Ho v Regulator Australia Pty Ltd & Anor (No. 2) - [2004] FMCA 402

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HO v REGULATOR AUSTRALIA PTY LTD & ANOR (No.2)

[2004] FMCA 402

HUMAN RIGHTS – COSTS – Competing costs claims – conduct of the parties – conduct before the Human Rights and Equal Opportunity Commission not relevant – conduct at the interlocutory stage of the Court proceeding previously dealt with – whether a special costs order should be made because the applicant only partially successful considered.

Federal Magistrates Act 1999 (Cth)
Federal Magistrates Court Rules 2001 (Cth)
Sex Discrimination Act 1984 (Cth)

Anglo-Cyprian Trade Agencies Limited v Paphos Wine Industries Limited [1951] 1 All ER 873
Cooke v Plauen Holdings [2001] FMCA 91
Ho v Regulator Australia Pty Ltd & Anor [2004] FMCA 62
Horman v Distribution Group Limited [2001] FMCA 52
Hughes v Western Cricket Association (Inc) (11986) 8 ATPR 40
McBride v State of Victoria (No 2) [2003] FMCA 31
Morosi v Mirror Newspapers [1977] 2 NSWR 749
Newcrest Mining (WA), BHP Minerals Limited v The Commonwealth of Australia, The Director of National Parks and Wildlife (1993) FCA, unreported, French J
Oshlack v Richmond River Council (1998) 193 CLR 72
Schmierer v Horan & Anor (No 2) [2004] FMCA 9
Shiels v James & Anor [2000] FMCA 2

Applicant:

MARIA HO

First Respondent:

Second Respondent:

REGULATOR AUSTRALIA PTY LTD

NEIL KENNY

File No:

SZ1388 of 2002

Delivered on:

25 June 2004

Delivered at:

Sydney

Hearing date:

Decided on submissions

Judgment of:

Driver FM

REPRESENTATION

Counsel for the Applicant:

Ms E Brus

Solicitors for the Applicant:

Dooley & Associates

Counsel for the Respondent:

Ms L Rowan

Solicitors for the Respondent:

Clark McNamara Lawyers

ORDERS

In addition to costs awarded in her favour on 18 June 2003, the respondents shall pay 50 per cent of the applicant’s costs and disbursements of and incidental to these proceedings, with the exception of costs of the hearing on 9 February 2004.
The applicant shall pay the respondent’s costs of the hearing on 9 February 2004, fixed in the sum of $4,707.50.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ1388 of 2002

MARIA HO

Applicant

And

REGULATOR AUSTRALIA PTY LTD

First Respondent

NEIL KENNY

Second Respondent

REASONS FOR JUDGMENT

Introduction and background

Both the applicant and the respondents in these proceedings have sought a costs order in their favour arising out of my principal judgment in the matter: Ho v Regulator Australia Pty Ltd & Anor [2004] FMCA 62. I gave judgment in the principal proceedings on 12 May 2004. I found two instances of a breach of the Sex Discrimination Act 1984 (Cth) (“the SDA”) and ordered relief in the form of declarations and an award of $1,000 in general damages to the applicant, inclusive of interest up to judgment.
The applicant seeks a general costs order in her favour. Alternatively, she seeks an order for a proportion of her costs. Alternatively, she seeks to maintain an interlocutory costs order I made in her favour and an order that thereafter each party bear their own costs for the remainder of the proceedings. As a last resort, the applicant seeks an order that each party bears the whole of their own costs for the duration of the proceedings.
The respondents seek a costs order in their favour in respect of 90 to 95 per cent of the respondents’ legal costs, on the basis that, although the applicant succeeded on two minor issues, she was for the greater part unsuccessful and the issues upon which she was unsuccessful were responsible for 90 to 95 per cent of the legal costs incurred.
Both parties have submitted written submissions in support of their claims for costs. The applicant’s written submissions were filed on 10 June 2004 and the respondents’ submissions were filed in my chambers on the following day.

Consideration

I accept an adopt paragraphs 9 and 10 of the applicant’s written submissions as to the relevant general principles:
Subsection 79(2) and (3) of the Federal Magistrates Act 1999 (Cth) reads:
(2)The Federal Magistrates Court or a Federal Magistrate has jurisdiction to award costs in all proceedings before the Federal Magistrates Court (including proceedings for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
(3)Except as provided by the rules of the Court or any other Act the award of costs is in the discretion of the Federal Magistrates Court or Federal Magistrate.
In Horman v Distribution Group Limited [2001] FMCA 52 Federal Magistrate Raphael said as follows:
The general rule for discretion in awarding a proportionate of costs is that:
“Ordinarily costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order." Toohey J in Hughes v Western Cricket Association (Inc) (1986) 8ATPR 40 at 48 cited in Newcrest Mining (WA), BHP Minerals Limited v The Commonwealth of Australia, The Director of National Parks and Wildlife (1993) FCA unreported, French J.
In Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 McHugh J says:
The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretions.
In Anglo–Cyprian Trade Agencies Limited v Paphos Wine Industries Limited [1951] 1 All ER 873 at 874 Devlin J formulated the relevant principal as follows:
No doubt, the ordinary rule is that, where a Plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.
"Misconduct" in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus the Court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purposes of increasing the costs recoverable; or obtains relief which the unsuccessful party has already offered in settlement of the dispute."
The applicant asserts that she has not been guilty of misconduct but rather that the respondents have unnecessarily protracted these proceedings. The applicant refers first to the conduct of the respondents before the Human Rights and Equal Opportunity Commission (“HREOC”). I do not regard the conduct of the parties to a complaint to HREOC as relevant to a consideration of a costs order in proceedings before the Court consequent upon the termination of a complaint by HREOC. In the first place, the proceedings before HREOC are in the nature of private alternative dispute resolution proceedings. The Court only has jurisdiction to deal with a matter where conciliation fails before HREOC. It is entirely inappropriate for the Court to take into account what may or may not have occurred in the attempts at conciliation before HREOC for the purposes of costs in the court proceedings. No costs apply to conciliation proceedings before HREOC and there should be no costs implication arising subsequently in respect of those conciliation proceedings.
Secondly, the applicant refers to the conduct of the respondents at the interlocutory stage of the proceedings in this Court. The issue of the conduct of the respondents at that stage arose at a directions hearing before me on 18 June 2003. I ordered that costs of the day in the amount of $190 be awarded to the applicant. I considered then, and I remain of the view, that that order adequately deals with the issue of the respondents’ conduct raised to that point. I will not re-open that issue now. That earlier costs order should stand in any event.
Both parties assert that they should receive a costs order based on the conduct of the other party in the period after 18 June 2003 which they assert unnecessarily prolonged the hearing. The applicant's legal advisers saw a need to introduce expert psychiatric evidence about the applicant. That psychiatric evidence was introduced as evidence in reply but raised a new significant factual issue. In the circumstances, although I agreed to receive the evidence, I also decided to give the respondents the opportunity to introduce expert evidence in reply to it. This led to the presentation of competing psychiatric evidence which prolonged the hearing.
I do not consider that it was improper for the applicant to seek to introduce expert psychiatric evidence at the late interlocutory stage of the proceedings. It must have been apparent to the applicant’s legal advisers that she suffered from some form of mental condition. Her instructions were that she suffered from Post Traumatic Stress Disorder brought on by the conduct of the respondents. If the applicant’s mental condition was caused by conduct of the respondents that amounted to breaches of the SDA and if the applicant was unlawfully dismissed from her employment by reason of that conduct, she would logically be entitled to significant damages. In addition, it was both reasonable and necessary for the applicant’s legal advisers to satisfy themselves that the applicant was able to give proper instructions. If not, she would have needed a litigation guardian. That was certainly an issue of concern for me. I took up that issue with the applicant’s psychiatrist, Dr Luong, who confirmed that in his opinion, a litigation guardian was not required. Far from being improper to obtain evidence from Dr Luong, it was both necessary and desirable. His evidence could probably have been obtained earlier but it was obtained in reasonable time prior to the trial of the matter and the respondents were able to deal with it without prejudice.
Neither was there anything improper in the respondents expanding the proceedings to obtain their own psychiatric evidence. The evidence of Dr Luong went to an issue of fundamental importance to the outcome of the proceedings. That evidence needed to be tested and the respondents were entitled to, and did, obtain a second opinion. As matters turned out, the evidence ultimately obtained from Dr Robertson had a significant impact on the outcome of the case. His evidence influenced me in finding that the applicant suffers from a personality disorder.
In my view, prima facie, the applicant should receive an order for costs in her favour. Generally, costs should follow the event. The applicant was the successful party. I identified two instances of sex discrimination. The first was trivial and did not sound in damages. The second was more significant but only called for a modest award of damages on account of non-economic loss. I was not satisfied that the applicant had been dismissed from her employment by reason of unlawful conduct of the respondents under the SDA. I found, in the circumstances, that the applicant had not suffered any economic loss by reason of the conduct of the respondents which I had found to be unlawful. Importantly, I found that the second respondent, Mr Kenny, had not sexually harassed the applicant. This meant the rejection of a very substantial part of the applicant’s claims and the rejection of her claims for significant damages. The issue for me to decide in these circumstances is whether the costs award that the applicant would ordinarily enjoy as the successful party should be reduced or eliminated by reason of the limited nature of her success or whether, conversely, a costs order should be made in favour of the respondents by reason of their substantial success on the issues of primary significance.
The respondents refer to the following quote from Ritchie’s Supreme Court Procedure at page 3156.12:
The propositions that successful parties are generally entitled to costs, and costs follow the event rule, can combine to produce difficult discretionary considerations where the proceedings involves multiple issues and the parties succeed on some issues and fail in others. Particularly, this is so where, eg, a Defendant succeeds on issues that occupied the bulk of time taken by the proceedings. The general approach taken by the courts in these situations is that it will ordinarily be appropriate toward the costs of the proceedings suite a successful party without attempting to differential between those particular issues and which were successful and those on which it failed, unless a particular issue or group of issues is clearly dominant or separable. [respondents’ emphasis retained]
The respondents refer to the decision of the NSW Court of Appeal in Morosi v Mirror Newspapers [1977] 2 NSWR 749 at 808. In that case the Court of Appeal awarded the respondent to the appeal two thirds of the costs of the consolidated action but also awarded the other party costs relating to that part of the action which it succeeded on. That was a defamation case and it appears that the Court considered that the issues were readily severable to enable a proper costs assessment to be made. In this case, the respondents submit that the vast majority of time taken in the proceedings concerned those allegations which the applicant was unable to prove. Of particular importance is the fact that the applicant’s claims of sexual harassment and unlawful dismissal have been rejected. The issues upon which the applicant succeeded were either trivial or relatively minor. There is some precedent that in such a circumstance the respondents might receive a costs order in their favour: Anglo Cyprian Trade Agencies v Paphos Wine Industries [1951] 1 All ER 873.
In this Court various approaches have been taken to deal with this kind of problem. In Cooke v Plauen Holdings [2001] FMCA 91 I awarded costs against the respondent notwithstanding that the applicant was unsuccessful in a claim of sexual harassment and wrongful dismissal and succeeded only on a relatively minor basis of sex discrimination. In that case I referred with approval to the views expressed by Raphael FM in Shiels v James & Anor [2000] FMCA 2 at paragraph 80 concerning the general desirability of an award of costs in favour of a successful applicant in human rights proceedings, so as to avoid an award of damages being swallowed up by the cost of litigation.
A different approach was taken in McBride v State of Victoria (No 2) [2003] FMCA 31 by McInnis FM. There, His Honour said that it was somewhat artificial to attempt to divide the issues and apportion costs on a mathematical basis but that it was relevant in exercising the discretion of the Court as to costs to look at the substantial outcome. His Honour had found that the applicant had been unsuccessful in significant aspects of the claim and decided that the successful applicant’s costs should be reduced by 50 per cent. I adopted the same approach as McInnis FM in Schmierer v Horan & Anor(No 2) [2004] FMCA 9 in reliance upon earlier Federal Court authority. That was a bankruptcy case.
In the present case, although the applicant succeeded on two minor issues, she was substantially unsuccessful. While, as I said in my first judgment in this matter, there are some similarities between this case and Cooke v Plauen Holdings Pty Ltd, there are also some significant differences. The applicant in Cooke succeeded substantially in persuading me that what she said occurred did occur, however she failed in persuading me that what had occurred had amounted to sexual harassment. In this case, most of what the applicant asserted occurred I have found did not occur. Her case failed substantially not on the law, but on the facts. In the circumstances of this matter, there is more to be said for the approach taken by McInnis FM in McBride than my earlier approach in Cooke.
It would be unjust to deprive the applicant of a costs order altogether. She succeeded in two minor respects and the substantial part of her case which failed was not intentionally fabricated. I found that the allegations of sexual harassment made by the applicant were a delusional fantasy stemming from her personality disorder. The applicant was able to convince herself, Dr Luong and presumably her legal advisers of the truth of her allegations. Having regard to the evidence of Dr Robertson, she was unable to convince me. However, the evidence of Dr Robertson was not heard until 9 February 2004, the fifth day of the trial. Having regard to the importance of the evidence of Dr Robertson to the ultimate outcome of the case, I have formed the view that the respondents should have their costs of the day on 9 February 2004. The applicant should have 50 per cent of her costs for the balance of the proceedings in addition to the existing interlocutory award of costs in her favour. This takes into account my view that although the issues upon which the applicant succeeded occupied less than 50 per cent of the hearing time (and presumably less than 50 per cent of the preparation time) the assessment of costs is not a strict mathematical exercise in circumstances where the parties were both partially successful and the issues between them are not readily severable. The applicant had a genuine but delusional belief in all of her claims. It was only on the final day of the trial of the matter that her true state of mind was identified. In my view, the interests of justice call for a division of costs in the manner I have stated above.
Costs should be determined on the basis of the scale of costs applicable pursuant to the Federal Magistrates Court Rules 2001 (Cth) (“the Federal Magistrates Court Rules”). For the purposes of rule 21.15 of the Federal Magistrates Court Rules I certify that it was reasonable for both parties to employ an advocate as well as solicitors to appear for them on each day of the trial of this matter. The applicant is entitled to receive fifty per cent of scale costs under the Federal Magistrates Court scale, for stage 1, stage 5 (for a four day hearing), stage 6 (for a four day hearing) and disbursements (other than counsel’s fees which are covered by the advocacy loading). The respondents are entitled to receive costs in the sum of $4,707.50 in respect of the final day of the trial. This comprises $1,295 for preparation, $1,365 for the solicitors’ attendance at court and $2,047.50 for counsel. That figure may be set off against the awards of costs in favour of the applicant in the proceedings.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 25 June 2004