Gill v Ethicon Sàrl (No 7) - [2020] FCA 700

FEDERAL COURT OF AUSTRALIA
Gill v Ethicon Sàrl (No 7) [2020] FCA 700

File number: NSD 1590 of 2012

Judge: KATZMANN J

Date of judgment: 25 May 2020

Catchwords:
COSTS — indemnity costs — application that 90% of costs awarded to applicants be paid on an indemnity basis — where respondents denied allegations that medical devices they manufactured and sold could cause certain complications when admissions made in cross-examination that they had known they could since before any of the devices were released to the Australian market, whether conduct of respondents unreasonable — whether, if an indemnity costs order should be made, it should be for the proportion sought

PRACTICE AND PROCEDURE — application for lump sum costs order — where appeal pending, whether directions for assessment of costs and determination of amount should await the final disposition of the appeal or appeals

Legislation:
Federal Court of Australia Act 1976 (Cth) ss 4, 37M(1), 37N, 43, 52(1)

Federal Court Rules 2011 (Cth) r 40.01

Cases cited:
Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179

Clipsal Australia Pty ltd v Clipso Electrical Pty Ltd (No 4) [2017] FCA 436

Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 3) [2017] FCA 810

Hamod v New South Wales (2002) 188 FCR 659

Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116

Peterson v Merck Sharpe and Dohme (Aust) Pty Ltd (No 5) (2010) 87 IPR 234; [2010] FCA 605

Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175

Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court of Australia, French J, 3 May 1991)

Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 18 WAR 190

Wotton v Queensland (No 6) [2017] FCA 245

Date of hearing: Determined on the papers

Date of last submissions: 11 May 2020

Registry: New South Wales

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Regulator and Consumer Protection

Category: Catchwords

Number of paragraphs: 59

Counsel for the Applicants: Mr AJL Bannon SC with
Mr DE Graham SC
Mr A Naylor
Ms Z Hillman

Solicitor for the Applicants: Shine Lawyers

Counsel for the Respondents: Ms KC Morgan SC with
Mr DTW Wong

Solicitor for the Respondents: Clayton Utz

ORDERS

NSD 1590 of 2012

BETWEEN:
KATHRYN GILL

First Applicant

DIANE DAWSON

Second Applicant

ANN SANDERS

Third Applicant

AND:
ETHICON SÀRL

First Respondent

ETHICON INC.

Second Respondent

JOHNSON & JOHNSON MEDICAL PTY LTD (ACN 000 160 403)

Third Respondent

JUDGE:

KATZMANN J

DATE OF ORDER:

25 MAY 2020

THE COURT ORDERS THAT:
1.The costs be fixed in a lump sum.
2.The question of what proportion of those costs should be paid on an indemnity basis be reserved.
3.The applicants notify my chambers by 4pm on 29 May 2020 if they seek leave to file evidence in relation to the proportion of costs that should be awarded on an indemnity basis.
4.In the event that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] FCA 700
Decision Date: 25 May 2020

CaseChat Overview and Summary

The case of Gill v Ethicon Sàrl (No 7) involved a representative action concerning the sale of nine urogynaecological medical devices made of polypropylene mesh, designed for permanent implantation in the female pelvis to treat stress urinary incontinence or pelvic organ prolapse. The devices were manufactured by Ethicon Sàrl and Ethicon Inc., and sold in Australia by Johnson & Johnson Medical Pty Ltd. The applicants alleged that the respondents contravened the Trade Practices Act 1974 and the Australian Consumer Law, and breached their common law duty to take reasonable care, resulting in injury, loss, and damage to the applicants. The case reached the Federal Court of Australia, where the applicants succeeded in their claims, leading to an order for the respondents to pay the applicants’ costs. This judgment addressed two specific matters arising from that order: an application by the applicants for indemnity costs and an application for a lump sum costs order.

The primary legal issue before the court was whether the respondents' conduct was unreasonable enough to warrant an indemnity costs order for 90% of the applicants' costs. The applicants argued that the respondents had denied allegations that the medical devices could cause complications, despite admissions made during cross-examination that the respondents had been aware of the potential complications before the devices were released to the Australian market. The second issue was whether the assessment of costs and determination of the amount should await the final disposition of the pending appeals, or if the directions should proceed in the meantime.

The court reasoned that the overarching purpose of the civil procedure provisions is to facilitate the just resolution of disputes according to law and as quickly, inexpensively, and efficiently as possible. In exercising its discretion to award costs, the court must take account of any failure to comply with the duty imposed by the relevant sections of the Federal Court of Australia Act 1976. However, the court held that the question of what proportion of the costs should be paid on an indemnity basis should be reserved, and the applicants were given a deadline to notify the court if they sought leave to file evidence regarding the proportion of costs to be awarded on an indemnity basis. The court also directed that the amount of the lump sum be determined by a Registrar and that the respondents pay the costs of the applicants' interlocutory application. The costs of the indemnity costs application were reserved.

In conclusion, the court issued several orders to address the applicants' requests for costs, including fixing the costs in a lump sum, reserving the question of what proportion of those costs should be paid on an indemnity basis, and granting leave to the applicants and respondents to file and serve evidence and submissions regarding the costs. The court also directed that a Registrar determine the amount of the lump sum in a manner deemed appropriate, including on the papers.

Orders

Orders of the court

1. The costs be fixed in a lump sum.

2. The question of what proportion of those costs should be paid on an indemnity basis be reserved.

3. The applicants notify my chambers by 4pm on 29 May 2020 if they seek leave to file evidence in relation to the proportion of costs that should be awarded on an indemnity basis.

4. In the event that leave is sought in accordance with order 3, the applicants file and serve that evidence by 29 June 2020.

5. By 4.00pm on 29 June 2020 the applicants file and serve a Costs Summary within the meaning of [4.10] of the Costs Practice Note (GPN-COSTS) and conforming to [4.11] of the practice note.

6. Leave be granted to the applicants to file and serve a Costs Summary which is no longer than 20 pages.

7. By 4.00pm on 24 August 2020 the respondents file and serve a Costs Response in compliance with [4.13] and [4.14] of GPN-COSTS, save that leave is granted to the respondents to file a Costs Response which is no longer than 16 pages.

8. In the event that the parties cannot agree on the amount of the lump sum, by 4.00pm on 14 September 2020 the parties file and serve submissions, not exceeding 10 pages, addressing the law as to costs on relevant issues.

9. The respondents pay the costs of the applicants’ interlocutory application filed on 17 April 2020.

10. Costs of the indemnity costs application be reserved.

THE COURT DIRECTS THAT:

11. Pursuant to r 1.37 of the Federal Court Rules 2011 (Cth), a Registrar determine the amount of the lump sum in such manner as he or she sees fit, including, if considered appropriate, on the papers.

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 was a long-running representative action in which the applicants succeeded: Gill v Ethicon Sàrl (No 5) [2019] FCA 1905 (the principal judgment); Gill v Ethicon Sàrl (No 6) [2020] FCA 279. On 3 March 2020 I made a number of orders, including an order that the respondents pay the applicants’ costs. This judgment addresses two matters arising from that order. The first is an application by the applicants for indemnity costs, which was made orally in court on 3 March 2020. The second is an application, made in writing and filed on 17 April 2020, for an order that costs be paid in a lump sum and seeking directions to facilitate the determination by the Court of the amount. The action relates to nine urogynaecological medical devices made of polypropylene mesh designed for permanent implantation in the female pelvis in the treatment of either stress urinary incontinence or pelvic organ prolapse. The devices were manufactured by two foreign companies, Ethicon Sàrl and Ethicon Inc. (collectively Ethicon), and sold in Australia by a related company, Johnson & Johnson Medical Pty Ltd (JJM). The applicants alleged that in supplying, distributing, marketing or promoting the devices the respondents contravened the Trade Practices Act 1974 (Cth) and the Australian Consumer Law in multiple respects and also breached their common law duty to take reasonable care for their safety, causing them injury, loss and damage. Abbreviations used in this judgment reflect those used in the principal judgment and some familiarity with that judgment is assumed.The application for indemnity costs The applicants sought an order that the respondents pay 90% of their costs as agreed or taxed on an indemnity basis and their disbursements as agreed or taxed. This formulation is at odds with their application for a lump sum costs order, which was filed later, and, in the light of that application should be read as if the phrase “as agreed or taxed” was not included. The Court’s power to award costs derives from s 43 of the Federal Court of Australia Act 1976 (Cth). The Court is given a broad discretion, limited only by the need to act judicially and by the obligations imposed by Pt VB of the Act. One of those obligations is contained in s 37M(3), which relevantly provides that the Court must exercise any power conferred on it by the civil practice and procedure provisions of the Act and the Rules of Court made under the Act in the way that best promotes their overarching purpose. That purpose is described in s 37M(1). It is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Section 37N relevantly provides:(1)The parties to a civil proceeding before the Court must conduct the proceeding … in a way that is consistent with the overarching purpose.(2)A party’s lawyer must, in the conduct of a civil proceeding before the Court … on the party’s behalf:(a) take account of the duty imposed on the party by subsection (1); and(b) assist the party to comply with the duty.…(3)In exercising the discretion to award costs in a civil proceeding, the Court or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2).…

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

File number:	NSD 1590 of 2012
Judge:	KATZMANN J
Date of judgment:	25 May 2020
Catchwords:	COSTS — indemnity costs — application that 90% of costs awarded to applicants be paid on an indemnity basis — where respondents denied allegations that medical devices they manufactured and sold could cause certain complications when admissions made in cross-examination that they had known they could since before any of the devices were released to the Australian market, whether conduct of respondents unreasonable — whether, if an indemnity costs order should be made, it should be for the proportion sought PRACTICE AND PROCEDURE — application for lump sum costs order — where appeal pending, whether directions for assessment of costs and determination of amount should await the final disposition of the appeal or appeals
Legislation:	Federal Court of Australia Act 1976 (Cth) ss 4, 37M(1), 37N, 43, 52(1) Federal Court Rules 2011 (Cth) r 40.01
Cases cited:	Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 Clipsal Australia Pty ltd v Clipso Electrical Pty Ltd (No 4) [2017] FCA 436 Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 3) [2017] FCA 810 Hamod v New South Wales (2002) 188 FCR 659 Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 Peterson v Merck Sharpe and Dohme (Aust) Pty Ltd (No 5) (2010) 87 IPR 234; [2010] FCA 605 Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175 Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court of Australia, French J, 3 May 1991) Unioil International Pty Ltd v Deloitte Touche Tohmatsu (1997) 18 WAR 190 Wotton v Queensland (No 6) [2017] FCA 245
Date of hearing:	Determined on the papers
Date of last submissions:	11 May 2020
Registry:	New South Wales
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Regulator and Consumer Protection
Category:	Catchwords
Number of paragraphs:	59
Counsel for the Applicants:	Mr AJL Bannon SC with Mr DE Graham SC Mr A Naylor Ms Z Hillman
Solicitor for the Applicants:	Shine Lawyers
Counsel for the Respondents:	Ms KC Morgan SC with Mr DTW Wong
Solicitor for the Respondents:	Clayton Utz