Commonwealth of Australia v Brittain

[2005] HCATrans 742

[2005] HCATrans 742

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S38 of 2005

B e t w e e n -

COMMONWEALTH OF AUSTRALIA

Applicant

and

ANTHONY WINSTON BRITTAIN

Respondent

Application for special leave to appeal

McHUGH ACJ
GUMMOW J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 9 SEPTEMBER 2005, AT 9.30 AM

Copyright in the High Court of Australia

MR P.J. HANKS, QC:   Your Honours, I appear with MS C.M. HARRIS for the applicant.   (instructed by Mallesons Stephen Jaques)

MR A.G. MELICK, SC:   I appear with MR I.F. BUTCHER for the respondent.   (instructed by James Taylor & Co)

McHUGH ACJ:   Yes, Mr Hanks.

MR HANKS:   Your Honours, we must first seek an order dispensing with compliance with the time limit fixed by rule 41.02.1.  Your Honours, that application which we made in the application for special leave is supported by Mr Tandora’s affidavit.

McHUGH ACJ:   Yes, you might go to your main point.

MR HANKS:   Thank you, your Honour.  Now, your Honours understand that this appeal relates essentially to a costs order made by the Court of Appeal following its upholding of an appeal against a judgment entered by Justice Mathews in relation to the plaintiff’s claim, the plaintiff being a member of the crew of the Melbourne on the night when it collided with the Voyager.  That is in February 1964. 

Your Honours will recollect that a substantial element in his claim, which was in negligence, was that he had lost the value of the pension valued at some $800,000 by reason of essentially being pressured, required as a consequence of the after effects of the collision into retiring from the Navy prematurely.  Your Honours will also know that the present applicant made a Calderbank offer of $125,000 and the jury returned a verdict in favour of the plaintiff of just over $25,000.  Now, speaking to this ‑ ‑ ‑

McHUGH ACJ:   Well, it may indicate that the jury thought that he only suffered ‑ ‑ ‑

MR HANKS:   It could indicate anything, your Honour.

McHUGH ACJ:   ‑ ‑ ‑ depression for a limited or closed period.

MR HANKS:   It could be.  That is so, your Honour.  But the jury with its customary Delphic clarity did not reveal precisely how they had come to that figure.  So it was on the basis essentially of a misdirection or non‑direction by the trial judge that the Court of Appeal allowed the appeal and the misdirection or, as it was put, perhaps non‑direction was the failure to give a clear direction based on Medlin. 

Now, the court then directed that the costs be dealt with separately and it is against the court’s order on costs that we brought this application.  There are two elements in the order which we say are objectionable.  The first was that the present applicant should pay the respondent’s costs of the first trial rather than the customary order allowing those costs to abide the result of the second trial.  The second aspect of the order was that those costs be paid on an indemnity basis. 

The first element, your Honours, we say was flawed, that is the court’s conclusion that it should depart from the general rule, because, as it put it, the present applicant was the cause or its conduct was the cause of the miscarriage of the first trial.  It was flawed and there are three reasons why we say that.  The first is the court failed to give any consideration to the part played in the trial judge’s non‑direction or misdirection by ‑ ‑ ‑

GUMMOW J:   What was the statutory power that was being exercised?

MR HANKS:   The statutory power, your Honour, would be found in section ‑ ‑ ‑

GUMMOW J:   You are not saying it was beyond power?

MR HANKS: No – section 76 of the Supreme Court Act, which has now been replaced by section 98 of Civil Procedure Act 2005. So there is undoubtedly a discretion in the court to make an order and to extend that order ‑ ‑ ‑

GUMMOW J:   You are in House v The King territory, are you not?

MR HANKS:   We are, your Honour, yes, and we say that the discretion has miscarried because of a failure first to consider the part that was played in that non‑direction, as we would put it, or misdirection by the conduct of the plaintiff’s counsel at the trial.  I want to take your Honours to some parts of the transcript to illustrate that point.  There is a second consideration; that is the failure on the part of the court to consider the significance of the order that they made for neutralising entirely the Calderbank offer and the significance of the Calderbank offer.  I will come to that in a moment, but can I take your Honours first to what appears in the application book.

GUMMOW J:   Just in terms of House v The King, which limbs and branches of that formulation does this case fall into?

MR HANKS:   It falls into, your Honour, if I can put it this way, simply it is a misapplication of the discretion.

McHUGH ACJ:   The last component?

MR HANKS:   Yes, your Honour. 

HEYDON J:   You say it is such an absurd order that, though one cannot put one’s finger on an error of fact or error of law or error of principle, nonetheless there must be one there?

MR HANKS:   Well, there is a substantial error of principle in failing to take into account these matters, your Honour, which we say properly have to be taken into account when one comes to that question, what should be done with the costs of the first trial?  Now, if one is going to focus, as the court did, on the conduct of my client’s counsel at the first trial, one must also consider whether the conduct of the respondent’s counsel played any part in the misdirection.  We have referred your Honours, I think, in the outline to some of the passages in the transcript.

HEYDON J:   Do you maintain the second sentence of paragraph 13 of your argument in reply, which is on page 92?

MR HANKS:   Yes and no, your Honour.  The respondent has helpfully put on an affidavit as to a communication that passed between junior counsel for the respondent and senior counsel for the applicant, as I understand it, immediately before the commencement of the resumed hearing before Justice Mathews, but the terms in which that communication was made are perhaps a little oblique, your Honour.  Certainly our point would be that if senior counsel for my client was given notice on the morning in those terms, there was no opportunity properly to prepare submissions or authorities in relation to the very question that was going to be raised.

GUMMOW J:   Is there any exposure of the Court of Appeal of its reasoning on this question of indemnity costs?

MR HANKS:   No, other than that concluding paragraph, your Honour, and I will come to that shortly if I might.  I just wanted to remind your Honours that in the course of our learned friend’s address to the jury on what appears to be 10 March, page 107 of the application book, our learned friend put the very point of the cause of his client’s early retirement in terms that were inconsistent with Medlin, that is that it was incumbent on the plaintiff to prove that the pre-eminent reason for leaving the Navy was the consequence of the incident on 10 February. 

Now, your Honours, subsequently our friends then asked for a specific Medlin direction.  That can be found at page 136 in the application book.  That was the point at which the trial judge expressed some doubt and uncertainty as to the basis of such a direction.  Nevertheless, she acceded to the propriety of doing that.  Her Honour then made a direction which the Court of Appeal found was perhaps imperfect, and that can be found at page 193 of the application book, where her Honour referred to:

a material part of the [present respondent’s] case is that a material reason for his wanting to leave the Navy was his disillusionment . . . So the defendant –

my client –

relies on that as showing, well, there are other reasons why he wanted to leave the Navy.

Your Honours, despite the running footer on that page, that was almost at the conclusion of the proceedings on 11 March rather than 12 March 2003.  Her Honour said on the same page, “Well, I’m now going to let the jury go over until tomorrow and I’ll deal with the rest of the summing‑up tomorrow”, and in the absence of the jury our friend then appearing for the present respondent said, “I am happy with your Honour’s summing up”.  So within a few minutes of her Honour making that direction to the jury, which subsequently formed the basis of the appeal and which the Court of Appeal found to be deficient, our friend said, “I am happy with that summing up”. 

It was then the following morning that junior counsel for the applicant came back to the point and asked for a direction which was essentially in terms of Medlin, although junior counsel was not able to assist the court by producing any authority to support the submission.  The submission was undoubtedly opposed by counsel appearing for my client in terms that we would not now seek to defend, undoubtedly.  But what happened then – that was on 12 March – her Honour declined to make the direction because her Honour was persuaded by the submissions made by my client’s senior counsel, undoubtedly.  But that was in circumstances where counsel for the present respondent had indicated on the previous day contentment with the terms of her Honour’s charge to the jury and were unable on that day to assist her Honour with reference to any authority. 

Now, it is in those circumstances that we say that to attribute responsibility for the error into which the trial judge fell and a miscarriage of the first trial entirely to my client is plainly wrong.  The facts do not support that.  Now, that is the first point, your Honours.

HEYDON J:   You have left out what happened on page 136 on 11 March before those events you referred to.  There the trial judge seems to have accepted the need to give a direction of the kind the Court of Appeal later said should have been given.

MR HANKS:   Of course, that is so, your Honour, and one can only conjecture that the trial judge accepted that she had discharged that when she gave the directions to be found on page 193.  That would be my assumption, your Honour.

HEYDON J:   But then she refused to ‑ ‑ ‑

MR HANKS:   Give a further direction.

HEYDON J:   ‑ ‑ ‑ to correct it or give a further direction when junior counsel for the respondent raised the matter again on the 12th.

MR HANKS:   That is so, your Honour.  Now, essentially what we would say, if one was to summarise this, is that the trial judge ultimately, as the Court of Appeal found, fell into error in not clarifying her Honour’s direction, but did so in circumstances where the responsibility properly should be shared by all parties, not by one party alone, so as to justify the order made by the Court of Appeal.  That is the first matter we wish to raise in relation to that part of the order. 

The second matter was this, your Honours.  There was a critical matter that if there was fault on the part of my client’s counsel, there was a critical matter that had to be balanced against that, in effect, the offer of compromise or Calderbank letter which is identified by the trial judge in her reasons at page 9 of the application book. 

If the present respondent on the retrial were to recover less than that amount, then on the retrial the judge there could properly conclude as an exercise of discretion that the plaintiff should not have his costs from the time that that offer was made in respect of the first trial and in respect to the second trial.  But the orders made by the Court of Appeal effectively prevent this factor being taken into account in the exercise of the second trial judge’s discretion, at least so far as the first trial is concerned. 

Essentially what the Court of Appeal has done is to divide what is one claim made by the plaintiff into separate watertight compartments to isolate the Calderbank letter so that it can only be taken into account in relation to the costs of the second trial.  But that offer can properly be characterised as relating to the whole of the claim made by the present respondent as relevant to the costs of that claim.

HEYDON J:   Was that point made to the Court of Appeal?

MR HANKS:   I am unable to assist your Honour on that.  I would assume so, your Honour, but I cannot assist you.

HEYDON J:   It is not recorded?

MR HANKS:   No, it is not recorded.

HEYDON J:   But it does not follow that it was not.

MR HANKS:   Your Honour will understand that both I and my junior were not involved in any earlier stage of this proceeding.  Now, can I turn to the indemnity costs question.  As your Honours know, trite at best, the normal order is that costs are paid on a party‑and‑party basis and here the Court of Appeal has departed from that order.  It has cited what was said, as we understand it, in Oshlack at paragraph 44.

GUMMOW J:   Page?

MR HANKS:   In Oshlack, I believe, your Honour, page 89

GUMMOW J:   Yes, but whereabouts in the application book?

MR HANKS:   Where did it cite that?  I think it is at page ‑ ‑ ‑

McHUGH ACJ:   Page 52, is it?

MR HANKS:   ‑ ‑ ‑ 52, thank you, your Honour, and I thank my friend.

McHUGH ACJ:    Last paragraph.

MR HANKS:   Yes, it is the final paragraph of the judgment:

Further, in the circumstances where the appellant has been put to the expense of a new trial solely because of the failure to give the Medlin direction, it is appropriate that the respondent pay the appellant’s costs of the first trial on an indemnity basis:  see Oshlack –

at paragraph 44.  Now, as we understand it, paragraph 44 does identify a basis for departing from the normal rule and it is apparent, at least from the reasons of the court here that that was what it had in mind, that basis.  The basis, as we understand it, would be that there was some delinquency on the part of the party which would justify a departure.

GUMMOW J:   You say if they are going to talk about delinquency, you were both delinquent?

MR HANKS:   Yes, but if I could put it even better, your Honour, this is not the type of delinquency that would justify an order for indemnity costs.  The principles we say that emerge from the authorities are that there is an element of knowing misconduct or bad faith, undue, deliberate or groundless prolonging of proceedings, abuse of process, acting in a highhanded fashion.  All of those matters would be examples of delinquency and there is no such delinquency found here or alleged here and no basis for any such finding. 

What happened was that our counsel made a legal submission on the issue of causation as he saw it.  After argument it was accepted by the trial judge.  No indication that counsel knew the submission was wrong or that he intended to mislead, and that was found to be in error subsequently. 

Now, if one equates the making of legal submissions of that kind to deliberate misconduct or want of good faith which the authorities do accept would justify an award of indemnity costs, then we say the Court of Appeal here has acted on the wrong principle in the exercise of its discretion in drawing that equivalence.  If the making in good faith of a wrong submission on the law does provide foundation for the award of costs, then that award is no longer going to be confined to special circumstances.  It is not unknown for counsel to get the law wrong when making submissions on the part of their clients.

McHUGH ACJ:   Yes.  Well, maybe I am out of touch with the practice, but I must have appeared in hundreds of appeals where one side had vigorously opposed a direction being put to a jury and it was later held to be erroneous and a new trial ordered.  I have no recollection of any party ever being ordered to pay the costs of the first trial in those circumstances.

MR HANKS:   Well, that goes to the objection or, as it were, the first element of the order made by the court, your Honour.

McHUGH ACJ:   Yes.

MR HANKS:   But to make the order on an indemnity basis might compound the sin or the error on the part of the Court of Appeal.  We are here – this is trite, your Honour – talking of adversary proceedings where counsel will vigorously advance a particular point in her or his client’s interests and it is, of course, imperative that counsel not make submissions known to be misleading.

McHUGH ACJ:   I suppose what distinguishes this case from the type of case that I just mentioned is that there was a precise High Court authority on the point which should have been applied and your counsel opposed it.

MR HANKS:   Yes, and is responsible for its non‑application.  That is a very complex and difficult question, your Honour, with respect.  Undoubtedly our friends at one point asked for a Medlin direction.  The trial judge expressed some doubt and uncertainty as to the basis of that and then agreed, although not taken to the authority to make that direction.  Subsequently counsel came back to the trial judge and asked for the direction to be made again, but at that stage, despite the uncertainty which the judge had previously expressed, counsel did not produce Medlin or take the judge to the authority or perhaps produce a draft form of direction that would be consistent with Medlin, steps that would have assisted the trial judge and removed any uncertainty. 

It is in those circumstances that the trial judge fell into error, as the Court of Appeal found.  So, as your Honours understand, our objection to the order is on those two bases:  not allowing the costs of the first trial to abide the second trial when the second trial judge could properly take account of all the considerations, including the Calderbank offer and the outcome of the second trial, and secondly, making the order on an indemnity basis in circumstances where the conduct that is attributed to my client through its counsel does not answer the description of delinquent behaviour.  Those are our submissions, your Honours.

McHUGH ACJ:   Yes, thank you.  Yes, Mr Melick.

MR MELICK:   I will firstly deal with the facts.  At page 136 it is quite clear that there was agreement between counsel and acceptance by her Honour that the direction should be given to the jury that they only had to be satisfied that the plaintiff’s illness was the material cause of him leaving the Navy.  At that stage the issue had been joined and was closed.  There was no basis upon which junior counsel the next day could be expected to know that there would be a capricious and as yet still unexplained reversal of senior counsel for the Commonwealth’s position as to the direction that should be given to the jury. 

The direction that was asked for, they only had to be satisfied there was material cause, is on all fours with Medlin.  It does not matter what was said in addresses to the jury that the test was put slightly higher because what counsel say to the jury do not carry any weight in law.  In law the jury is to be directed by the judge as to what law they have to apply.  When her Honour referred to counsel’s submissions to the jury on this point, what she did not tell the jury, “And in law that is the correct position and that is what you must apply.” 

At page 196 when it was indicated to her Honour that we were happy with her directions, all that meant at that stage was on the direction she had given so far there had not been an erroneous direction in law and left overnight the question that she still had not given an appropriate direction as she had agreed to the previous day had been agreed to by the Commonwealth.  So junior counsel was entitled to remind her Honour that she had yet to give the direction that she stated she would the previous day.

Without warning, and, as I said, completely unexplained and still unexplained to this day, the Commonwealth changed their position and led her error into law and did not produce one authority to the court to say why the position they had accepted the day before was no longer what they thought to be the position.  As a result of that, what happens?  We had a trial that took place in March 2003.  The Full Court dealt with the matter in March 2004.  The order for costs was handed down in November 2004 and 10 months later we are still arguing about the same matter. 

We say there is absolutely no point of general principle or departure from general principle in relation to these matters.  Costs are in the discretion of the court and it is a very wide discretion.  This Court has held that.  Even in Oshlack when it refers at paragraph 44 to the matter my learned friend suggested requires some sort of delinquency, it refers to several cases, including R v Smith; Ex parte Rundle 6 WAR 299 at 301, which is a decision of Chief Justice Malcolm in the Court of Appeal of Western Australia, where the Court reinforces yet again it is a very wide discretion and they will not interfere unless there is some obvious error.

It is wrong to suggest that Oshlack is authority that there must be some sort of delinquency to engender the exercise of the discretion of a court to order costs apart from the general rule.  When one considers the cases that are dealt with by their Honours in the Court of Appeal in this matter, they make it quite clear that in many cases, or at least in two of the leading cases, there was no delinquency.  In Malpas v Malpas – and I take your Honours to page 48 of the papers – the behaviour which led to a non‑application of a general rule, a reversal of a general rule and costs being award on the first trial was the convincing of one of the parties to allow in evidence that was later found to be inadmissible.  That was paragraph 21. 

At paragraph 24 the Court of Appeal referred to Ryan v Caelli.  Once again, the case there was an erroneous – I am sorry.  It was an application made by counsel there was no case to answer, which was accepted by the trial judge, and yet again the court held it was appropriate not to follow the usual order and awarded costs of a first trial.  We say the behaviour of counsel in this case was far worse.

GUMMOW J:   How do you get to the indemnity order?

MR MELICK:   I am dealing with the first point first, your Honour.

GUMMOW J:   All right.

MR MELICK:   We say in this case behaviour of the counsel was far worse because it was not just merely robustly asking or requesting a direction which later turned out to be wrong in law, it was reversal of an acceptance that the law asked for was correct and then without warning reversing his position.

McHUGH ACJ:   Yes, but counsel’s turnaround seems to have been on the basis of relevance to the issue – not the concept, but relevance – and so was her Honour’s.

MR MELICK:   But, your Honour, they had accepted it the day before. 

McHUGH ACJ:   In a very general sort of way.

MR MELICK:   Well, her Honour the day before said, okay, when a direction was asked for the jury to be told as a matter of law they only had to be satisfied that the injury was the material cause of the plaintiff leaving the Navy, that was where it was at and there is still no explanation as to why that position was departed from.  We would submit the reason there is not is because there cannot be a logical rational explanation for it.  It seems to have been a completely capricious act of counsel which has caused the trial to miscarry and to place a plaintiff who is pitted against the resources of the Commonwealth in an unenviable position of having to fund yet another trial and to be exposed to two sets of costs, or the possibility of two sets of costs rather than one.

Then leading on to the point about indemnity costs, this was a long and protracted trial.  I will not go into the reasons for it because your Honours do not have the entire transcript in front of you.  Why should a plaintiff be exposed to a solicitor/client component of a cost of a trial that has miscarried through no error on his part or the part of his counsel?  We say there was no ‑ ‑ ‑

McHUGH ACJ:   But that would mean that whenever a new trial was ordered as a result of a direction that was asked for and opposed there should be an order that the losing party pay the costs of the first trial.

MR MELICK:   No, your Honour.  This case is not one of principle because it is a very unusual set of facts.  It is a reversal, an unexplained reversal, capricious reversal of a previously held and agreed position as to what direction should be given to the jury as a matter of law.  In the absence of any explanation or any justification for that reversal, we say not only engenders an order for costs but an order for indemnity costs.

McHUGH ACJ:   Yes, but what did counsel say?  He said, “Yes, it sounds right.”  Is that not the expression ‑ ‑ ‑

MR MELICK:   It was more than that, your Honour.  The next day he went off talking about other matters which were not related to Medlin.  It starts at the bottom of 136:

Your Honour, they sound to be appropriate with perhaps just this additional point.

What he is talking about is going off to is Annetts v McCann about whether psychiatric illness was the same sort of injury:

I appreciate your Honour has said something about it but what you get from these judgments is the clear distinction between mere emotional distress on the one hand, or recognisable psychiatric illness on the other hand.

I am not sure what judgment he was referring to her Honour there.  I have a feeling it might have been Annetts v McCann because the judgment is not identified.  But what he was talking about there was the threshold point.  In other words, they had to be satisfied it was a psychiatric injury, not just mere emotional distress.

McHUGH ACJ:   It would not be Annetts v McCann.  That is a natural justice case. 

MR MELICK:   No, it is Annetts v McCann and Tame, the two joint judgments – sorry, the judgment handed down by this Court at the same time, Tame and Annetts, where one was upheld and one was not.  The distinction there was that this Court said there there has to be a recognisable psychiatric illness rather than mere emotional distress.  That is the question of foreseeability of the type of distress that could be envisaged from wrongly being accused of having a conviction recorded against you in the matter of Tame.  So that had absolutely nothing to do with the Medlin direction, because once you got to the point where the jury has accepted there is a psychiatric illness, you then have a situation it was the direction we were entitled to as a matter of law. 

The other reason we say we should be entitled to indemnity costs here, we have lost a verdict.  We had a verdict that, as a result of the Commonwealth’s negligence, we suffered a psychiatric injury, that because the Court of Appeal found that the question of damages and injury were so inextricably intertwined, they ordered a retrial on all matters.  So because of the capricious behaviour of counsel we lost a verdict which we were

entitled to hold and we now had to go to the expense of a trial on all issues yet again. 

We say there is no general point of principle here.  The cases are redolent with the fact that the courts have extremely wide discretion as to costs.  You do not have to merely have delinquency or inappropriate behaviour such as inappropriate allegations of fraud.  Malpas v Malpas and Caelli’s Case make it quite clear.  They were cases where the behaviour of counsel, which was far less inappropriate than this situation, led to reversal of the ordinary situation.  We say the additional factors in this case are what should lead to the order for indemnity costs not being disturbed.  Unless your Honours wish any further assistance.

McHUGH ACJ:   Yes, thank you.  Yes, Mr Hanks, anything in reply?

MR HANKS:   Only this, your Honours.  Senior counsel that appeared for our client at the trial has been criticised as engaging in capricious and unexplained conduct.  All we can say is that the response which counsel gave to her Honour’s inquiry about the directions – plural – on page 137, I think, your Honour, of the application book was in general terms plainly counsel understood that he was replying to a range of directions which were contemplated, not merely the Medlin direction.  We can only assume that counsel had not directed his mind specifically to the question of Medlin and when he did on the following day adopted the view which is now being criticised, namely that it was all a matter of causation or could only be a matter of causation when it related to the integers of the cause of action. 

Now, that is a view which counsel took.  It is plainly wrong we would have to concede.  Medlin demonstrates that it is wrong.  But we do not accept that it was capricious.  It was something that counsel considered and advanced, not improperly.  Thank you, your Honours.

McHUGH ACJ:   Thank you.  In this matter the Commonwealth seeks special leave to appeal against costs orders made by the Court of Appeal. 

We are of the view that special leave should be refused.  The order of the Court of Appeal was a discretionary order in a very unusual case with unusual facts.  In the circumstances, we are not convinced that the case raises any question of general principle or that the applicant has demonstrated error sufficient to warrant the grant of appeal to this Court.  Accordingly, the application is refused with costs.

AT 10.04 AM THE MATTER WAS CONCLUDED