraph (a) — on an indemnity basis.
(3) If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’s costs:
(a) before 11.00 am on the second business day after the offer was served — on a party and party basis; and
(b) after the time mentioned in paragraph (a) — on an indemnity basis.
Note 1 Costs on an indemnity basis is defined in the Dictionary.
Note 2 The Court may make an order inconsistent with these rules — see rule 1.35.
In Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd (No 2) [2004] FCA 1212, Kenny J considered an offer to an Applicant to discontinue, with no order as to costs, concluding that it was doubtful whether or not this type was a genuine offer of compromise. Beasley JA undertook a detailed analysis in Brymount Pty Limited t/a Watson Toyota v Cummins & Anor Young Shire Council v Cummins & Anor (No 2) [2005] NSWCA 69.
Whilst an offer made in accordance with R.25.01 would have led to the automatic consequences set out in R.25.14 of the Federal Court Rules, subject to the Court making different orders departing from the Rules, the Applicant here bears the burden of persuading the Court that an indemnity order ought to be made in light of the conduct of the parties and the offer that was made.
It is well established that a Calderbank offer does not automatically entitle an applicant to an order for indemnity costs; see John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 at 205. The authorities were reviewed by the Full Court of South Australia in Pirrotta v Citibank Ltd (1998) SASC 6922 where Debelle J (with whom Olsson and Millhouse JJ agreed) said:
23. Given the approach of the trial judge, it is unnecessary for this court to determine whether it should follow the approach of the Supreme Court of New South Wales as exemplified in Multicon or follow the other line of cases to the effect that a Calderbank letter is but one of the factors to be considered when determining whether to order indemnity costs. In the result, there might not be a great deal of difference between the two approaches. As the matter was not fully canvassed in argument. It is better to defer any final decision until an occasion when the matter is fully argued. However, four matters can be mentioned until the matter is ventilated more fully.
24. First, although Rule 41 provides a regime for the making of offers by plaintiffs to compromise actions, it should not be regarded as the only means by which plaintiffs might make such offers. There will obviously be situations which do not fall precisely within the rule. Rule 41 is in terms addressed to litigation between one party and another and thus might not always apply in multi-party litigation or where the litigation is otherwise complex. Thus, regard should, in appropriate circumstances, be had to a Calderbank letter for the purpose of determining whether an order for indemnity costs should be made.
25. Secondly, it is undesirable to permit a regime which differs in important respects from that contemplated by the Rules of Court and imposes more onerous obligations. Thus, while recognising that the Rules do not provide for every occasion and that there are circumstances which justify the writing of a Calderbank letter, the terms in which such a letter are couched should, as a general rule and so far as is reasonably practicable, conform to the regime in Rule 41. I do not mean to suggest a slavish adherence to Rule 41 but a party who seeks to use a Calderbank letter as the basis for solicitor and client costs should frame the letter in terms which are consistent with the spirit and intent of the Rule 41.
26. Thirdly, given the terms of Rule 41.04, a Calderbank letter might result in an order as to costs on a basis similar to that provided in Rule 41.04. One question to be determined is whether a plaintiff should have his costs on a solicitor and client basis for the whole of the action or only from a reasonable time after the offer has been made. There is much to be said for the latter view but I do not express a concluded opinion. Another question is whether any presumption should operate in favour of a plaintiff who makes a Calderbank offer. The effect of Rule 41.04 is that costs will be ordered on a solicitor and client basis unless the court thinks it proper to order otherwise. To that extent, the Rule expresses a prima facie presumption that it will operate in favour of a plaintiff who has been awarded a monetary sum higher than he had been prepared to accept. As the Full Court observed in Whitehead v Maas, the intention of Rule 41 is penal and is to be applied as an incentive to settlements. But the proviso plainly recognises that there will be circumstances where the court will find that the full rigour of the rule should not apply.
27. Fourthly, until the matter is fully argued, I think the approach should be that the writing of a Calderbank letter should be one of the factors, albeit a significant factor, to be weighed by a court when considering whether to order indemnity costs. I do not think that the complexity of litigation standing alone should necessarily preclude the operation of the rule. The rule is designed to promote settlement of both complex and straightforward litigation and the court will have regard to all relevant circumstances in determining whether the penalty rule as to costs should apply.
The case was the first case decided under s. 37 of the Protection of Moveable Cultural Heritage Act 1986. Whilst the Respondent submits that it reasonably proceeded on the assumption that the parties had agreed that the Applicant bore the onus of proof, on the material before me it does not convince me that it was reasonable to assume that there was an agreement to this effect. Rather, there was an assumption made that was not actively disputed. However, it was apparent to the Respondent from the outset, as is borne out by the evidence led by the Respondent, that regardless of the legal onus of proof they bore a significant evidentiary onus.
The Respondent does rely upon the fact that the Applicant did not give notice of their objection to Professor Chappell’s affidavit, which had been served by post and a cover letter of 28 September 2011, many months before the relevant offer.
Review of the Reasons for Judgment indicates that the Minister accurately foresaw the outcome with respect to the columns and the trophy skull. The Commonwealth’s evidence that the other items were likely to be authentic and part of the cultural heritage of the place in which they were made was generally accepted. There was no issue in the case that the objects had been exported from Hong Kong.
The difficulties that the Commonwealth confronted at trial related to the details of the evidence led. For example, the expert called on behalf of the Commonwealth with respect to the Han Dynasty was not able to give evidence as to the geographic area of the Han Dynasty in relation to the geographic area of the People’s Republic of China, which lead to various assumptions which do not withstand scrutiny if specific proof is required, rather like assumptions relating to the Prussian Empire and the borders of the modern day Republic of Germany. Similar difficulties confronted the Commonwealth with respect to the evidence relating to Chinese law and export of the items from China. Whether the outcome would have been different had the Commonwealth presented a case prepared with a greater focus on the technical difficulties of proof (perhaps with an expert with respect to the geographical area of the relevant Han Dynasty, and an expert in Chinese law) can only be a matter of speculation.
The reality is that, on a general level, the Commonwealth had a case that was one that most people would say was worth pursuing, which ultimately failed when strict proof of the various elements was required. It could not be said that it was unreasonable for the Commonwealth to pursue such a case, with respect to the Chinese objects.
However the Commonwealth was well aware of its difficulties with respect to the Columns and Trophy Skull. The offer to reduce costs by 30% seems to me to accurately reflect the proportion of costs relating to the Trophy Skull and Columns.
I am not ultimately persuaded that the circumstances of this case call for a costs order on a basis other than a party/party assessment.
The remaining question is to determine whether or not an assessment should be made pursuant to the lump sum amounts in Schedule 1 of the Federal Magistrates Court Rules, or assessed in accordance with the scale set out in the Federal Court Rules.
Rule 21.10 of the Federal Magistrates Court Rules 2001 provides as follows:
21.10 Costs and disbursements
Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
(a) costs in accordance with Parts 1 and 2 of Schedule 1; and
(b) disbursements properly incurred.
Note For costs in a proceeding to which the Bankruptcy Act 1966 applies, see Part 13 of the Federal Magistrates Court (Bankruptcy) Rules 2006.
As much is acknowledged in paras.3-4 of the Applicant’s submissions with respect to costs, however no submissions were made directly addressing why this case would justify an order departing from the court rules. In this regard, the comments of Lucev FM in Piersons Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No.3) [2010] FMCA 250 highlight an important consideration
43. It is clear from a combined reading of:
a.the FMC Rules;
b.information available on the FMC Website;
c.cases decided by the Court; and
d.other secondary sources,
and the Court’s own experience, that it is well established and well known that the primary source used for fixing costs in general federal law proceedings (other than, arguably, in bankruptcy) in this Court is the event-based scale in Schedule 1 of the FMC Rules. Whilst there is discretion to depart from the event-based scale, that is the exception rather than the norm. The event-based scale under Schedule 1 of the FMC Rules exists to provide simplicity and certainty in determining costs, such that a lawyer attending to take final judgment ought to have been able to calculate the exact costs, in the vast majority of cases.
Similarly, in Staples Waste Removals Pty Ltd v Arev Computer Centre Pty Ltd & Ors (No.3) [2012] FMCA 418, Smith FM said:
33. However, taking all of these matters into account, I have not been persuaded that an approach to party/party costs would not be most appropriately approached by using Schedule 1 to the Federal Magistrate’s Court Rules. The applicant deliberately chose this Court as its preferred forum, presumably attracted by its commitment to achieving relatively informal, cheap and efficient finality in its litigation, according to procedures appropriate to an inferior court. I consider that in the present case there is a clear attractiveness in now awarding an amount of quantified costs under Schedule 1, rather than allowing the matter to further proceed through protracted taxation procedures at great expense, I suspect, to everyone involved, including the public purse. Balancing all the issues of justice which should inform my discretions to award costs, I have decided to fix a lump sum today by reference to Schedule 1, notwithstanding that it may result in substantially lower amount of costs becoming recoverable by the applicant than if I had ordered taxation under the Federal Court Rules.
Whilst the matter raised interesting and complex legal issues to be dealt with at trial, the overall preparation of the matter was certainly not outside the nature of matters commonly coming before the Court in general federal law jurisdiction. The material filed and the number of witnesses called was modest, as were the documents involved.
In the circumstances, I accept that the event-based scale in Schedule 1 of the Federal Magistrates Court Rules 2001 is appropriate in this case.
I therefore make Orders for the Respondent to pay the Applicant’s costs in accordance with Schedule 1 of the Federal Magistrates Court Rules 2001 as agreed, and failing agreement, as assessed by the Court.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
Date: 31 January 2013
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