Heckler and Koch GmbH v Faxtech Pty Ltd (Costs)
[2017] VSC 96
•10 March 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2012 6005
BETWEEN:
| HECKLER & KOCH GMBH | Plaintiff |
| v | |
| FAXTECH PTY LTD (ACN 007 154 234) trading as POINT TRADING | Defendant |
| AND BETWEEN: | |
| FAXTECH PTY LTD trading as POINT TRADING | Plaintiff by Counterclaim |
| - and - | |
| HECKLER & KOCH GMBH | First Defendant by Counterclaim |
| - and - | |
| THE COMMONWEALTH OF AUSTRALIA | Second Defendant by Counterclaim |
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JUDGE: | DERHAM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 March 2017 |
DATE OF JUDGMENT: | 10 March 2017 |
CASE MAY BE CITED AS: | Heckler & Koch GmbH v Faxtech Pty Ltd (Costs) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 96 |
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PRACTICE & PROCEDURE – Costs – Interlocutory application to vary confidentiality regime applying to documents discovered and produced by non-party pursuant to discovery application and subpoena – Confidentiality regime established by agreement to protect interests of non-party and facilitate effective and efficient discovery and production of documents relevant to issues in the proceeding – Non-party joined as a defendant to counterclaim – Application by defendant/plaintiff by counterclaim to vary confidentiality regime and have produced for inspection documents in respect of which party claims client legal privilege and public interest immunity – Defendant/plaintiff by counterclaim partly successful – Appropriate order as to costs in favour of defendant/plaintiff by counterclaim.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/Defendant by counterclaim | Mr S Rubenstein | Logie-Smith Lanyon |
| For the Defendant/Plaintiff by counterclaim | Dr A Trichardt | Charles Fice |
| For the Second Defendant by counterclaim | Mr R Knowles | Moray & Agnew |
HIS HONOUR:
Introduction
These reasons deal with the costs claimed by the defendant/plaintiff by counterclaim (‘Point Trading’) in consequence of orders made concerning the confidentiality of documents discovered by the second defendant by counterclaim (‘the Commonwealth’) and regarding claims for client legal privilege (‘CLP’) and public interest immunity (‘PII’) in respect of some of those documents.
Background
On 22 November 2016, I published reasons for decision (‘Reasons’) in relation to an application by Point Trading to produce for inspection three documents, two of which I will compendiously described as the Australian Government Solicitor Reports (‘AGS Reports’) and the third as the Source Evaluation Report (‘SER’).[1] After a further hearing on 15 February 2017, on 17 February 2017, I made orders consequent upon those Reasons.
[1]Heckler & Koch GMBH v Faxtech Pty Ltd [2016] VSC 697.
Point Trading’s application to produce for inspection the AGS Reports and the SER were included in applications of a wider kind made by two summonses filed on 4 December 2015. One concerned discovery of documents generally and is described as the discovery summons. These reasons are not concerned with that summons. The second summons applied for various orders concerning the confidentiality of documents produced by the Commonwealth pursuant to earlier orders and subpoenas, and as to CLP and PII claimed in respect of some of those documents. This was called the ‘confidentiality summons’.
Most of the documents the subject of the confidentiality summons were dealt with over a period of time culminating in an order on 11 March 2016, which followed hearings on 15 and 16 February 2016.[2] No order as to the costs of the summons was then made. I noted in the order of 11 March 2016 that the determination of the applications in the summons was not complete:
For the purposes of completeness and clarity, some matters the subject of the defendant’s summons filed on 4 December 2015 remain to be determined by the Court. Those matters include the documents the subject of proposed order 5 of the summons.[3]
[2]The hearing also involved the discovery application. The delay between the hearing the making of the order was partly due to debates between the parties as to the terms of the orders proposed and the matters appropriate to be included in ‘Other Matters’.
[3]Order 11 March 2016, paragraph O of ‘Other Matters’.
The documents referred to in ‘proposed order 5’ of the summons included the AGS Reports and the SER the subject of the Reasons and the order of 17 February 2017.
Point Trading now seeks an order that the Commonwealth pay all of its costs of and relating to the applications made by the confidentiality summons on an indemnity basis and that those costs be taxed immediately. The Commonwealth contends that there should be no order as to costs.
Point Trading filed a substantial written outline of submissions with 20 annexures, which included prior orders of the Court, summonses, an affidavit and correspondence between Point Trading and the Commonwealth. The Commonwealth also filed a substantial written outline of submissions and a folder of material which included prior orders, affidavits, exhibits and correspondence. Both parties handed up further correspondence concerning particular documents discovered or produced by the Commonwealth and debates between the parties regarding them. I will not refer to all this extensive material in addressing the disputed question of costs. That I do not specifically refer to correspondence or other material does not mean I have not read it and taken it into account.
Confidentiality Regime
I give an account of the interlocutory steps preceding the summons of 4 December 2015, and post-dating that summons in the Reasons.[4] In brief summary, the confidentiality regime was put in place initially when the Commonwealth was not a party in the context of a non-party discovery application made by Point Trading. In the Reasons I set out the substance of the regime established by the order of 29 October 2013.[5] The circumstances in which that order was made are accurately described by the Commonwealth in it submissions:[6]
On that day [29 October 2013], those arrangements were the subject of negotiation at court between the legal representatives for Faxtech and the Commonwealth.[7] Indeed, the arrangements were first proposed to Derham AsJ by Faxtech’s representatives. Those arrangements were subsequently agreed between the parties. Importantly, and although the Court’s order does not expressly say as much, Faxtech consented to the orders for the confidentiality arrangements.
[4][2016] VSC 697 [23]-[45].
[5]Reasons [24]-[26].
[6]Commonwealth Outline of Submissions 1 March 2017.
[7]See, for instance, pages 5 to 8 and 21 to 27 of the transcript for the hearing on that date.
The confidentially regime in place when the Commonwealth was not a party was prophylactic. The nature and extent of documents which might be produced in consequence of the non-party order were not then precisely known. At the time the order was made, the confidentiality of the documents needed to be revisited.[8] Whether that was necessary depended on whether the relevance of the documents to Point Trading’s case made greater disclosure necessary or desirable. If disclosure wider than Point Trading’s external and in-house lawyers was necessary, application was to be made by Point Trading. The Commonwealth was then obliged to justify the confidentiality it sought. It should be noted that the Commonwealth objected to the production of documents to Point Trading on a wider basis than mere confidentiality. The Commonwealth resisted production, either on discovery or pursuant to subpoena, on the grounds of CLP, PII and relevance.[9]
[8]See the Reasons [25].
[9]See for example the Commonwealth’s Outline of Submissions dated 27 November 2014, exhibit NLA-4 to the affidavit of Norman Lee Abrams sworn 14 October 2015 (‘the Abrams Affidavit’).
This expedient confidentiality regime permitted disclosure of documents to the parties’ lawyers without the need, initially, for detailed consideration of what grounds the Commonwealth had to object to wider inspection of the documents. It was later used to cater for confidentiality concerns when Point Trading issued subpoenas to the Commonwealth, again before it became a party.[10]
[10]See Order of 28 November 2014.
Prior to its joinder as a party, the Commonwealth had proposed, in response to a request by Point Trading, a way in which the confidentiality arrangements could be varied to include Point Trading’s sole director, Mr Avner Klein.[11] Point Trading’s representatives did not respond to that proposal or seek to enter into negotiations about it. Instead, on 12 June 2015, Point Trading applied to the Court for orders that included extending the confidentiality regime to include Mr Klein. It appears that application was subsequently not proceeded with by Point Trading.[12] That application also sought to join the Commonwealth as a defendant to Point Trading’s counterclaim, which did ultimately proceed with orders made on 3 September 2015 joining the Commonwealth.
[11]The Abrams Affidavit [16] (and the exhibits thereto).
[12]The Abrams Affidavit [15]-[20] (and the exhibits thereto).
The order of Almond J joining the Commonwealth as a party included provision for pleadings to be served without redactions. The Commonwealth then exposed concerns arising from it being alerted by Point Trading that its client had a right to search the Court file and that the order might be construed as upsetting the longstanding confidentiality regime that prevented Point Trading’s personnel – other than external and internal lawyers – from inspecting confidential material. It was suggested by Point Trading that Mr Klein was entitled to inspect the file and those documents.[13] The solicitor for the Commonwealth, Mr Norman Abrams, swore a lengthy affidavit on 14 October 2015 in support of an application that was intended to continue the restrictions put in place initially by the order of 29 October 2013.
[13]Those documents included, for instance, the unredacted version of the source evaluation report.
The result of this application was an order made by Justice Almond, on 19 October 2015, to the effect that documents filed in the Court referring to confidential material (within the meaning of that term as it is defined in the Court’s order of 3 September 2015) be placed in a sealed envelope and marked confidential, not to be disclosed to anyone other than the Court and a party’s external legal representative or in-house legal counsel who had provided a signed confidentiality undertaking. At the time of that application, Point Trading foreshadowed that it would make application to determine or modify the confidentiality regime originally put in place by the orders of 29 October 2013.[14]
[14]See the Reasons [24]-[26].
By its summons of 4 December 2015, Point Trading sought to be relieved from the confidentiality undertakings given pursuant to the order of 29 October 2013, and pursuant to further orders made on 28 November 2014, to lift the confidentiality regime in respect of specific documents and classes of documents and to inspect the AGS Reports and the SER.
In support of the application, Point Trading served substantial affidavit material shortly after filing the summons and additional evidentiary material on 18 and 25 January 2016.[15]
[15]Affidavits of Mr Klein and Mr Stephen Quinn of 18 January 2016; affidavit of Ms Jane Driscoll of 25 January 2016. Much of this evidence related to the source evaluation report.
On 11 February 2016, the Commonwealth filed an outline of submissions which for the first time identified the documents it conceded no longer needed to be the subject of the confidentiality regime. In those submissions, the Commonwealth agreed to remove from the confidentiality regime most, but not all, documents. It did so on the basis that the release of any document to the parties should occur ‘as a discovered document’. In addition, many of the released documents were subject to redactions. In particular, all existing redactions to documents were maintained and some additional redactions were made.[16]
[16]See the annexure to the order made on 11 March 2016.
The application came on for hearing on 15 and 16 February 2016 together with the discovery summons. On 16 February 2016, orders and directions were made for the parties to confer for the purpose of resolving questions of discovery and narrowing the issues in dispute in respect of that discovery.
Point Trading ultimately agreed to the variation of the confidentiality regime substantially as proposed in the Commonwealth’s submissions and this agreement was given effect by the order of 11 March 2016.[17] The result was that by that order, the confidentiality regime no longer applied to documents specified in an annexure to that order. In addition, orders were made releasing those who had given confidentiality undertakings in respect of the documents referred to in the annexure from those undertakings. No order as to the costs of the application was made. It was noted in other matters that some of the matters the subject of the Point Trading summons of 4 December 2015 remain to be determined. It was these outstanding matters that are the subject of the Reasons.
[17]See paragraph L of ‘Other matters’ in the order made on 11 March 2016.
The Reasons were delivered to the parties on 22 November 2016, but not published more widely. In the Reasons, I concluded that the AGS Reports were not created for the dominant purpose of giving legal advice but that they included some legal advice and possible references to material subject to PII.[18] The parties were asked to consider two matters. First, whether the Commonwealth desired to submit evidence as to whether some parts of the AGS Reports should be redacted. Second, whether some parts of the Reasons should not be published more widely than to the parties.
[18]Reasons [84].
After considerable delay, the Commonwealth made submissions on 14 February 2017, supported by further affidavit material, and a hearing was held on 15 February 2017. The questions whether the AGS Reports and the Reasons should be redacted was argued. I accepted that some redactions should apply to the AGS Reports but rejected any redactions to the Reasons. I gave reasons that day and included them in a summary form in the order made on 17 February 2017. The argument on 15 February 2017 also related to Point Trading’s application to dismiss the claim of the plaintiff and the defence of the Commonwealth for non-compliance with orders for discovery and a default notice given by Point Trading under r 29.12.1 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’). I did not order that the plaintiff’s claim or the Commonwealth’s defence to counterclaim be struck out, but did make an order awarding Point Trading its costs of that application. The order provided for the production to Point Trading of the AGS Reports, as redacted, and declared the SER to be the subject of PII. The hearing and determination of Point Trading’s claim for costs was adjourned to 2 March 2017.
Submissions
I have pointed out that both Point Trading and the Commonwealth made extensive submission. I set out below a summary of them.
Point Trading
Point Trading submitted that it was not until 11 February 2016 when the Commonwealth filed submissions for the hearing on 15 and 16 February 2016, that the Commonwealth did anything to try to agree to vary the confidentiality regime. The Commonwealth’s submission included a table of the documents over which it contended confidentiality continued to be required and those where it was no longer needed. Point Trading had prepared and filed a great volume of affidavit material in support of its application, including the affidavit of Ms Lyndal Mews,[19] Avner Klein,[20] Steven Quinn,[21] and Jane Driscoll.[22] The Commonwealth filed affidavits of Bryan Elliott,[23] and Simon Welsh.[24] Point Trading also filed an outline of submissions regarding its confidentiality application.
[19]9 December 2015.
[20]18 January 2016.
[21]18 January 2016.
[22]25 January 2016.
[23]22 December 2015, incorporating earlier affidavits.
[24]22 December 2015.
Point Trading submitted that:
(a) the Commonwealth adopted an overly restrictive approach to the confidentiality of the documents it has discovered. It points to the concessions made by the Commonwealth after the hearing of the confidentiality application on 15 and 16 February 2016, and to the Commonwealth’s lack of success in relation to the claim for CLP in respect of the AGS Reports, and its unsuccessful claims to redact passages in the AGS Reports which were either the subject of a claim for CLP or PII. In making these submissions, counsel for Point Trading has pointed to the material which shows that the Commonwealth’s sensitivity in respect to some of the matters is misplaced because some were published in publicly available media;
(b) the approach of the Commonwealth by seeking to have a ‘prophylactic’ confidentiality regime and to insist on maintaining that regime while knowing that the bulk of the material was not confidential, has caused significant delays in the proceeding, interrupted and delayed the preparation by Point Trading of its case and caused Point Trading to incur significant costs in respect of the various applications it has made. In a broad sense, counsel for Point Trading submitted that the Commonwealth did nothing to try to agree to vary the confidentiality regime and had acted in ‘total opposition’ to any variation of the confidentiality arrangements at all times prior to 11 February 2016 and has been claiming confidentiality for years without having looked at the documents carefully to determine whether they should be confidential or not;
(c) the Commonwealth is a model litigant and as such it has an obligation to conduct proceedings fairly and to exercise its powers honestly and fairly and as a moral exemplar. Point Trading contends the Commonwealth has taken tenuous or preposterous points in relation to the confidentiality of its documents; in particular its conduct falls short of that required for a model litigant regarding the confidential documents, confidentiality regime and AGS Reports;
(d) the Commonwealth’s conduct in relation to the confidentiality regime in particular constitutes an abuse of process.[25] Point Trading submits that the Commonwealth’s conduct evidences, at least, the use of Court procedures in an unjustifiably oppressive way towards Point Trading and brings the administration of justice into disrepute by seeking redactions of parts of the Reasons; and
[25]See H Lundbeck A/S v Alphapharm Pty Ltd [2016] FCA 1232, [64].
(e) in relation to the SER, even though Point Trading was unsuccessful in relation to the claim for PII over it, there are particular considerations that make it appropriate not to take its lack of success in that part of the application in determining the costs question. Those considerations included that:
(i) neither Point Trading nor its current lawyers had seen the SER, but had seen leaked excerpts which did not point to there being a valid claim for PII over the document;
(ii) there were no classification markings (such as ‘secret’) on the partial SER that Point Trading had seen;
(iii) the AGS Reports, which Point Trading’s legal advisors had seen, referred to the SER in relation to the supply of ammunition and this is a matter in issue in the proceeding; and
(iv) it was therefore reasonable for Point Trading to take the view that the SER was relevant to the issues in dispute and that no PII applied to it.
Point Trading submits that the following circumstances justify an indemnity costs order:
(a) making an allegation that is known to be incorrect;
(b) conduct which causes loss of time to the Court and to another party – seeking the redaction of parts of the AGS Reports for which there was no basis;
(c) persisting with claims that parts of the AGS Reports were the subject of CLP notwithstanding that they had been unredacted when the particular version of the AGS Reports was previously provided to Point Trading;
(d) the length of time over which the issues regarding the confidentiality regime and the confidentiality of documents has been before the Court; and
(e) the conduct of the Commonwealth falling short of that expected of a model litigant.
Point Trading also submits that certain provisions of the Civil Procedure Act 2010 (‘CPA’) are applicable to the circumstances of this case, especially ss 28(1) and (2) and s 29(1). These sections allow for costs orders by way of sanction, that is for costs orders to be punitive or disciplinary.[26] When a contravention of the overarching obligation under the CPA is established, the powers of the Court are wider than otherwise would apply and have both a compensatory and punitive element. Point trading submits that, accordingly, the conduct of the Commonwealth contravenes the overarching obligations.
[26]Actrol Parts Pty Ltd v Coppi [2015] VSC 758 [105].
Point Trading submitted that the Commonwealth’s conduct in relation to the confidentiality regime, and its claims that certain documents fall within that regime, has made it necessary for Point Trading to seek the relief sought. It was forced to issue the summons of 4 December 2015 and has achieved substantial success. The fact that the Commonwealth was successful in respect of the claim for PII in respect of the SER, should not affect the overall success that Point Trading has enjoyed
The Commonwealth
The Commonwealth submitted that there is no proper basis for any order that it pay Point Trading’s costs of its application to vary the confidentiality regime when proper regard is had to the history of the proceeding. In particular the following matters:
(a) the circumstances surrounding the establishment and maintenance of the confidentiality regime;
(b) Point Trading’s lack of any concerted effort to remove or alter the regime before its application on 4 December 2015;
(c) the Commonwealth’s significant and timely efforts to present its position on the confidentiality regime the subject of that application;
(d) Point Trading’s agreement with the Commonwealth’s position on the confidentiality regime as recorded in the order of 11 March 2016, including the Commonwealth’s existing and additional redaction of documents; and
(e) the parties’ need, in any event, to attend Court on 15 and 16 February 2016 for the discovery application and the other matters the subject of this application.
The Commonwealth fleshed out this submission by referring to the following matters:
(a) the confidentiality regime, agreed between Point Trading and the Commonwealth permitted disclosure of documents to the parties’ legal representatives without, in most instances, any need for detailed consideration of what, if any, objections to production the Commonwealth might have. This has effectively postponed to another time the question of what, if any, objections might be made by the Commonwealth in respect of release of those documents more broadly;
(b) it was always the intent of the orders establishing the confidentiality regime that the regime might need to be revisited if Point Trading’s lawyers, after considering the documents discovered or produced, applied to the Court for an order to remove or vary the confidentiality arrangements to allow greater disclosure of those documents;
(c) the evidence in Mr Abrams’ affidavit of 14 October 2015, shows that Point Trading’s submissions that the Commonwealth did nothing to try to agree to vary the confidentiality regime and had acted in ‘total opposition’ to any variation of the confidentiality arrangements at all times prior to 11 February 2016, proceeds on a misunderstanding of the facts;
(d) the Commonwealth points to its proposal for a way in which the confidentiality arrangements could be varied to include Point Trading’s sole director, Mr Avner Klein, and the lack of a response other than Point Trading’s application on 12 June 2015 for orders that included extending the confidentiality regime to include Mr Klein. This showed a co-operative and reasonable response as opposed to one characterised by total opposition to any variation of the regime;
(e) it was only by its summons of 4 December 2015 that Point Trading applied to the Court to remove the confidentiality arrangements in relation to documents previously produced by the Commonwealth. It was only then that the Commonwealth was called upon to consider the confidentiality attaching to those documents. It is entirely wrong for Point Trading to submit that the Commonwealth knew prior to this time that the confidentiality arrangements should not apply to the documents subject to the regime. When that happened, the Commonwealth set about the significant task of determining, for each of the documents:
(i) whether or not the existing confidentiality arrangements should remain in place;
(ii) if not, whether different confidentiality arrangements should apply; and
(iii) what, if any redactions, should apply to the document on any release to the parties themselves;
(f) the Commonwealth undertook that task within a reasonable period of time and with all due expedition after Point Trading’s application. Among other things, Point Trading served substantial and additional evidentiary material on 18 and 25 January 2016.[27] Much of this evidence related to the SER. Point Trading was unsuccessful on this point and in its outline of submissions complains of the necessity to file this material;
(g) the Commonwealth completed that task and presented its position in its outline of submissions filed 11 February 2016, and in the attachment to that outline; and
(h) the remaining matters the subject of Point Trading’s application related to the disclosure of the AGS reports and the SER. Those matters were the subject of the Reasons.
[27]On 18 January 2016, Point Trading served two affidavits of that date, one of Mr Klein and another of Mr Stephen Quinn. On 25 January 2016, Point Trading served an affidavit of Ms Jane Driscoll of that date.
The Commonwealth also submitted that:
(a) in light of these matters, it cannot be said the Commonwealth has acted in any way which departs from its model litigant obligations or its overarching obligations under the CPA;
(b) each party has had an equal measure of success because the Court accepted the Commonwealth’s position on the SER and accepted Point Trading’s position on the AGS report;
(c) Point Trading could have advanced its arguments about those documents at the time of the Court’s consideration of its subpoena and had it done so there would have been considerable savings of time and money;[28] and
(d) The Commonwealth devoted considerable resources to the question of disclosure of the SER. A large amount of evidence was filed by both parties in respect of that document. The Commonwealth had already presented, in its earlier response to Point Trading’s subpoena, detailed evidence and submissions on this point. By reason of Point Trading’s application, it was necessary to revisit that evidence and those submissions and put additional material before the Court.[29]
[28]Referred in the Reasons [28]-[35].
[29]See the affidavit of Mr Elliott dated 22 December 2015 and the affidavit of Brigadier Simon Welsh dated 22 December 2015. See also footnote 31 above.
Applicable Law as to Costs
Unless otherwise expressly provided by any Act or by the Rules of Court, the costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid.[30]
[30]Supreme Court Act 1986 (Vic), s 24(1).
Rule 63.02 of the Rules[31] provides that the power and discretion of the Court under s 24 of the Supreme Court Act should be exercised in accordance with O 63. Rule 63.28 of the Rules provides that, subject to Part 3 of the Order, costs in a proceeding which are to be taxed shall be taxed on a standard basis, an indemnity basis or such other basis as the Court may direct. Under r 63.31 of the Rules, the usual basis for ordering and taxing costs is the standard basis, unless the Court orders otherwise.
[31]Supreme Court (General Civil Procedure) Rules 2015 (Vic).
The discretion regarding costs has been described as absolute, unconfined or unfettered, although that discretion must be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation.[32] In the exercise of the discretion, practices or guidelines have been developed,[33] which are not legal rules that confine the exercise of the discretion.[34] There is a settled practice that in the absence of good reason to the contrary, a successful litigant should receive his or her costs.[35] It is not, however, a legal rule devised to control the exercise of the Court’s discretion.[36]
[32]See for example Latoudis v Casey (1990) 170 CLR 534, 537; cited with approval in Oshlack v Richmond River Council (1998) 193 CLR 72, 86 (‘Oshlack’).
[33]Oshlack.
[34]Norbis v Norbis (1986) 161 CLR 513, 537; Oshlack.
[35]Ritter v Godfrey [1920] 2 KB 47, 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732, 809; Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460, 477.
[36]Oshlack [35].
The purpose of a costs order is to compensate the successful party for the costs incurred, and not to punish the unsuccessful party. That purpose is a guide to the exercise of the discretion.[37] The provisions of the CPA, however, may be relevant to the exercise of the court’s discretion in relation to costs. In particular, ss 28(1) and (2) and 29(1) of the CPA may be applicable.
[37]Latoudis v Casey (1990) 170 CLR 534, 563 (Toohey J, Mason CJ agreeing) 567 (McHugh J); Ohn v Walton (1995) 36 NSWLR 77, 79.
In Actrol Parts Pty Ltd v Coppi (No 3),[38] Bell J, after reviewing the authorities on the application of the CPA, said of the powers in ss 28 and 29 of the CPA:
the purposes of the powers of the court under s 24 of the Supreme Court Act and O 63 of the Supreme Court (General Civil Procedure) Rules are compensatory (even where indemnity costs are ordered). By contrast, where contravention is established the powers of the court under pt 2.4 of the Civil Procedure Act are wider[39] and have both compensatory and punitive elements.[40] The proper exercise of these powers has been judicially considered in this court.[41]
[38][2015] VSC 758 [110].
[39]Yara (2013) 41 VR 302, 308-10 [16]-[22] (Redlich and Priest JJA, Macaulay AJA) (‘Yara’).
[40]Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd (No 4) [2013] VSC 14 (4 February 2013) [5]-[7] (J Dixon J), approved in Yara [24] (Redlich and Priest JJA, Macaulay AJA).
[41]Besides the cases just mentioned, see also Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 (14 September 2012) [19] (Croft J) and Dura [2014] VSC 400 (15 December 2014) [77]ff (J Dixon J).
The exercise of the discretion to award costs over and above the ordinary is exceptional, being reserved for cases where the losing party has engaged in unmeritorious, or deliberate or high-minded or other improper conduct such as to warrant the Court showing its disapproval and at the same time preventing the successful party being left out-of-pocket.[42] The principles governing the making of indemnity orders are succinctly stated in a number of cases.[43] It is not necessary to repeat them in this case.
[42]Australian Guarantee Corp Ltd v De Jager [1984] VR 483, 502; PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24; Fountain Selected Meats (Sales) Pty Ltd v Int Produce Merchants PtyLtd (1988) 81 ALR 397, 401.
[43]Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 232-234; Ugly Tribe Company Pty Ltd v Sikola [2001] VSC 189 [7] and [8].
Immediate Taxation
Rule 63.20.1 of the Rules establishes the default position that interlocutory costs orders are not to be taxed until the proceeding is concluded, unless the Court orders that the costs may be taxed immediately. This avoids multiple taxations and leaves the taxation of costs until all issues of costs between the parties have been resolved.[44]
[44]Dale v Clayton Utz (No.3) [2013] VSC 593 [58].
In Setka v Abbott (No.2),[45] the Court of Appeal summarised the factors that may warrant an order for immediate taxation of costs as one or more of the following:
[45][2013] VSCA 376 [27]; See also Dale v Clayton Utz (No.3) [2013] VSC 593 [65].
(a) there is a prospect of considerable delay in completion of the proceedings;
(b) the issue the subject of the interlocutory order is discrete from what will finally require determination; and
(c) the party against whom the order was made has been guilty of unsatisfactory conduct, that is conduct that was unreasonable, reprehensible or involving a want of competence and diligence.
Consideration
By its summons filed on 4 December 2015, Point Trading sought to vary the confidentiality regime and to challenge claims to CLP and PII, and was in part successful in that endeavour. The burden has always rested on the Commonwealth to satisfy the Court in relation to any particular document or class of documents that it was and is appropriate for the regime to apply to it and to satisfy the Court as to the applicability of CLP or PII to particular documents.
Point Trading submitted that it was ‘forced’ to issue its summons. Although this may not be strictly correct, Point Trading nevertheless had to raise the issue squarely so as to require the Commonwealth to justify the application of the confidentiality regime and to justify its claims to CLP and PII. The task had to be done in some fashion. In adversarial litigation, the only way of obtaining an adjudication is to apply to the Court for whatever relief is appropriate. Moreover, there would be no easy way to seek costs in the case of success without the matter being agitated in Court.
Having regard to:
(a) the fact that the Commonwealth has always borne the burden of persuading the Court that confidentiality orders were and are appropriate to be applied to particular documents;
(b) the prophylactic nature of the original regime; and
(c) the fact that the Commonwealth claimed confidentiality and then, to a significant extent (but not completely), gave up the claim,
Point Trading should be considered to have had substantial success in its application on the issue of confidentiality.
It is no answer for the Commonwealth to point to the fact that Point Trading agreed to the regime. That was both sensible and in accordance with its overarching obligations under the CPA.[46] It merely put off to a later time any dispute about whether Point Trading itself, as distinct from its lawyers, could see and give instructions regarding the documents. That dispute was substantially resolved by Point Trading’s summons.
[46]It was in accordance also with the obligation to cooperate in connection with the proceeding: s 20 of the CPA.
Thus, there was substantial, although not total, success by Point Trading in relation to the confidentiality regime not continuing to apply to a lot of the documents produced by the Commonwealth.
Then there are the issues of the AGS Reports and the SER. Point Trading had called for the production of these documents for inspection prior to joining the Commonwealth as a party and had abandoned the claim.[47] It abandoned its call for production, it seems, because of a change of lawyers acting for it and the difficulty of addressing the issues in a timely manner, there having been several previous delays. It is evident that some of the delays and burdens which Point Trading claims to have suffered by the asserted obduracy of the Commonwealth are, in reality, of its own making.
[47]Reasons [28]-[35].
But ultimately, Point Trading has succeeded in having almost all of the AGS Reports revealed to it and without restrictions apart from minor redactions. Point Trading and its lawyers had seen similarly redacted versions previously, but subject to a claim to ‘without prejudice’ privilege. That no longer applies.[48] Point Trading is able to use the AGS Reports for the purposes of its counterclaim and has filed amended pleadings that rely upon them. Its success in this regard needs to be taken into account in determining the issue of costs. It is relevant to observe, however, that when Point Trading abandoned its claim to inspect the AGS Reports on 24 February 2015, it was ordered to pay the costs of the Commonwealth, including, but not limited to, the costs of preparing for and appearing at the hearings on 26 and 28 November 2014, 5 December 2014, and 13 and 24 February 2015 and, as well, ‘any reasonable loss or expense otherwise incurred by the Commonwealth in complying with the Subpoena’.[49]
[48]Reasons [85]-[89].
[49]Order 24 February 2015 [3].
I agree with Point Trading’s submission, for the reasons advanced by Point Trading, that it was reasonable for Point Trading to contest the claim for PII over the SER.
These matters lead me to the conclusion that the Commonwealth’s submission that there should be no order as to costs of Point Trading’s confidentiality summons should be rejected. By the same token, the success that Point Trading has had has been tempered by the fact that:
(a) the Commonwealth ultimately agreed to vary the confidentiality orders with respect to a range of documents and that agreement is reflected in the order of 11 March 2016;
(b) some of its affidavit material was more relevant to the issue of whether the SER was protected by PII;
(c) the hearing on 15 and 16 February 2016 concerned both the confidentiality summons and the discovery summons;
(d) it has received an order for the costs of its application to dismiss the Commonwealth’s defence to counterclaim by reason of non-compliance with the discovery orders and default notice, a matter which occupied a part of the hearing on 15 February 2017; and
(e) I have accepted the argument of the Commonwealth that there must be some redaction of the AGS Reports. Point Trading did not achieve the full disclosure of those documents as it sought.
This is not a case where it is sensible to attempt a division of the costs between different issues. It would be difficult, if not impossible, to separate different elements of the confidentiality summons, and the work attributable to those elements, on which the parties, respectively, have had success. Moreover, some tasks arguably relate to both matters and the discovery summons.
Taking into account all the matters advanced on both sides, overall I consider that Point Trading should have 50% of the costs of its confidentiality summons.
Indemnity Costs
At the centre of Point Trading’s submissions is that the Commonwealth has insisted on the confidentiality regime whilst knowing that the bulk of the confidential documents are not, and were not, confidential or maintaining weak arguments in respect of confidentiality, CLP, redaction or PII. This approach, according to Point Trading, has caused significant delays in the proceeding, interrupted, delayed and complicated its preparation, caused unnecessary administrative burdens on its external and internal lawyers, increased its costs and liability for costs and brought the administration of justice into disrepute.
I do not accept that this is a proper characterisation of the conduct of the Commonwealth. It has previously justified its claims to PII and CLP in relation to a variety of documents, although in relation to the AGS Reports I was persuaded to revisit the issue, a matter I deal with at some length in the Reasons.[50] The Commonwealth had not been called upon to justify the confidentiality orders until Point Trading issued its summons. The confidentiality regime, which is the genesis of the requirement for Point Trading to agitate the issue of whether the Commonwealth has justification for confidentiality, is a regime Point Trading agreed should be put in place. The Commonwealth then undertook the considerable task of reviewing all the documents the subject of the confidentiality regime, and it came to a fair and reasonable position, with which Point Trading agreed. That position is reflected in the order of 11 March 2016. The Commonwealth has advanced material as to the reason for the delay after the issue of the summons that explains the time it took to complete the task. That included the Christmas and New Year period during which there was a ‘stand down’ for the military personnel who are involved in the assessment of the documents.
[50]Ibid [75]-[84].
I will therefore not order that the costs to be awarded to Point Trading be assessed on an indemnity basis. Costs on a standard basis is appropriate.
Immediate Taxation
Point Trading also applied for an immediate taxation order. Having regard to the principles referred to above, this is not a case where the issue the subject of the interlocutory orders is discrete from what will finally require determination. The discovery of documents in the proceeding is a usual element in the interlocutory processes leading to trial and concerns documents that are, prima facie relevant to the issues in the proceeding. In the case of the AGS Reports, these have now been used by Point Trading to assist in the advancement of the counterclaim against the Commonwealth. Whether or not that will be successful is beside the point. The issues of confidentiality, CLP and PII are not separate from what will finally require determination.
Point Trading contends that the Commonwealth has been guilty of unsatisfactory conduct. That is, conduct that was unreasonable, reprehensible or involving a want of competence and diligence. As I have said above, I disagree. The Commonwealth has been vigilant in protecting the national interests in the confidentiality of sensitive defence related material. In my view, the Commonwealth may have been over-cautious in some instances, but that is not the same thing as showing either unreasonableness, reprehensible conduct, or a want of competence or diligence.
It is unclear whether the delay in the matter coming to trial warrants an immediate taxation order. But the reservation of liberty to apply and the ability of Point Trading to return to the Court to renew an application for an immediate taxation order will protect it if the trial turns out, for whatever reason, to be delayed significantly.
Conclusion
For the reasons set out above, I will order that the Commonwealth pay 50% of Point Trading’s costs of its summons filed on 4 December 2015, being the summons of that date in which Point Trading and its legal advisers applied, amongst other things, to be relieved from confidentiality undertakings given pursuant to orders made on 29 October 2013 and 28 October 2014. These costs include the costs directly related to Point Trading’s application for the costs of that summons, being the costs of the hearing held on 2 March 2017 and the costs of the preparation for that hearing.
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