Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 7)

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FEDERAL COURT OF AUSTRALIA

Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 7) [2020] FCA 206

File number(s): VID 1157 of 2017
Judge(s): ANDERSON J
Date of judgment: 27 February 2020
Catchwords:

COSTS – interlocutory applications – where primary judge refused privilege claims – where primary judge’s decision was overturned on appeal – where Full Court remitted the matter for re-determination – where Full Court reserved costs of application before primary judge – where privilege claims are re-determined – consideration of appropriate costs order in respect of primary judge’s decision and re-determination of privilege claims

Held: no order as to costs in respect of primary judge’s decision – first and sixth respondents to pay 80% of applicant’s costs of and incidental to re-determination of privilege claims
Legislation: Federal Court of Australia Act 1976 (Cth) s 43(2)
Cases cited:

Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2013] FCA 567

Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S)

Commissioner of Taxation v AusNet Transmission Group Pty Ltd (No 2) [2015] FCAFC 124

Day v Estate of Adams (deceased) trading as Tattersall Sweep Consultation (unreported, TASSC, Slicer J, 17 March 1997)

Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 3) [2019] FCA 285

Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 6) [2020] FCA 64

Dodds Family Investment Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261

Gray v Richards (No 2) [2014] HCA 47; 89 ALJR 113; 315 ALR 1

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

Meneses v Directed Electronics OE Pty Ltd (No 2) [2019] FCAFC 200

Meneses v Directed Electronics OE Pty Ltd [2019] FCAFC 90

Moroccanoil Israel Ltd v Aldi Foods Pty Ltd (No 2) [2017] FCA 1393

Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72

Protect Pacific Pty Ltd v Steuler Services GmbH & Co KG [No 2] [2015] VSCA 123

R v Ronen [2004] NSWCCA 67; 62 NSWLR 707

Re Australian Property Custodian Holdings Ltd (in liq) (recs and mgrs apptd) (controllers apptd) (No 2) [2012] VSC 576; 93 ACSR 130

Stewart v Atco Controls Pty Ltd (In liq) (No 2) [2014] HCA 31; 252 CLR 331

Telstra Corporation Limited v Phone Directories Company Pty Ltd (No 3) [2014] FCA 949

Umoona Tjutagku Health Service Aboriginal Corp v Walsh [2019] FCAFC 32
Date of hearing: Determined on the papers
Date of last submissions: 21 February 2020
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Category: Catchwords
Number of paragraphs: 29
Counsel for the Applicant/ Cross-Respondents: Mr M W Wise QC with Ms N J Hickey
Counsel for the Applicant/ Cross-Respondents: K&L Gates
Counsel for the First Respondent First Respondent did not appear
Counsel for the Sixth
Respondent/Cross-Claimant: 		Dr S B McNicol AM QC with Mr A N McRobert
Solicitor…
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Details
Case
[2020] FCA 206
Decision Date

CaseChat Overview and Summary

In this case, the court was asked to determine the appropriate costs order in respect of two interlocutory decisions in the proceeding Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd. The primary judge had previously refused the privilege claims of the Meneses parties, a decision that was later overturned on appeal. The Full Court remitted the matter for re-determination and reserved the costs of the application before the primary judge. The applicant, Directed, sought costs in relation to the re-determination of the privilege claims. The legal issues before the court included the appropriate exercise of its discretion in awarding costs, particularly in relation to the re-determination of privilege claims and the primary judge’s decision.

The court found that it was not appropriate to make an order as to costs in respect of the primary judge’s decision because the Full Court had already held that the costs of the application before the primary judge be reserved. The court considered the degree of success achieved by the applicant in the re-determination judgment, noting that Directed was substantially successful. However, the court also took into account the late termination of the retainer by OE Solutions, which added complexity to the issues argued at the hearing. Exercising its discretion judicially, the court decided that the first and sixth respondents should pay 80% of the applicant’s costs of and incidental to the re-determination of the privilege claims. These costs were to be taxed on a standard basis and payable forthwith.

The court's final orders were that there be no order as to costs in respect of the primary judge’s decision and that the first and sixth respondents pay 80% of the applicant’s costs of and incidental to the re-determination of the privilege claims, with such costs to be taxed on a standard basis and payable forthwith.

Orders

Orders of the court

1. There be no order as to costs in respect of the application resulting in the Order of Justice O’Callaghan dated 6 March 2019, as detailed in Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 3) [2019] FCA 285.

2. The first and sixth respondents pay 80% of the applicant’s costs of and incidental to the applications resulting in the Order of Justice Anderson dated 17 February 2020, as detailed in Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 6) [2020] FCA 64, with such costs to be taxed on a standard basis and payable forthwith.

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

This decision concerns the appropriate costs order in respect of two interlocutory decisions in this proceeding, namely Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 3) [2019] FCA 285 (Primary Judgment) and Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 6) [2020] FCA 64 (Re-determination Judgment). For the reasons expressed below, I will make orders to the effect that:(a)there be no order as to costs in respect of the Primary Judgment; and(b)the first respondent (OE Solutions) and the sixth respondent (Mr Meneses) (together, the Meneses parties) pay 80% of the applicant’s (Directed’s) costs of and incidental to my Re-determination Judgment, with such costs to be taxed on a standard basis and payable forthwith.Background The history of the proceeding is detailed in my Re-determination Judgment. Those reasons also define various terms, and explain certain concepts, that are referred to below in these reasons. In short, in the Primary Judgment a judge of this Court (primary judge) refused the privilege claims of the Meneses parties. However, the primary judge’s decision was overturned on appeal: Meneses v Directed Electronics OE Pty Ltd [2019] FCAFC 90 (Full Court Judgment). The Full Court subsequently held that Directed pay the Meneses parties’ costs of the application for leave to appeal and the appeal, but that the costs of the application before the primary judge be reserved: Meneses v Directed Electronics OE Pty Ltd (No 2) [2019] FCAFC 200 (Full Court Costs Judgment). Mr Meneses’ privilege claims were remitted to me for re-determination. This included, most fundamentally, the determination of an essential factual enquiry, namely the identification of which documents were within OE Solutions’ control at the relevant time: see [155] of the Full Court Judgment. On 7 February 2020, in the Re-determination Judgment, I delivered reasons for judgment addressing the application by the Meneses parties to be relieved from the obligation to produce certain documents for inspection by Directed on the grounds of Mr Meneses’ privileges against self-incrimination and self-exposure to penalties. I made orders requiring the parties to provide submissions on costs and the appropriate form of final relief. On 17 February 2020, after receiving written submissions from the parties regarding the form of final relief, I made the following relevant orders:1. The application by the First Respondent (OE Solutions) and the Sixth Respondent (Mr Meneses) (together, the Meneses Parties) to be relieved from the obligation to produce documents for inspection by the Applicant (Directed) on the grounds of the privilege against self-incrimination and the privilege against self-exposure to penalties:(a) in relation to OE Solutions, is dismissed; and(b) in relation to Mr Meneses:(i) is dismissed in respect of the documents enumerated in categories P1A, P1B and P2 of Part 2 of the Meneses Parties’ Lists of Documents filed on 18 December 2019 and 6 January 2020 (List of Documents); and(ii) is granted in respect of the documents enumerated in categories P3 and P4 in Part 2 of the List of Documents.2. OE Solutions is required to produce for inspection by the parties in this proceeding, including Directed, the documents enumerated in categories P1A, P1B, P1C, P1D and P2 of Part 2 of the List of Documents (Producible Documents).3. Pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth), Mr John Lindholm of KPMG Australia (KPMG) is appointed, without any requirement to file security, until further order as receiver of the Producible Documents (Receiver), in accordance with the powers in the Schedule of Powers or such further or other powers as the Court thinks fit.

Ratio Decidendi

Legal Principle Established

The court’s discretion must be exercised judicially, that is, not arbitrarily or capriciously: Walsh at [41] per White, Perry and Banks-Smith JJ, citing Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [22] per Gaudron and Gummow JJ. Ordinarily, costs will be awarded to the successful party, although other factors may influence the court’s discretion: Gray at [2], citing Stewart v Atco Controls Pty Ltd (In liq) (No 2) [2014] HCA 31; 252 CLR 331 at [4] per Crennan, Kiefel, Bell, Gageler and Keane JJ; see also Walsh at [42]. Consideration It is convenient to first consider the application of these principles to my Re-determination Judgment before turning to the Primary Judgment.Re-determination JudgmentDegree of success on re-determination Directed was substantially successful against the Meneses parties in the Re-determination Judgment. The Meneses parties applied to be relieved of the obligation to produce documents enumerated in Part 2 of the Meneses parties’ List of Documents filed on 18 December 2019 and 6 January 2020. As explained in the Re-determination Judgment, these documents were grouped into particular categories. In their written submissions dated 9 January 2020, the Meneses parties abandoned their application in respect of the documents in categories P1C and P1D and agreed to produce those documents. After hearing the parties, I granted the Meneses parties’ application to be relieved of the obligation to produce documents in categories P3 and P4. However, I dismissed OE Solutions’ application (most importantly in respect of the documents in categories P1A, P1B and P2). In doing so, I held that, contrary to the Meneses parties’ argument, the Court was entitled to make an order directing either the independent parties or Norton Rose Fulbright (NRF) to produce copies of the relevant documents (although it was ultimately preferable to require the independent parties to do so). The Meneses parties were also unsuccessful in their opposition to Directed’s application to appoint a receiver over the relevant documents (for the purposes of those documents being produced to Directed).OE Solutions’ termination of NRF retainer An additional consideration weighs against the Meneses parties. On 20 January 2020, eight days prior to the hearing before me, OE Solutions filed a notice that it had terminated its retainer with NRF, and that it was no longer represented in the proceeding. As I noted at [141] of the Re-determination Judgment, “Counsel for Mr Meneses was unable to provide a sufficient explanation for OE Solutions’ late termination of its retainer with NRF, and I have not otherwise received one”. As Directed submits, the apparent design of the retainer termination was to circumvent a potential order by this Court requiring NRF to provide the relevant documents to OE Solutions. For the purposes of this costs decision, all that I conclude is that the termination by OE Solutions of its retainer with NRF was exceptionally late in the context of this interlocutory dispute. It occurred eight days before the hearing of the re-determination, and more than two years after the Meneses parties had instigated their application. This late shift in the factual matrix, although ultimately not determinative, caused additional complexity in the issues argued at the hearing. I take this into account in exercising my discretion.Exercise of discretion