FEDERAL COURT OF AUSTRALIA
Bellamy’s Australia Limited v Basil (No 2) [2019] FCAFC 169
Appeal from: McKay Super Solutions Pty Ltd (Trustee) v Bellamy’s Australia Ltd (No 2) [2019] FCA 215 File numbers: VID 208 of 2019
VID 211 of 2019Judges: MURPHY, GLEESON AND LEE JJ Date of judgment: 30 September 2019 Catchwords: COSTS – application for indemnity costs – whether refusal of genuine offer of compromise was unreasonable – application refused Cases cited: Black v Lipovac [1998] FCA 699; 217 ALR 386
Brosnan v Katke [2016] FCAFC 156
Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40
Klemweb Nominees Pty Ltd (as trustee for the Klemweb Superannuation Fund) v BHP Group Limited [2019] FCAFC 107; (2019) 369 ALR 583
Seven Network Ltd v News Ltd [2009] FCAFC 166; (2009) 182 FCR 160
Southernwood v Brambles Limited [2019] FCA 1021
Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited (No 2) [2019] FCA 1061
Date of hearing: Determined on the papers Date of last submissions: 5 September 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 11 Counsel for the Applicant: Mr M C Garner with Mr G Kozminsky Solicitor for the Applicant: MinterEllison Counsel for the Respondents: Ms R M Doyle SC with Mr D P Lorbeer Solicitor for the Respondent in VID 208 of 2019: Maurice Blackburn Solicitor for the Respondent in VID 211 of 2019: Slater and Gordon ORDERS
VID 208 of 2019 BETWEEN: BELLAMY’S AUSTRALIA LIMITED (ACN 124 272 108)
Applicant
AND: PETER ANTHONY BASIL
Respondent
JUDGE:
MURPHY, GLEESON AND LEE JJ
DATE OF ORDER:
30 SEPTEMBER 2019
THE COURT ORDERS THAT:
1.The respondent’s application for indemnity costs is refused.
2.The applicant pay the respondent’s costs of the application on a party/party basis.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
VID 211 of 2019 BETWEEN: BELLAMY’S AUSTRALIA LIMITED (ACN 124 272 108)
Applicant
AND: MCKAY SUPER SOLUTIONS PTY LIMITED (ACN 110 853 024) (AS TRUSTEE FOR THE MCKAY SUPER SOLUTIONS FUND)
Respondent
JUDGE:
MURPHY, GLEESON AND LEE JJ
DATE OF ORDER:
30 SEPTEMBER 2019
THE COURT ORDERS THAT:
1.The respondent’s application for indemnity costs is refused.
2.The applicant pay the respondent’s costs of the application on a party/party basis.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
On 23 August 2019, the Court dismissed the applications for leave to appeal from an interlocutory judgment in these proceedings, which are two formerly competing class actions that are being case managed together and are to be heard together: Bellamy’s Australia Limited v Basil [2019] FCAFC 147. The respondents now seek an order for indemnity costs from the date of the rejection by the applicant (BAL)…
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- Case
- [2019] FCAFC 169
- Decision Date
CaseChat Overview and Summary
The primary legal issue before the Court was whether the appellant's refusal to accept the respondents' offer of compromise was unreasonable. The Court considered whether the appellant had a reasonable prospect of success on appeal, the strength of the arguments presented, and whether there were any relevant legal precedents that would have compelled the appellant to accept the offer. The Court also evaluated the potential for injustice caused by duplicated legal costs in the context of case management of duplicative class actions.
The Court found that the appellant's refusal to accept the respondents' offer was not unreasonable. The Court noted that the appellant's contention of substantial injustice was not so weak as to render its refusal unreasonable. Given that case management of duplicative class actions was a developing area within the courts, the Court held that it was not unreasonable for the appellant to have considered that it may have had a prospect of obtaining leave to appeal in relation to the primary judge's refusal to make cost capping orders in the duplicative proceedings. The Court concluded that the respondents had not demonstrated that the refusal was unreasonable, and therefore, the application for indemnity costs was refused.
The Court ordered that the respondents' application for indemnity costs was refused, and the appellant was to pay the respondents' costs of the application on a party/party basis. This decision underscores the importance of demonstrating unreasonableness in refusing a genuine offer of compromise to be entitled to indemnity costs, and highlights the developing nature of case management of duplicative class actions within the courts.
Orders
Orders of the court
1. The respondent’s application for indemnity costs is refused.
2. The applicant pay the respondent’s costs of the application on a party/party basis.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
In Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 at [5], a Full Court said:The refusal of a Calderbank offer will not always attract an award of indemnity costs. The offeror must show that the rejection was unreasonable in the circumstances of the case: Black v Lipovac [1998] FCA 699; (1998) 217 ALR 386 at [217]-[218]. The respondents have not convinced us that the rejection was unreasonable. By the August 2008 offer all the respondents were offering to give up was any claim they may have to costs of the appeal. There was little in the offer that was attractive to the appellant. Of course the appellant was entirely unsuccessful on the appeal, for substantially the reasons explained by the respondents in their August letter. However the appeal was not on its face without any prospect of success. Counsel for the appellant was able, on the available material, to present arguments that required careful attention. It was only on a close examination of the documentation that the Court concluded that the appeal on liability should be dismissed. In retrospect, the appellant’s case was never a strong one, but on the principal points argued (liability) the appellant’s case was not so [weak] that it should be taken to have acted unreasonably in refusing the August offer, which offered little in the way of a genuine compromise.CONSIDERATION The respondents’ offer constituted a genuine offer of compromise. If accepted, BAL would have faced no immediate adverse costs exposure and would not have been liable to pay the costs of the application unless the respondents were eventually to succeed in the substantive proceeding. At least with the benefit of hindsight, it is obvious that BAL’s applications were not strong, particularly in the light of the Full Court’s recent decision in Klemweb. The Court’s decision to hear the application for leave to appeal in advance of the substantive appeal and the ultimate delivery of judgment against BAL on the day of the hearing reflect the weakness of BAL’s case. However, we are not persuaded that BAL’s contention of substantial injustice was so tenuous that it acted unreasonably in refusing to accept the respondents’ offer. Case management of duplicative class actions is a developing area within the courts and duplicated legal costs are liable to cause injustice. There was no decision directly on point against BAL. In those circumstances, it was not unreasonable for BAL to have considered that it may have had a prospect of obtaining leave to appeal in relation to the primary judge’s refusal to make cost capping orders in the duplicative proceedings.CONCLUSION The application for indemnity costs is refused.