Davis v Wilson (Costs)

Case [2025] FCA 666

FEDERAL COURT OF AUSTRALIA

Davis v Wilson (Costs) [2025] FCA 666

File number(s): NSD 862 of 2018
Judgment of: SHARIFF J
Date of judgment: 20 June 2025
Catchwords:

COSTS – application for costs – where contraventions established under s 1041H of the Corporations Act 2001 (Cth) and s 12DA of the Australian Securities and Investments Commission Act2001 (Cth) (ASIC Act) – where no loss proven to have been caused by contraventions for purposes of s 1041I of the Corporations Act and 12GF of the ASIC Act – whether Court should make “issue-based” costs orders apportioning costs – alternatively, whether costs awarded to respondents on ordinary basis should be discounted by 50% or such other proportion

COSTS – where evidence filed and served but not read – whether special costs orders should be made disentitling respondents to recovery of costs associated with their uncalled witnesses and unread evidence

COSTS – application for costs against third-party litigation funder – where funded applicants brought unsuccessful proceedings – where litigation funder stood to receive financial benefit from the fruits of the litigation – where litigation funder agreed to exercise a high degree of control and to direct prosecution of applicants’ claims

HELD – not appropriate to apportion costs on an issue-by-issue basis; costs awarded to the respondents on the ordinary basis; respondents and litigation funder be jointly and severally liable for such costs  
Legislation:

Australian Securities and Investments Commission Act2001 (Cth) ss 12DA, 12GF

Corporations Act 2001 (Cth) ss 1041H, 1041I

Federal Court of Australia Act 1976 (Cth) ss 37M, 37N, 43

Federal Court Rules 2001 (Cth) r 40.02(b)

Uniform Civil Procedure Rules 2005 (NSW) r 42.1
Cases cited:

Australian Conservation Foundation v Forestry Commission of Tasmania (1988) 81 ALR 166

Brady v NULIS Nominees (Australia) Ltd in its capacity ato MLC Super Fund (Costs) [2025] FCA 128

Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 9) [2008] FCA 1115

Crowley v Worley Limited (Costs) [2024] FCA 211

Davis v Wilson [2025] FCA 108

Downer EDI Rail Pty Ltd v John Holland Pty Ltd [2018] NSWSC 581

Edwards v Nine Network Australia Pty Ltd (No 6) [2024] FCA 758

EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92

Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 327 ALR 192

Greiss v Seven Network Operations Ltd (Costs) [2024] FCA 377

Hampton v BHP Billiton Minerals Pty Ltd [2012] WASC 285

Hughes v Western Australian Cricket Association (Inc) [1986] FCA 511; ATPR 40-748

Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7

Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd [2001] QCA 191; [2003] 1 Qd R 26

Koolan Iron Ore Pty Ltd v Infrassure Ltd (No 4) [2024] FCA 894

Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; 247 FCR 61

Marmax Investments Pty Ltd v Rpr Maintenance Pty Ltd (No 2) [2015]…

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Details
AGLC
Davis v Wilson (Costs) [2025] FCA 666
Case
[2025] FCA 666
Decision Date

CaseChat Overview and Summary

In this case, the applicant, Davis, sought costs against the respondents, Wilson and EY, as well as the litigation funder, LCM. The proceedings stemmed from claims made by Davis against Wilson and EY for contraventions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). The primary legal issue before the Court was whether the costs should be apportioned on an issue-by-issue basis, or whether the costs should be awarded on the ordinary basis, with a potential discount. Another issue was whether special costs orders should be made against the respondents for uncalled witnesses and unread evidence.

The Court found that it was not appropriate to apportion costs on an issue-by-issue basis, as the ordinary basis of awarding costs was sufficient in this case. The Court noted that the ordinary rule is that costs follow the event, but this rule is not prescriptive and the Court has a wide discretion to make an award as to costs. The Court considered that the respondents had succeeded on the main issues and the Davis Applicants had not established their counterfactual case or suffered causally connected loss. As such, the Court awarded costs to the respondents on the ordinary basis. The Court also found that the Davis Applicants were liable to pay the respondents' costs of the proceedings, including costs associated with uncalled witnesses and unread evidence, on a lump sum basis.

The Court dismissed the Davis Applicants' application for issue-based costs orders and their alternative application for a 50% discount on the respondents' costs. The Court found that the Davis Applicants' conduct of the case, including the filing of uncalled witnesses and unread evidence, warranted the imposition of costs against them. The Court also found that the litigation funder, LCM, was jointly and severally liable for the respondents' costs, as it had agreed to exercise a high degree of control and direct the prosecution of the applicants' claims.

The Court made orders dismissing the Davis Applicants' further amended originating application and the cross-claims filed by the respondents. The Court also made orders fixing the common questions of fact and law determined in the proceeding, and bound the applicants and all persons who are Group Members (as defined in the Fifth Further Amended Statement of Claim) at the date of the Orders, other than those who have opted out of the proceeding, by the answers to the common questions. The Court ordered that the applicants and LCM are jointly and severally liable to pay the respondents their costs of and incidental to the proceeding on the ordinary basis, to be paid on a lump sum basis. The Court also ordered that the parties confer and provide short minutes of order to the Associate to Justice Shariff regarding the process of fixing the costs payable under the Orders.

Orders

Orders of the court

1. The further amended originating application dated 6 July 2022 be dismissed.

2. Pursuant to s 33Z(1) of the Federal Court of Australia Act 1976 (Cth) (the Act), the common questions identified in Annexure A to these Orders:

(a) stand as the common questions of fact and law determined in this proceeding; and

(b) be answered in the terms set out in Annexure A.

3. Pursuant to s 33ZB of the Act, the applicants and all persons who are Group Members (as defined in the Fifth Further Amended Statement of Claim dated 30 August 2024) at the date of these Orders, other than those who have opted out of the proceeding pursuant to s 33J of the Act, are bound by the answers to the common questions in Annexure A.

4. The applicants and LCM Operations Pty Ltd are jointly and severally liable to pay the second respondent (Mr Wilson) and third respondent (EY) their costs of and incidental to the proceeding on the ordinary basis subject to Order 7 and Order 8.

5. Pursuant to r 40.02 of the Federal Court Rules 2011 (Cth), the costs the subject of Order 4 be paid on a lump sum basis.

6. By 27 June 2025, the parties confer and provide short minutes of order to the Associate to Justice Shariff regarding the process of fixing the costs payable under Orders 4 and 5.

7. The cross-claim filed in this proceeding by EY on 14 March 2024 be dismissed with no order as to costs as between the parties to it.

8. The cross-claim filed in this proceeding by Mr Wilson on 21 June 2019 be dismissed with no order as to costs as between the parties to it.

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

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

On 21 February 2025, I delivered a judgment in these proceedings: Davis v Wilson [2025] FCA 108 (“J” or “February Judgment”). These reasons assume familiarity with the February Judgment and I adopt the defined terms there set out. By way of overview, and as briefly summarised at J [24], I relevantly found that the Davis Applicants had: (a)established that Mr Wilson and EY each contravened s 1041H of the Corporations Act, and that EY additionally contravened s 12DA of the ASIC Act, (b)not established their counterfactual case, and (c)not established that they suffered causally connected loss for the purpose of s 1041I of the Corporations Act and s 12GF of the ASIC Act as against Mr Wilson or EY. I made orders that the parties (a) confer about the answers to be given to the Common Questions in order to give effect to my reasons in the February Judgment, and (b) seek to resolve the question of costs, failing which they were to make any relevant applications as to costs supported by evidence and submissions. The parties have since reached substantial agreement as to the answers to be given to the Common Questions but remained in dispute over a handful of them (specifically, as to questions 1.1, 3 and 4). The disputes between the parties largely turned on whether I considered it necessary to answer a small number of questions in a particular way in light of my reasons in the February Judgment. The parties agreed that I did not need to give reasons for resolving the remaining disputes between them as to the answers to be given to the Common Questions, and that it was a matter for me as the trial judge to answer the questions as I considered appropriate based on my earlier reasons. In light of the position taken by the parties, my answers to the Common Questions are set out in Annexure A to the Orders I have made today. These answers are to be read together with the reasons set out in the February Judgment. The remaining contest between the parties relates to costs. Mr Wilson and EY each filed interlocutory applications seeking that (a) the Davis Applicants pay their respective costs of, and incidental to, the proceedings on the ordinary basis, and (b) the costs of the proceedings be fixed in a lump sum. Mr Wilson and EY also seek orders for costs against the litigation funder, LCM Operations Pty Ltd (LCM), such that it is jointly and severally liable to each of the Respondents for their respective costs of the proceedings. LCM opposed these orders. Whilst the Davis Applicants accepted that the costs of the proceedings should be fixed in a lump sum, they opposed the orders sought against them and filed their own interlocutory application seeking that the Court exercise its discretion to make “issues based costs orders”. In essence, such orders would make the Respondents liable to the Davis Applicants for their costs in respect of those issues on which the Davis Applicants were successful while the Davis Applicants would otherwise be liable to the Respondents for their costs in respect of the remaining issues on which the Davis Applicants were unsuccessful. Additionally, the Davis Applicants sought orders that the Respondents pay their costs incurred in connection with the affidavits filed by the Respondents but not read by them. Alternatively, the Davis Applicants submitted that the Court should apportion costs such that they be liable only for 50% of the Respondents’ costs or such other amount as considered appropriate.

Ratio Decidendi

Legal Principle Established

Alternatively, the Davis Applicants sought an order that they are to pay 50% of the Respondents’ party-party costs on the ordinary basis, or such a proportion of the costs as the Court considers just. 2.2 Consideration Section 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) gives the Court a wide discretion to make an award as to costs, which is to be exercised judicially: Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 (Nicholas, Beach and Burley JJ) at [3] citing Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; 247 FCR 61 at 132 [305] (Bennett, Besanko and Beach JJ). It has often been observed in this Court that the “ordinary rule is that costs follow the event…”: Idenix at [3] citing Les Laboratoires at 130 [297]–[298]; see also Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 327 ALR 192 at 193 [6] (French CJ, Kiefel, Nettle and Gordon JJ). However, it has also been observed that s 43 of the FCA Act does not prescribe a general or ordinary rule as to costs and does not specify that costs are to follow the “event”: see Queensland North Australia Proprietary Limited and others v Takeovers Panel and others (No 2) [2015] FCAFC 128; 236 FCR 370 (Dowsett, Middleton and Gilmour JJ) at [17]–[18]. This position is to be contrasted to r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW). For the reasons explained by the Full Court in Queensland North at [9]–[19], there can at times be a contest as to the relevant “event” and whether it refers to the overall outcome of the case or by reference to particular issues at trial: referring to Interchase Corporation Ltd v ACN 010 087 573 Pty Ltd [2001] QCA 191; [2003] 1 Qd R 26 at [83] (McPherson JA). The Full Court in Queensland North stated at [16] that in this Court “the expression, ‘costs follow the event’, has been used to describe an award of costs based on the overall outcome, rather than success or failure on individual issues”. Although the Court would generally make an order in favour of the “successful party”, s 43(3)(e) of the FCA Act provides that the Court may make an award of costs in favour or against a party whether or not the party is successful in the proceeding. The circumstances in which costs may be awarded against a party that has not been successful in the proceedings have been addressed in numerous decisions. Most conveniently, the Full Court in Queensland North stated at [8] that the decisions of this Court: …treat the success or failure of the relevant party as being the starting point in consideration of the question of costs. However they contemplate at least three distinct categories of situation in which a successful party might be deprived of costs, or even ordered to pay the costs of the other side. One such category is where the applicant has been only partially successful in that it has not obtained all of the relief sought. The second category is where a party has succeeded in obtaining the relief sought, but has not succeeded on all bases (factual or legal) upon which it sought such relief. Of course, it is possible that a particular outcome will fall into both categories. A third category involves consideration of the successful party’s conduct of the case.