Edwards Madigan Torzillo Briggs Pty Ltd v Stack & Ors

[2004] HCATrans 391

[2004] HCATrans 391

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S563 of 2003

B e t w e e n -

EDWARDS MADIGAN TORZILLO BRIGGS PTY LIMITED

Applicant

and

GLORIA STACK

First Respondent

AGL GAS COMPANY (NSW) PTY LIMITED

Second Respondent

STATE RAIL AUTHORITY OF NEW SOUTH WALES

Third Respondent

ARUP PARTNERS PTY LIMITED

Fourth Respondent

OVE ARUP CONSULT PTY LIMITED

Fifth Respondent

OVE ARUP PTY LIMITED

Sixth Respondent

TMG INTERNATIONAL PTY LIMITED

Seventh Respondent

GROUP ONE INTERIORS PTY LIMITED

Eighth Respondent

ABIGROUP CONTRACTORS PTY LIMITED

Ninth Respondent

JOSEF AND SONS CONTRACTING PTY LIMITED (IN LIQUIDATION)

Tenth Respondent

JOSEPH AND SONS PTY LIMITED

Eleventh Respondent

ROBERT JOSEF

Twelfth Respondent

DANIEL JOSEF

Thirteenth Respondent

BARRY ADLER

Fourteenth Respondent

ROBERT CAMPBELL

Fifteenth Respondent

Application for special leave to appeal

GLEESON CJ
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 8 OCTOBER 2004, AT 10.06 AM

Copyright in the High Court of Australia

__________________

MR P.M. BISCOE, QC:   If the Court pleases, I appear with my learned friend, MS E.A. COLLINS, for the applicant.  (instructed by Minter Ellison)

MR J.E. MACONACHIE, QC:   If your Honours please, I appear with MR R.S. SHELDON for the second, eighth, ninth and tenth respondents.  As I understand it, the Court is aware of the position of each of the other respondents.  (instructed by Ebsworth & Ebsworth)

GLEESON CJ:   There is a certificate from the Deputy Registrar saying that she has been informed by the solicitors for the first respondent that the first respondent will play no active part in the hearing, by the solicitors for the third, fourth, fifth and sixth respondents, that those respondents will submit to any order of the Court save as to costs, and by the seventh, twelfth, thirteenth, fourteenth and fifteenth respondents, that those respondents will submit to the order of the Court save as to costs.  No appearance has been filed for the eleventh respondent, and the solicitor for the applicant has sworn an affidavit deposing that she has caused a company search to be performed in relation to the eleventh respondent and stating the results of that. 

MR MACONACHIE:   Indeed, your Honour.  Mrs Stack, the first respondent, has, in fact, put on a submission to the effect that she supports our position. 

GLEESON CJ:   Yes, Mr Biscoe.

MR BISCOE:   If your Honours please, this application raises for consideration, we suggest, the interaction of two costs rules or principles.

GLEESON CJ:   We try not to devote a great deal of our time to dealing with issues about discretionary orders for costs.

MR BISCOE:   Yes, and it will be said against us, no doubt, that we are seeking leave to appeal from a refusal of leave to appeal against a discretionary decision.  We have to acknowledge ‑ ‑ ‑

KIRBY J:   Special leave to appeal.

MR BISCOE:   Special leave to appeal.  We appreciate that that way of putting it is unattractive to what we wish to say.  However, any cost matter that comes before this Court has to pass through that hurdle, we suggest. 

GLEESON CJ:   When was the last cost matter that came before this Court?

KIRBY J:   I suppose it was Latoudis.

MR BISCOE:   Probably Oshlack, your Honour.  Your Honour, the way I put it was that it raises for consideration the interaction of two costs rules or principles.  The first is the ordinary rule that a successful litigant has a prima facie entitlement to costs.  The second is the rule formulated by Justice McHugh in the Lai Qin Case in 1997, an administrative law case, that the court will usually make no order as to costs where litigation is settled or its future prosecution becomes futile, at least where both parties have acted reasonably.  This Full Court has not considered Lai Qin. 

Your Honour, may I identify the core context of this application in three sentences.  First, the applicant obtained a consent judgment as a defendant during the trial of a personal injury case in the Supreme Court of New South Wales in November 2002 but was denied most of its costs, that is, after July 2001.  Second, the plaintiff was influenced to consent to the judgment because she had obtained consent judgments against some of the other defendants who agreed to indemnify her against any costs that she had to pay the applicant.  Thirdly, the Supreme Court Rules, Part 52A rule 11 provides:

that the costs follow the event, except where it appears to the Court that some other order should be made ‑ ‑ ‑

KIRBY J:   And there is another factor, that the plaintiff is indemnified by four defendants, is there not?

MR BISCOE:   Yes.  That was in my second proposition, your Honour, that the judgment she obtained against some of the defendants – four, in fact, as your Honour says – they agreed to indemnify her against any costs that she had to pay the applicant.

KIRBY J:   Is that the injustice that you are complaining of, that, in effect, the settlement was on the basis that those defendants who shared the responsibility to the plaintiff ought to bear the costs that you were involved in by reasons of the plaintiff’s prudence in getting you to court?

MR BISCOE:   No, I cannot put it on the basis that because she was fortunate enough to get an indemnity from others who apparently had deep pockets that it is therefore an injustice to us that they will not do it.  I cannot put it that way.  But, your Honours, the principles which I would suggest arise are these.  First of all, does a consent judgment in a common law damages claim attract the ordinary rule that prima facie the successful party is entitled to costs or, as the Court of Appeal held in this case, are costs at large?  As a corollary to that question, does it make any difference that the consent judgment is in favour of the defendant against whom the plaintiff is  influenced not to proceed because she has obtained judgment against another defendant?

Now, your Honours, we have attempted, in paragraph 1 of our written summary, to identify the ramifications of that question by setting out four scenarios that fall for consideration.  Without reading all of that, might I just identify this proposition.  Let us suppose that the plaintiff in this case had, by consent, obtained a judgment against my client for $1 million.  Would it then be said that she had no prima facie right to costs?  It has been said against my client that because we were the defendant and we got a consent judgment by consent that costs are at large.  Why is this important?  It is important, your Honours, because the Court of Appeal acknowledged in their judgment at paragraphs 18 and 19, which is in the application book at page 59, that although – well, the way approached it was this in paragraph 18, that:

there was no prima facie entitlement on the part of EMTB to costs merely because the proceedings were to be dismissed –

But in paragraph 19 they said:

Had EMTB had a prima facie entitlement to costs, then it may be that the grounds on which his Honour relied to express his disapproval of EMTB’s actions would not have been sufficient to deprive EMTB of the costs –

What were those grounds?  They are stated on page 58 in the last dot point.  What it effectively amounts to, your Honour, is that my client refused a settlement proposal by the plaintiff prior to judgment that we should pay our own costs.  So the question of whether we did or did not have a prima facie right to costs is critical and, I would suggest, not just because of my client’s position but generally.  That is to say, are people to be encouraged to settle actions by consent judgments as they would be encouraged if they knew they had a prima facie right to costs or, even in a party and party context, can you then have sort of a mini-trial where you rake over settlement negotiations in order to see whether there has been an unreasonable refusal to accept a costs offer. 

May I say this, your Honours, as far as we can tell, the only context in which the courts have ever permitted an inquiry into settlement negotiations is in the Calderbank context, but here it has been held against us in a party and party context.  Your Honours might say, how did that arise?  It arose this way.  We did make an application for indemnity costs based on Calderbank offers, and it was refused.  That material then having got before the court, as we perceived it at the time, for that purpose was then held against us in the party and party context.  So we would suggest that there are these large questions of principle that arise in a very small context.

KIRBY J:   They are possibly, but I see a spectre looming in front of me like an iceberg that then the High Court would be trying to work out what was the just disposition of the costs.  That does not seem a very attractive thing for us to be doing.

MR BISCOE:   Your Honours can do it one of two ways, I would suggest, if you get to that point.  Having resolved the question of principle, which is obviously quite a short point, your Honours could just send it back down to the Court of Appeal for them to determine the case in light of your decision.

GLEESON CJ:   There is another consideration related to that, Mr Biscoe, arising out of that.  The issue concerns the construction and application of the costs rules of the Supreme Court of New South Wales and it is the judges of the Supreme Court of New South Wales who can alter those rules from time to time if they do not think they are working satisfactorily. 

MR BISCOE:   One of the problems with that, your Honour, is that the Court of Appeal overlooked the costs rule – the costs follow the event rule, which is SCR Part 52A rule 11, which is behind tab 5 in the folder that we sent up to you.  Although, your Honours, we put that squarely to the Court of Appeal, they did not refer to it.  If you go back to Oshlack’s Case where there was an apparent division in this Court as to how you approach costs, and the view of Justice McHugh with whom the Chief Justice at that time agreed, and I would suggest your Honour Justice Kirby’s view was that there is an ordinary rule that costs follow the event. 

We say that that is mirrored in this rule to which the Court of Appeal did not refer, but it is certainly true that Justices Gaudron and Gummow in that case took the view that it is a question of statutory construction.  But, as we pointed out in our written summary, they also pointed out in that case where they were considering the Land and Environment Court Act that there was no rule under that Act to which they had been referred.  So they were able to say in that case that costs were at large.  But here there is no doubt about it.

KIRBY J:   Yes, but it is very broad terms, is it not?  Part 52A rule 11 says the general rule and then it says:

except where it appears to the Court that some other order should be made as to the whole or any part of the costs.

It could not be more general.  When you look at this case, this was a case which was proceeding to trial – I think six weeks were set aside for the trial – an awful lot of court time and public cost were to be involved and then the matter was settled and the judge looked at the fairness as between the different parties and looked at the arrangements between you and the plaintiff before the settlement, and he took into account a list of about 15 or 10 items.  Why was it not open to the Court of Appeal to say, if they had had the rule before them, that that appeared to them that some other order should not be made in this case than the one made by the judge?

MR BISCOE:   For two reasons.  First of all, they did not refer to the rule.  Secondly ‑ ‑ ‑

KIRBY J:   But the rule is really declaratory of my understanding of the common law.

MR BISCOE:   Your Honour, if it was declaratory – and we would respectfully agree – they should have said we had a prima facie right to costs but something misplaced the prima facie rule.  Your Honours, this is of very pervasive importance to litigation in general.  All the time people are settling cases ‑ ‑ ‑

KIRBY J:   I appreciate that, but we would not normally bring a matter up, especially on costs and especially in a discretionary matter where the discretion is so at large and especially where it has gone through the judges of the Supreme Court, in a matter like this, if we were not reasonably comfortable that it was going to lead somewhere.  I am not at all comfortable that it would in the peculiar facts of this case.

MR BISCOE:   There are no peculiar facts, your Honour.

KIRBY J:   Well, it is a big trial.  In disposition of costs in big cases where there are an awful lot of parties, which I think the trial judge said it was prudent to the plaintiff to include in the action, in those cases it does require some very broad balancing of considerations, and that is what the rule requires.

MR BISCOE:   Your Honour’s concern is, will it lead anywhere.  The best that I can point to in that regard, strongly, as to where it is going to lead is in paragraph 19.  If your Honours say that my client had a prima facie right to costs, then there is every indication in paragraph 19 of the Court of Appeal’s judgment that we are going to succeed here.  Can I put it this way.  Your Honour, we got up to the end ‑ ‑ ‑

GLEESON CJ:   If you succeed here, what are you going to do, get an order for leave to appeal to the Court of Appeal?

MR BISCOE:   I would have in mind either one of two things would ultimately happen.

KIRBY J:   You would say either we solve it or we set aside their order, send it back and say, “You said that if they had had a prima facie right you overlooked the rule, you have to take that into account, and redetermine the costs with that rule in mind, bearing in mind paragraph 19”.

MR BISCOE:   Indeed.  Can I just put it this way, your Honour, to get this context right.  We were up at the end of the first week of a case.  It settles around us and the plaintiff offers us a consent judgment, and then we are told that costs are at large.

KIRBY J:   Yes, but maybe you should have then said, “Hey, steady on.  We’re not going to just walk away from this.  You are going to be liable for the costs”.

MR BISCOE:   I would suggest, your Honour, that there having been ‑ ‑ ‑

KIRBY J:   The costs are always in the minds of lawyers.  It is always there.

MR BISCOE:   I know, your Honour, it is a very real thing for the clients.

KIRBY J:   That is an argument for taking it up.  It is the main point of some litigation.

MR BISCOE:   It is a very real thing.  But, your Honour, there is the narrow point.  This is not a big appeal but it is a very, very important point, we would suggest.  Does somebody who consents to a judgment have a prima facie right to costs, or not?  If they do, then there is every indication we are going to succeed from paragraph 19.  Your Honour, the only other two points I would like to make, if I ‑ ‑ ‑

KIRBY J:   Tell me how that touches on encouragement of settlement.

MR BISCOE:   Yes.  It encourages it in this way, your Honour.  Let us suppose that having been offered this consent judgment at the end of the first week of a matter that has been set down for six weeks, we had said, “No, you haven’t agreed to pay our costs, therefore, although the matter is settled with everybody else, we insist upon litigating this because we believe we will be vindicated and that we will win and at the end of six weeks you’ll have to pay our costs”.  That raises the question of whether we could do it.  The court might say, “We’re not going to be a party to this”, in which case it is said costs are at large and yet you have no prima facie entitlement. 

So, your Honours, if your Honours do say there is a prima facie right to costs, then it will encourage settlements.  It will encourage people to do what we do and say, “Yes, of course we are not going to insist upon going on for six weeks” ‑ ‑ ‑

KIRBY J:   And it is very hard to believe that experienced counsel would not at the trial have said, ‘What about our costs?”

MR BISCOE:   We did.  We asked for costs, your Honour, and the trial judge refused it.  When we got up to the Court of Appeal ‑ ‑ ‑

KIRBY J:   Immediately at the time of settlement?  At the time of settlement ‑ ‑ ‑

MR BISCOE:   I cannot go into the settlement negotiations, your Honour.

KIRBY J:   ‑ ‑ ‑ when you were offered the – or did you just lie in wait and grab the consent judgment and then say, “Yes, we’ll take the consent judgment and now we want our costs”?

MR BISCOE:   Your Honour, there was an impasse.  The plaintiff says, “All I am prepared to do is to give you a consent judgment”.  The question then is, if the beneficiary of that says, “Yes, thank you very much, I’ll take it”, is it then to be said, as the Court of Appeal said, that you do not have any prima facie right to costs ‑ ‑ ‑

KIRBY J:   Nothing was said by you at the time you said, “Yes, we’ll take a consent judgment”.

MR BISCOE:   It was said in open court.

KIRBY J:   That is the fact of the matter?

MR BISCOE:   It is the fact of the matter.

KIRBY J:   I think you would have been in a much better argumentative position to come to us if you had said something at that time.

MR BISCOE:   For example, if I might respectfully inquire?

KIRBY J:   Well, if you had said, “We’ll take the judgment.  We want our costs”.

MR BISCOE:   Well, we did say that and we argued it.

KIRBY J:   Immediately, when judgment was ‑ ‑ ‑

MR BISCOE:   Yes, immediately.  It was done at that time.  We have set out the chronology of what happened precisely in our summary of argument, your Honour.  Mr Maconachie has very kindly just said to me that he concedes that.

KIRBY J:   But you did not press for Justice Cooper to decide the issue there and then.

MR BISCOE:   We did.

KIRBY J:   But why was it that you accepted the judgment and this dispute then arose?  Why was the judgment not, as it were, withheld until that matter was determined? 

MR BISCOE:   I am not sure how that could be done, your Honour.  We were offered the judgment, we were given the judgment, we indicated we wanted to argue costs, the judge decided the order in which matters would be attended to and he attended to them in that order, as we have set out on page 82 of the application book, your Honour.  Nothing remarkable about the course of events, I would suggest.  Your Honours, if I am not taking up too much of your time ‑ ‑ ‑

GLEESON CJ:   No, we have a limit on the amount of our time that you are going to take up, so within that limit you can take up as much as you like. 

MR BISCOE:   If your Honour pleases.  Can I just identify very briefly two additional matters in support of the argument.  The first is this,

your Honour, how good is a consent judgment?  We know from cases such as James Hardie v Seltsam and Deputy Commissioner of Taxation v Chamberlain that it established conclusively that we were not liable to the applicant and it is just as good as a judgment on the merits for res judicata purposes.  A question which really arises here is, is it inferior to a judgment on the merits for the purposes of attracting the ordinary rule as to costs?

The second and final matter that I would just like to mention, if I may, your Honours, is this, in terms of Lai Qin.  Lai Qin was a case which concerned parties as between whom something occurred to make it futile to proceed ‑ ‑ ‑

KIRBY J:   Is this the one with Justice McHugh’s dicta in it?

MR BISCOE:   Yes, your Honour.  It was a case where a protection visa had been refused.  Mr Lai Qin sought for that to be declared invalid and in the meantime the Minister issued another protection visa, so that as between the parties something occurred so as to make it futile to proceed.  In our case nothing occurred as between us and the plaintiff to make it futile to proceed; rather, the plaintiff had the good fortune of getting a judgment against others.  But the plaintiff might similarly be influenced by having won the lottery, your Honours.  So we would suggest one of the points of principles which your Honours would also consider, if your Honours were minded to grant this application, would be the precise limits of the Lai Qin principle.  If the Court pleases.

GLEESON CJ:   Yes, Mr Maconachie.

KIRBY J:   What do you say about the point on paragraph 19 of the reasons of the Court of Appeal, that is to say that they overlooked the rule and yet they posited the possibility that if there was a prima facie right to costs, that that would be a new starting point?  That seems to me to be the best argument for the applicant.

MR MACONACHIE:   It is no argument at all, with respect.  This was a consent judgment only in form.  It was a mechanism and the most convenient, sensible, expeditious and cost‑effective way of saving the community the vast expense of both public and private money in determining how something that had become unnecessary to pursue should be terminated.

KIRBY J:   I understand that, but this is the deployment of power and the rule of the Supreme Court which has effect under a statute says you start from the prima facie entitlement.  After all, the plaintiff brought the present applicant into Court and put them to the trouble and why should they be sacrificed to the public interests in the settlement?

MR MACONACHIE:   The rule in its terms provides for a broad discretion, the starting point being that the costs follow the event.  Our point is there was no event. 

GLEESON CJ:   And they got an order for costs in their favour up to a certain date.

MR MACONACHIE:   Indeed.

GLEESON CJ:   And the exercise of discretion was not to deny them costs simpliciter, but was to give them an order for costs up to a certain date and they had to bear their own costs after that date.

MR MACONACHIE:   Indeed.  At page 18 of the papers before your Honours, in paragraph 84 of Acting District Court Judge Cooper’s reasons for judgment, he starts with the proposition that:

EMTB was successful and normally would be entitled to costs. 

He had that rule in mind and the Court of Appeal on the application for leave to appeal plainly also had it in mind, but they characterised the case as one not involving a consent judgment as such but, rather, the disposition, by one means or another, of proceedings, the purpose of which had become unnecessary because the plaintiff had recovered everything that she could recover.  Any further proceedings by the plaintiff against EMTB were futile.

GLEESON CJ:   I think you call him an acting District Court judge.  He was an Acting Judge of the Supreme Court.

MR MACONACHIE:   I beg your pardon, he was.  I do apologise, your Honour.  I am thinking about another matter. 

GLEESON CJ:   It was the Supreme Court Rules.

MR MACONACHIE:   He was then acting as a judge of the Supreme Court – I apologise for that – and he was dealing with the Supreme Court Rules.

KIRBY J:   I assumed his Honour was appointed to do the trial, which was quite a lengthy trial, set aside a long time. 

MR MACONACHIE:   I do not think he was appointed to do that trial.  Judge Cooper had, from time to time, as your Honours no doubt well remember, sat as an acting judge of the Supreme Court on more than one occasion. 

KIRBY J:   Well, it is a pretty convincing judgment of Justice Cooper save for that paragraph 19, but your answer to that is the point that the Chief Justice put to you and ‑ ‑ ‑

MR MACONACHIE:   Indeed, and it really becomes a question of characterisation.

KIRBY J:   In fact, the rule which their Honours in the Court of Appeal appear not to have cited is really not all that different to my understanding of the common law. 

MR MACONACHIE:   They did not say it but, your Honour, this was an application for leave to appeal and they addressed the key issues.

KIRBY J:   But was it drawn to their Honours’ attention?

MR MACONACHIE:   Indeed. 

KIRBY J:   The rule was?

MR MACONACHIE:   Yes, I have a clear recollection of it being ‑ ‑ ‑

KIRBY J:   Because in this Court we see so many times, barristers love judges’ statements.  They do not like rules or statutes.  They hate them.

GLEESON CJ:   I think Mr Biscoe told us it was referred to ‑ ‑ ‑

MR MACONACHIE:   I am sure it was, your Honour.  I am trying to remember back to what happened in the Court of Appeal, but Acting Justice Davies, who wrote the judgment, spoke of reasons relating to dealing with the key issues and not every issue.  It was an application for leave to appeal.  The real question became the characterisation ‑ ‑ ‑

KIRBY J:   Anyway, it is a pretty basic rule.  Every judge knows it.

MR MACONACHIE:   It is, and if your Honours are to be invited to put further constraints upon what is necessarily a very broad rule, that is to the disadvantage of the quick, cheap and efficient disposition of proceedings.  That is all I wish to say.

GLEESON CJ:   Thank you, Mr Maconachie.  Yes, Mr Biscoe.

MR BISCOE:   I have nothing to add to my written submissions in reply, your Honour.

GLEESON CJ:   This is an application for special leave to appeal from a decision of the Court of Appeal of the Supreme Court of New South Wales, which refused leave to appeal from a costs order made by an acting judge of the Supreme Court following the settlement, after some days of hearing, of complex litigation.  The order of the primary judge was that the first respondent, who was the plaintiff in the action, should pay the costs of the applicant, who was a defendant, up to a certain date, but that thereafter there should be no order as to costs. 

That was a discretionary decision and the Court of Appeal saw no error of principle in the primary judge’s approach to the matter.  The case raises no issue suitable for a grant of special leave and we are not persuaded that the interests of justice require such a grant.  The application is dismissed with costs. 

We will adjourn for a short time to reconstitute. 

AT 10.31 AM THE MATTER WAS CONCLUDED