Carey v Freehills

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FEDERAL COURT OF AUSTRALIA

Carey v Freehills [2013] FCA 1258

Citation: Carey v Freehills [2013] FCA 1258
Parties: NORMAN PHILLIP CAREY & ORS (ACCORDING TO THE ATTACHED SCHEDULE) v FREEHILLS and AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
File number: VID 485 of 2008
Judge: KENNY J
Date of judgment: 26 November 2013
Catchwords: COSTS – “Calderbank” offers made – whether indemnity costs should be awarded – factors relevant to exercise of discretion – indemnity costs refused 
Legislation: Federal Court of Australia Act1976 (Cth)
Federal Court Rules 2011 (Cth)
Former Federal Court Rules 1979 (Cth)
Cases cited:

Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225
Re Wilcox: Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151
Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333
University of Western Australia v Gray (No 21) (2008) 249 ALR 360
Jones v Bradley (No 2) [2003] NSWCA 258
Brookfield Multiplex Limited v International Litigation Funding Partners Pty Ltd (No 4) [2009] FCA 803
Black v Lipovac (1998) 217 ALR 386
Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121
Specsavers Pty Ltd v Luxottica Retail Australia Pty Ltd [2013] FCA 648
Bitech Engineering v Garth Living Pty Ltd [2013] FCA 881
Date of hearing: Determined on the papers
Date of last submissions: 28 October 2013
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 50
Counsel for the Cross-Claimant: M L Coulson
Solicitor for the Cross-Claimant: Metaxas & Hager
Counsel for the Cross-Respondent: D A Klempfner
Solicitor for the Cross-Respondent: Colin Biggers & Paisley

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 485 of 2008
BETWEEN:

NORMAN PHILLIP CAREY & ORS
(ACCORDING TO THE ATTACHED SCHEDULE)
Cross-Claimants
AND:

FREEHILLS
First Cross-Respondent

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Second Cross-Respondent

JUDGE:

KENNY J

DATE OF ORDER:

26 NOVEMBER 2013

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The cross-claimants pay the first cross-respondent’s costs of and incidental to the cross-claim on a party and party basis.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 485 of 2008
BETWEEN:

NORMAN PHILLIP CAREY & ORS
(ACCORDING TO THE ATTACHED SCHEDULE)
Cross-Claimants
AND:

FREEHILLS
First Cross-Respondent

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Second Cross-Respondent

JUDGE:

KENNY J

DATE:

26 NOVEMBER 2013

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

1.INTRODUCTION

  1. On 20 September 2013, the Court dismissed the cross-claim, as amended, brought by Norman Phillip Carey and others (“the Carey parties”) against Freehills.  The nature of the cross-claim and the attendant circumstances are set out in reasons for judgment delivered that day: see Carey v Freehills [2013] FCA 954. Also on 20 September 2013, I made an order with respect to written submissions on costs, which provided that, absent the receipt of written submissions, the Carey parties were to pay Freehills’ costs.

  2. Freehills and the Carey parties have since filed written submissions.  Freehills has relied…

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Details
Case
[2013] FCA 1258
Decision Date

CaseChat Overview and Summary

In the case of Carey v Freehills, the parties were engaged in a dispute that involved a cross-claim filed against Freehills, which was the first cross-respondent in this matter. The nature of the dispute centred around whether indemnity costs should be awarded to Freehills, given that the cross-claimants had rejected two Calderbank offers. The case was heard in the Federal Court of Australia. The legal issues that the court needed to decide involved the circumstances under which indemnity costs could be awarded, particularly in the context of Calderbank offers, and the factors relevant to exercising the court's discretion in such matters.

The court examined the stage of the proceedings, the reasonableness of the cross-claimants' rejection of the Calderbank offers, and other factors pertinent to the exercise of discretion. It was noted that the cross-claimants had rejected the offers based on several grounds, including the early stage of the proceedings and their belief in the reasonable prospects of success of the cross-claim. However, the court found that Freehills had not established that the rejection was unreasonable or imprudent. The court also considered the broader context of the litigation, including the unsuccessful mediation and the procedural steps taken prior to the trial. Ultimately, the court decided that an indemnity costs order was not warranted, given the specific circumstances of the case.

The court's reasoning led to the outcome that Freehills was not entitled to indemnity costs. However, since Freehills had successfully defended the cross-claim, the court ordered that the cross-claimants pay Freehills’ costs of and incidental to the cross-claim on a party and party basis. Additionally, the court dismissed other claims made by the cross-claimants regarding the exclusion of certain costs from the overall costs order and the reimbursement of specific costs related to proposed witnesses.

The final orders made by the court included the directive that the cross-claimants pay the first cross-respondent’s costs of and incidental to the cross-claim on a party and party basis. The entry of these orders was governed by Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. The cross-claimants pay the first cross-respondent’s costs of and incidental to the cross-claim on a party and 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

The cross-claimants properly accepted that the two Calderbank offers foreshadowed a claim for indemnity costs in the event the offers were rejected and the proceedings resulted in a judgment adverse to the cross-claimants. 2.5Conclusion on indemnity costs On balance, having regard to all the circumstances, particularly the factors set out above, I would not make an indemnity costs order in this case. Freehills have not established that the rejection of the Calderbank offers by the Carey parties on 9 August 2010 and 8 April 2011 was unreasonable (or imprudent) in the relevant sense. Accordingly, I would refuse Freehills’ application for indemnity costs from either 9 August 2010 or 8 April 2011. Since Freehills successfully defended the cross-claim against it, however, I would order that the cross-claimants pay Freehills’ costs of and incidental to the cross-claim on a party and party basis. 3.OTHER MATTERS As noted above, the cross-claimants sought an order that the costs of and incidental to certain applications, motions and matters be excluded (collectively, “the excluded matters”) from any party and party costs order in Freehills’ favour. The cross-claimants submitted that an order in these terms would “provide clarity and guidance to the taxing officer”. Broadly speaking, the excluded matters were either matters that did not concern Freehills or matters that it would fall to the taxing officer (or judge, if a lump sum were fixed) to determine at a later date. In so far as these matters did not concern the cross-claim against Freehills, they would not naturally fall within a costs order made in the cross-claim between the Carey parties and Freehills; and accordingly I would say no more about them. In so far as these matters would fall to a taxing officer (or judge, if a lump sum were fixed) it seems to me that they should be left until the proper occasion to consider them arises. Accordingly, I would not make the order sought by the Carey parties in proposed order 1 of the Carey parties’ proposed orders. As also noted above, the cross-claimants also sought an order that Freehills pay the Carey parties’ costs of and incidental to: (1) the proposed evidence of Richard Gomm, Darren Jackson, David Brownell, Derrick Vickers, David McEvoy and Jorgen Elstoft; and (2) costs “wasted as the case ultimately presented by [Freehills] was not in accordance with its case its case pleaded”. The witnesses Gomm, Jackson, Vickers and McEvoy were witnesses for whom the second cross-respondent (ASIC) had prepared affidavits. When the compromise was reached between the second cross-respondent and the Carey parties, it remained open to Freehills to call these witnesses if that proved necessary. It ultimately did not prove necessary to call them. The proposed evidence of Brownell and Elstoft arose directly from Mr Carey’s own affidavit in relation to the assistance that the Westpoint Group had received from Boston Consulting Group and Como Consulting with respect to the potential share market float. There could be no doubt that at one stage this was a matter requiring investigation by Freehills. In conformity with the orders of the Court, their affidavits of evidence were filed and served prior to the commencement of the trial. As the trial progressed, however, it became apparent that the evidence of Brownell and Elstoft was unnecessary. This does not, however, disclose any basis for the Carey parties’ complaint that costs should be awarded in their favour because potential witnesses for whom Freehills had filed affidavits were not called at trial.

Ratio Decidendi

Legal Principle Established

The Carey parties have submitted that their rejection of both Calderbank offers was reasonable. They have supported this submission by reference to the following considerations.(a)The cross-claim was “in its infancy” on 9 August 2010 and, because the cross-claimants’ focus was the settlement of the main claim with the plaintiff in the intervening period, the cross-claim had not advanced further at the time the 8 April 2011 offer was made. (b)A period of more than 14 days to consider the offers would have been reasonable in the circumstances.(c)The offers made no compromise; and “any compromise in relation to legal costs would have been minimal, as only a Defence had been filed at that stage”.(d)The cross-claimants had received advice in relation to the cross-claim, on the basis of which Mr Carey believed that the cross-claim had reasonable prospects of success and of obtaining an award of damages “in the multi-millions”.2.4Consideration of claim for indemnity costs For the following reasons, I consider that that it is inappropriate to make an indemnity costs order in this case.2.4.1Stage of proceedings A cross-claim against Freehills was first filed on 3 October 2008, but on 11 December 2008 this cross-claim was apparently struck out, with liberty to re-plead. When filed on 5 May 2009, a new cross-claim was, as Freehills, said, partly defensive in the sense that, amongst other relief, it sought contribution or indemnity in respect of any liability Mr Carey may have had if the plaintiffs in the principal proceeding were successful. At the same time, this cross-claim also included a separate claim for damages and other relief. The cross-claim built on the cross-claim filed previously. Freehills filed its defence to the cross-claim on 3 June 2009. In general terms, this defence clearly foreshadowed the defence ultimately relied on at trial (although there were later amendments). In the interim, there was a mediation conference and substantial fights about discovery that did not concern Freehills. On 11 December 2009, the Court ordered that any reply to the cross-respondents’ defences be filed by 19 February 2010. No reply was filed at that time. In early 2010, there were motions for transferring this and other proceedings to the Supreme Court of Victoria, which were unsuccessful, as well as various other motions, where Freehills was not a key participant. On 20 May 2010, this proceeding, along with other related proceedings, was listed for directions to “deal with case management including the setting down of trial dates”. At a directions hearing on 13 August 2010, the cross-claim and a number of related proceedings was set down for trial in early September 2011. On 31 August 2010, the Court further ordered that the parties make discovery of all documents that they “consider to have a significant probative value to any parties’ claim or defence” by 31 January 2011 and that outlines of evidence and affidavits were to be done by 31 March 2011.