Canatan Holdings P/L v Audori P/L

[1993] FCA 568

CANATAN HOLDINGS PTY LIMITED v. AUDORI PTY LIMITED and CYRIL EDWARDS
No. G23 of 1992
FED No. 568
Number of pages - 3
Costs

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Einfeld J(1)

CATCHWORDS

Costs - action commenced in an inappropriate court - the "ordinary rule" that costs follow the event - broad discretion in Court - relevance of parties' pre-trial attitude to settlement

Federal Court of Australia Act 1976 (Cth) s. 53(2)

Federal Court Rules Order 62 rule 36A(1),(2)

Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1988) ALR 397

Hughes v Western Australian Cricket Association Inc (1986) 8 ATPR 40-748 at 48,136

Inn Leisure Industries Pty Ltd v D.F. McCloy Pty Ltd and Anor (No. 2) (1991) 28 FCR 172

Cretazzo v Lombardi (1975) 13 SASR 4

Forster v Forster (1893) 1 QB 564

Council of the Municipality of Botany and Ors v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories and Ors Gummow J unreported 9 March 1992

HEARING

SYDNEY

#DATE 20:8:1993

Counsel and solicitor for the applicant: Mr D Lloyd QC and Mr G Scragg

instructed by Carroll and

Knudsen

Counsel and solicitor for the respondents: Mr T J Morahan instructed

by Orford and Theodore

ORDER

The respondents are to pay the applicant's costs on a party and

party basis as assessed or taxed on the Federal Court scale.

Note: Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.

JUDGE1

EINFELD J On 16 July 1993 I gave judgment for the applicant in the sum of $97,775. The applicant now applies for an order for costs on a full indemnity basis. It argues that:

(a) this is a case where what has been described as "the ordinary

rule" that costs follow the event should apply: see for example Hughes v Western Australian Cricket Association Inc (1986) 8 ATPR 40-748 at 48,136 per Toohey J

(b) the applicant was the only party to make an offer of settlement before trial

(c) the amounts being suggested for settlement were substantially what was ultimately recovered

(d) the respondents' only offer of $40,000 inclusive of costs, made well into the trial and only after my encouragement, was quite unrealistic

(e) if the proceedings had not been fully fought, the applicant would have recovered nothing

1. The respondents agree that they should pay some costs but argues that they should be reduced by one third in accordance with Order 62 rule 36A(1) or (2). They submit that:
   

(a) costs should reflect the degree of success of the party seeking them: Forster v Forster (1893) 1 QB 564

(b) this case should have been brought in the District Court

(c) where a party proceeds in an inappropriate court, it is at risk as to costs, especially as to the unsuccessful parts of the case: Cretazzo v Lombardi (1975) 13 SASR 4; Inn Leisure Industries Pty Ltd v D.F.McCloy Pty Ltd and Anor (No. 2) (1991) 28 FCR 172 where Justice French made extensive reference to Justice Toohey's

judgment in Hughes

(d) the applicant has only been successful in a small part of its

claim, both in financial substance and as to time spent at the hearing

1. As pointed out in the principal judgment, this case in reality was essentially a breach of warranty claim with no federal element at all, and should have been brought in a state court. As the Chief Justice has pointed out in public fora more than once, if this Court is used by parties for such cases without penalty at least as to costs, it will be inundated by small claims for which it is neither established nor resourced. It is no answer to say, as the applicant now seeks to do, that when launched for about $400,000, the District Court did not have jurisdiction to hear it, for that would merely encourage parties deliberately to pitch their cases at unjustifiably high levels.

2. At the same time it must be acknowledged that this judgment has only come in just below the limit of the District Court's jurisdiction which applied when it commenced, and as the case would probably not yet have been heard in that Court, extra interest may have taken it over the limit if it had been tried there. Although the District Court limit has now been increased to $250,000, the applicant's advisers could not have known when the case was commenced that this would be so. Originally I was minded to order that costs be allowed to the applicant on the District Court scale but in these circumstances it would be unreasonable to do so. The fact that the case could have been commenced in the New South Wales Supreme Court is basically irrelevant to the quantum of costs that should now be awarded.

3. I am duly deferential to judicial expressions as to the so-called "ordinary rule" but in my opinion concepts based in English law of 100 years ago and more have little relevance to the litigation and costs explosion in Australia today. Undoubtedly that realisation was what prompted the Parliament to legislate the broadest possible discretion in section 43(2) of the Federal Court of Australia Act 1976. As the "ordinary rule" was applying at the time of that legislation, Parliament should be taken as intending that in future that rule be replaced by a broad consideration of all the circumstances including any imbalance between the parties and the reasonableness of their pre-trial attitudes to settlement.

4. In this case the respondents' attitude to settlement was quite unrealistic especially as the applicant can be inferred to have been willing to compromise on its top offer of $180,000 inclusive of costs. This conduct was, however, nothing like the criteria for indemnity costs presently fixed by binding or persuasive authority: Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1988) ALR 397, Council of the Municipality of Botany and Ors v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories and Ors Gummow J, unreported, 9 March 1992. These circumstances and the other factors relevant to this case lead me to the conclusion that the respondents should pay the applicant's costs as assessed or taxed on a party and party basis in accordance with the Federal Court rules.