Maurice Blackburn Cashman v Grizonic and Anor (No.2)
[2006] FMCA 644
•19 May 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MAURICE BLACKBURN CASHMAN v GRIZONIC & ANOR (No.2) | [2006] FMCA 644 |
| BANKRUPTCY – COSTS – Appointment of controlling trustee – application seeking orders under s.208 Bankruptcy Act 1966 and alleging abuse of process dismissed – application by each party for costs – whether ultimately successful respondent should recover costs of all proceedings – whether costs should be on an indemnity basis – whether applicant should recover costs in relation to part of the proceedings – whether each party should bear own costs in relation to part of the proceedings. |
| Bankruptcy Act 1966 (Cth), ss.32, 188, 189AAA, 208 Federal Magistrates Court Rules 2001, rr.13.10, 21.04, 29.08 |
| Maurice Blackburn Cashman Pty Ltd v Claudio Grizonic & Anor [2005] FMCA 1541 Maurice Blackburn Cashman Pty Ltd v Claudio Grizonic and Anor [2006] FMCA 126 Hughes v Western Australian Cricket Association (Inc) [1986] FCA 2491 Ritter v Godfrey (1920) 2 KB 47 Forster v Farquhar (1893) 1 QB 564 Cretazzo v Lombardi (1975) 13 SASR 4 Cummings v Lewis (1993) 41 FCR 559 Latoudis v Casey (1990) 170 CLR 534 Re Elgindata Ltd (No.2) [1992] 1 WLR 1207 Hirst v Education Queensland (No 2) [2005] FCA 793 Dias Aluminium Products Pty Ltd v Aluminium Pty Limited (No 2) [2005] FCA 1400 Eid v Wollondilly Retirement Village Pty Limited [2003] NSWCA 109 Colgate Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225 Andrews v Barnes (1887) 39 Ch D 133 Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1998) 81 ALR 397 Preston v Preston (1982) 1 All ER 41 Deputy Commissioner of Taxation v Johns [2005] FCA 1143 Graham Barclay Oysters Pty Limited v Ryan (No.2) [2000] FCA 1220 Brott v Grey [2000] FCA 1836 O’Keeffe Nominees Pty Limited v BP Australia Limited and Trade Practices Commission (Intervener) (1995) 128 ALR 718 NSW Dairy Corporation v Murray Goulburn Co-operative Limited (1989) 86 ALR 549; (1989) ATPR 46, 049 Woods v Walsh (1989) 22 FCR 204 Field v The Great Northern Railway Company (1878) 3 ExD 261 Creen v Wright (1877) 2 CPD 354 Bailey v Beagle Management Pty Limited [2001] FCA 60 MacDougall v Curleveski (1996) 40 NSWLR 430 Cummings v Lewis, unreported Federal Court of Australia, NG668 of 1989 |
| Applicant: | MAURICE BLACKBURN CASHMAN PTY LTD |
| First Respondent: | CLAUDIO GRIZONIC |
| Second Respondent: | CHRISTOPHER MEL CHAMBERLAIN |
| File number: | SYG2937 of 2005 |
| Judgment of: | Barnes FM |
| Hearing date: | 20 March 2006 |
| Delivered at: | Sydney |
| Delivered on: | 19 May 2006 |
REPRESENTATION
| Solicitors for the Applicant: | Maurice Blackburn Cashman |
| Solicitors for the Respondent: | Oliveri Attorneys |
ORDERS
That the applicant pay the costs of the first respondent of and incidental to the application of 12 October 2005 as agreed and in the absence of agreement taxed in accordance with the Federal Court Rules save and except the costs reserved on 24 October 2005, 3 November 2005,
8 December 2005, 12 December 2005 and 16 December 2005 which reserved costs shall be borne by each party.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2937 of 2005
| MAURICE BLACKBURN CASHMAN PTY LTD |
Applicant
And
| CLAUDIO GRIZONIC |
First Respondent
| CHRISTOPHER MEL CHAMBERLAIN |
Second Respondent
REASONS FOR JUDGMENT
These are applications by each of the respondent and the applicant for costs in relation to an application filed on 12 October 2005 seeking that the appointment of a controlling trustee under s.188 of the Bankruptcy Act 1966 (Cth) (the Act) be set aside as abuse of process or that orders be made under s.208 of the Act releasing the debtor’s property from control under Division 2 of Part X of the Act. Before it was resolved this matter came before the Court on a number of occasions. Costs were reserved on each of those occasions. The application was ultimately dismissed. The respondent seeks that the applicant pay his costs of all the proceedings on an indemnity basis. The applicant opposes this and has put a number of alternatives to the Court.
The application filed on 12 October 2005 sought a number of orders in relation to the appointment by the first respondent, Claudio Grizonic, of the second respondent, Christopher Mel Chamberlain, as controlling trustee under s.188 of the Act. One aspect of this application (whether leave of the Court was required under s.188(4) of the Act) was dealt with as a discrete preliminary matter in relation to which judgment was delivered on 14 October 2005. I ordered that the unsuccessful applicant pay the costs of the first and second respondents in relation to that part of the application (see Maurice Blackburn Cashman Pty Ltd v Claudio Grizonic & Anor [2005] FMCA 1541).
That left on foot as separate proceedings the other grounds in the application seeking an order setting aside the appointment pursuant to s.208 of the Act, a declaration that the authority signed by the first respondent under s.188 of the Act constituted an abuse of process and consequential relief (the abuse proceedings). As indicated above that application was also dismissed (see Maurice Blackburn Cashman Pty Ltd v Claudio Grizonic and Anor [2006] FMCA 126). However, there is a dispute between the applicant and first respondent as to liability for costs in relation to the abuse proceedings. The Court was informed that no order as to costs was sought by or in relation to the second respondent who took no further part in these proceedings. Thus for convenience the first respondent is referred to as the respondent.
The solicitor for the respondent indicated that he sought that the applicant pay the costs of the respondent on an indemnity basis or, in the alternative, on a party/party basis in respect of the abuse proceedings including all reserved costs.
The solicitor for the applicant contended that the applicant ought to have its costs in relation to each of the occasions on which costs were reserved, but conceded that the respondent ought otherwise to have his costs of the abuse proceedings (although not on an indemnity basis). First the applicant proposed that in lieu of costs orders for and against each of the applicant and the respondent, the parties should be ordered to pay their own costs of the proceedings including reserved costs (otherwise than as already dealt with by the Court in relation to that part of the application dismissed on 14 October 2005). In the alternative, the solicitor for the applicant contended that the Court should consider separately each of the occasions on which costs were reserved. It was submitted that, for reasons discussed below, the applicant ought to recover costs in relation to five of the occasions this matter was before the Court on the basis that costs were thrown away because of the state of preparedness of the respondent and because the respondent was unsuccessful in an application for summary dismissal and a notice of motion. On this basis it was suggested that an order should be made that the applicant pay the first respondent’s costs of the proceedings other than reserved costs as agreed or taxed in accordance with the Federal Court Rules and that the first respondent pay the applicant’s reserved costs of the proceedings on 24 October,
3 November, 8 December, 12 December and 16 December 2005.
Finally, the solicitor for the applicant suggested that if the Court was not prepared to make either order sought by the applicant, the parties should pay their own costs for each of 24 October, 3 November, 8,
12 and 16 December 2005 or for particular occasions.
It is relevant to have regard to the background to these proceedings, particularly in relation to those dates for which costs are in issue.
The solicitor for the respondent did not take issue with the chronology in the document filed for the applicant headed Chronology – Costs Hearing 20 March 2006 and in the outline of submissions prepared by counsel for the applicant.
On 29 June 2005 the applicant in these proceedings presented a creditor’s petition to this Court seeking a sequestration order in relation to the estate of the respondent. On 30 June 2005 the respondent executed an authority pursuant to s.188 of the Act appointing Ivor Worrell as controlling trustee. The authority was executed by
Mr Worrell on 11 July 2005. Hence the proceedings in relation to the creditor’s petition were stayed under s.189AAA of the Act. On
19 August 2005 the respondent’s creditors rejected a proposal put at a meeting of creditors.
The matter came back before the Court for a hearing of the creditor’s petition. On 30 August 2005 Federal Magistrate Raphael granted the applicant leave to file and serve a second creditor’s petition and adjourned the matter for hearing before me on 12 October 2005. On
29 September 2005, in separate proceedings between the first respondent and the original controlling trustee, a Registrar of the Court declared that the authority under s.188 of the Act appointing
Mr Worrell controlling trustee was not effective for the purposes of Part X of the Act within the meaning of s.188 of the Act.
On 10 October 2005 the respondent appointed Christopher Mel Chamberlain controlling trustee pursuant to s.188 of the Act.
The solicitors for the applicant were notified of the appointment on
11 October 2005. When the matter came before the Court on
12 October 2005 counsel for the respondent indicated that an adjournment of the hearing of the creditor’s petition was sought because of the appointment of the controlling trustee (but see in any event s.189AAA of the Act). Leave was granted to the applicant to file in Court an application which sought first a declaration that the authority of 10 October 2005 was void or not effective on the ground that the first respondent did not have leave of the Court under s.188(4) of the Act, and secondly orders under s.208 and that the appointment constituted, and should be set aside as, an abuse of process.
It is also relevant to note that on 12 October 2005 it was ordered that affidavits and pleadings filed in this Court in proceedings SYG1691 of 2005 (in relation to the first and second creditor’s petitions), SYG2364 of 2005 and SYG2522 of 2005 (other proceedings between the respondent and the first controlling trustee) could be used as evidence in the proceedings in relation to the application filed in Court on
12 October 2005.
The application for a declaration in relation to s.188(4) of the Act was dismissed with costs on 14 October 2005. The hearing in relation to the remaining grounds in the application (the abuse proceedings) was adjourned until 24 October 2005. Provision was made for variation of the hearing date with the agreement of the parties. The applicant was ordered to file and serve a written outline of argument and a schedule identifying the parts of the evidence in these proceedings and in related proceedings in this Court upon which it relied for the purpose of the abuse proceedings by 19 October 2005. The respondent was ordered to file and serve its written outline of argument on the application by
21 October 2005.
The applicant filed and served an outline of submissions (although the chronology prepared for the applicant indicates that this occurred on
20 October 2005). The applicant also filed and served a supplementary schedule of objections to the respondent’s affidavits. No schedule of evidence was filed by the applicant. No outline of argument was filed for the respondent.
On 24 October 2005 counsel for the respondent initially sought an adjournment of the abuse proceedings on the basis that, while the respondent’s solicitors had been provided with an unfiled copy of the applicant’s application of 12 October 2005, they had been served with an incomplete copy of the application filed in the registry on
13 October 2005. In explaining the absence of written submissions counsel for the first respondent referred to his other commitments and personal obligations and to the fact that the matter had been brought on quickly but that the applicant’s submissions had been served late, on the afternoon of 20 October 2005 and not on 19 October 2005.
He contended that the respondent had been prejudiced in preparation of his case. It was also contended that the applicant’s written submissions did not address all of the grounds in the application, so that the respondent was not in a position to know the basis for the claim. Counsel for the respondent moved orally under Rules 13.10(a) and (c) of the Federal Magistrates Court Rules 2001 for summary dismissal of the abuse proceedings as not disclosing any reasonable course of action or as an abuse of process. In the alternative he sought an adjournment.
The respondent’s application for summary dismissal was heard and dismissed. During that hearing counsel for the applicant outlined in some detail the background to the proceedings, relevant transactions and documents. The respondent did not establish that there was no reasonable cause of action or that the proceedings were an abuse of process of the Court. The hearing of this application occupied much of the time allocated for the hearing of the principal application on 24 October 2005 although the detailed manner in which counsel for the applicant outlined the applicant’s case in response to the application for summary dismissal did save some time in eventual presentation of the applicant’s case in the principal proceedings in description of events and documents to be relied on by the applicant. The costs of 24 October 2005 were reserved.
The hearing in relation to the abuse proceedings (the application of 12 October 2005) was then, of necessity, adjourned. It was listed for hearing on 3 November 2005. The respondent was ordered to file and serve any written evidence by 27 October 2005 and written submissions by 31 October 2005. An outline of preliminary submissions was filed for the respondent on 31 October 2005.
On 3 November 2005, after some preliminary discussion, the applicant commenced its case, outlining and discussing the evidence to be relied upon. Counsel for the respondent then sought a short adjournment, stating that he now understood at least the evidentiary basis relied upon by the applicant. However when the hearing resumed later that day, counsel for the respondent sought a further adjournment of the proceedings and requested that the applicant be required to file and serve points of claim. Counsel for the applicant was agreeable to filing and serving points of claim if so ordered (as he had foreshadowed on 24 October 2005). Orders were made for the applicant to file and serve points of claim within seven days and for the first respondent to file and serve a defence and any further affidavit material upon which he relied and also to indicate any existing affidavits upon which he intended to rely within fourteen days. As the parties proposed, the costs of 3 November 2005 were reserved. The hearing was adjourned until 12 December 2005.
It was not until 18 November 2005 that the applicant filed and served points of claim. The chronology provided to the Court indicates, and it is not disputed, that on 28 November 2005 and again on 5 December 2005 the applicant faxed letters to the solicitor for the respondent in which it requested the respondent’s solicitor to file points of defence and any further affidavits. The letter of 5 December 2005 foreshadowed that the applicant would seek to have the proceedings listed as a result of the respondent’s default. The matter was relisted before the Court for directions on 8 December 2005. In the meantime an affidavit sworn by the respondent was filed and served by the respondent personally on 6 December 2005. It did not contain all the annexures to which it referred. It is not disputed that the solicitors for the respondent played no part in preparing this affidavit.
On 8 December 2005 the solicitor for the applicant proposed that the hearing date of 12 December 2005 should be vacated and the hearing adjourned in the absence of points of defence or an indication of affidavits relied upon from the respondent and because the copy of his affidavit of 6 December 2005 which had been served contained an incomplete schedule of exhibits. It was also suggested in light of the evidence that had been filed that it was possible that the hearing may not be able to be finished in one day, as considerable time would be taken in dealing with objections to the voluminous material filed for the respondent. Further schedules of objections to the respondent’s affidavit evidence had been filed by the applicant. The solicitor for the applicant also suggested that some of the material referred to in the respondent’s affidavit of 6 December 2005 raised new issues and indicated that the applicant wished to issue a notice to produce in relation to some of those issues.
The solicitor for the respondent opposed an adjournment. However he told the Court that because the applicant had been late in filing points of claim the respondent’s counsel had been unable to file points of defence, because he had been involved in other proceedings. The solicitor for the respondent undertook to provide a list of affidavits on which he was intending to rely by midday on 8 December 2005.
I raised with the parties the possibility that the hearing should be adjourned to a time in January 2006 when a full day could be set aside. However the solicitor for the respondent sought that the matter proceed, or at least commence, on 12 December 2005. The costs of the day were reserved. The applicant’s chronology indicates that the respondent’s defence to points of claim was served at 5pm on 8 December 2005 and that it was confirmed that all affidavits of the respondent as stated in his affidavit 6 December 2005 including all annexures and exhibits would be relied on.
On 12 December 2005 counsel for the respondent confirmed that his client relied upon his affidavit sworn 6 December 2005. However it became apparent that the exhibits to that affidavit were incomplete. Counsel for the applicant submitted that the situation regarding the respondent’s evidence was highly unsatisfactory, particularly as the respondent had failed to comply with the timetable for service of affidavits, even after the proceedings had been relisted on 8 December 2005. It was agreed that none of the exhibits to the affidavit of 6 December 2005 marked A1 to A10 had been provided to the applicant and that exhibit A18 was missing and had not been provided to the applicant. Nor were all the documents before the Court. Counsel for the applicant sought an adjournment which was opposed by the respondent. I granted an adjournment. However Mr Killalea for the respondent indicated that he was unavailable in January 2006. On that basis the matter was listed for hearing on 9 February 2006. Further orders were made for the respondent to file and serve a list of affidavits upon which he intended to rely and to identify exhibits to be relied on.
On 13 December 2005 the respondent filed a notice of motion returnable on 16 December 2005 and an affidavit sworn by him on 12 December 2005 seeking that the matter be relisted for hearing on or before 23 December 2005, that the orders in relation to the filing of evidence by the respondent be set aside and that the respondent rely on an affidavit of Mr Grizonic sworn 12 December 2005 and an affidavit of Mr Oliveri sworn 24 August 2005 in proceedings SYG1691 of 2005. On 15 December 2005 the solicitor for the first respondent sent a facsimile letter to the applicant indicating that the respondent’s solicitor had not been involved in the preparation or filing of the affidavit and exhibits which had been prepared by his client without his assistance and supervision and that he had not been given the opportunity to review them. The solicitor’s letter stated:
“Our instructions were such that we were assured by our client that the evidence was in order. The first time I was provided a copy of the evidence was in Court on 12 December 2005.”
On 16 December 2005 the respondent’s notice of motion was heard. The matter was not relisted for hearing on or before 23 December 2005. However, at the request of the counsel for the respondent, the hearing date of 9 February 2006 was vacated. The matter was listed for hearing on 18 January 2006. It was confirmed that the affidavit evidence relied upon by the respondent was as listed in the notice of motion and noted that the respondent did not rely on any other material for the purposes of the proceedings. Costs were reserved.
On 18 January 2006 the hearing was completed. By order made on 23 January 2006 the application filed on 12 October 2005 was dismissed. Reasons for judgment were published on 17 February 2006.
In these circumstances the respondent seeks that the applicant pay his costs either on an indemnity basis or on a party/party basis. It is not in dispute that the applicant should meet the costs of the respondent on a party/party basis other than those of 24 October 2005, 3 November 2005, 8 December 2005, 12 December 2005 and 16 December 2005.
The Court has a general power to order the payment of costs pursuant to s.79 of the Federal Magistrates Court Act 1999. Section 32 of the Bankruptcy Act 1966 provides that the Court “may, in any proceeding before it…make such order as to costs as it thinks fit”. Thus the award of costs is in the discretion of the Court. Under the Federal Magistrates Court Rules (see Rule 29.08 of the Federal Magistrates Court Rules 2001 and now Rule 13.01(1) of the Federal Magistrates Court (Bankruptcy) Rules 2006), unless the Court otherwise orders, a person who is entitled to costs in a proceedings to which the Bankruptcy Act 1966 applies is entitled to costs in accordance with Order 62 of the Federal Court Rules. Rule 21.04 of the Federal Magistrates Court Rules 2001 and Order 62 Rule 15 of the Federal Court Rules both provide that when costs are reserved, those costs follow the event, unless the Court otherwise orders.
The general principles applicable to the exercise of the discretion of the court in relation to the award of costs were summarised by Toohey J in Hughes v Western Australian Cricket Association (Inc) [1986] FCA 2491 at [9] as follows:
The discretion must of course be exercised judicially. There are decisions, both of Australian and English courts, that throw light on the way in which the discretion is to be exercised. I shall not refer to those decisions in any detail; I shall simply set out in a summary way what I understand to be their effect.
1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v Godfrey (1920) 2 KB 47.
2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v Farquhar (1893) 1 QB 564.
3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v Lombardi (1975) 13 SASR 4 at 12.
Toohey J suggested at [10] that it was necessary to keep in mind the “note of cautious disapproval” expressed by Jacobs J in Cretazzo v Lombardi at 16 in relation to “applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of the trial”. However, as Toohey J went on to discuss, it is nonetheless relevant, although not conclusive, to consider how much time of the hearing is taken up with evidence and submissions relating to issues on which the party who is ultimately successful fails, whether any such issues are discrete and whether the circumstances are such that that party failed on such issues in circumstances where there should be some compensation to the other party for the time taken in meeting those issues. In the particular circumstances of that case, rather than attempt to apportion issues and leave the fixing of costs on such issues to the taxing office, Toohey J awarded the ultimately successful applicant 75% of his costs including reserved costs.
In Cummings v Lewis (1993) 41 FCR 559 Cooper J (with whom Sheppard and Neaves JJ agreed) referred with approval (at 602 – 603) to the principles in Hughes and added:
It is within the discretion of a trial judge to award only a proportion of a successful party’s costs if the conduct of that party in the trial was such as to unreasonably prolong the proceedings (Latoudis v Casey (1990) 170 CLR 534 at 544, 565; In Re Elgindata Ltd (No.2) [1992] 1 WLR 1207 at 1214, 1217).
Thus, while the general principle is that the order for costs ought to reflect the fact that an order for costs is intended to compensate the successful party, not to punish the unsuccessful one (see Hirst v Education Queensland (No 2) [2005] FCA 793), there are circumstances where the court may refrain from ordering costs in favour of a successful party or may order an allocation of costs in a case where there have been mixed results, albeit that this cannot be done “with mathematical precision” (Dias Aluminium Products Pty Ltd v Aluminium Pty Limited (No 2) [2005] FCA 1400 at [7]), or may award only a proportion of the successful party’s costs, for example if the conduct of that party has been such as to unreasonably prolong the proceedings (see Latoudis v Casey at 544 and 565). The issue is whether there are special circumstances justifying some order other than that the applicant pay the costs of the successful respondent and, in particular, whether there is anything in the circumstances or conduct of the respondent that would justify an order that he pay any part of the costs of the applicant. (Brott v Grey [2000] FCA 1836 at [7]).
The respondent contended that the applicant should pay all of the costs, including reserved costs, of the respondent on an indemnity basis because the applicant was unsuccessful on all points that it had raised and because it never had any prospects of success. It was pointed out that the applicant was a firm of solicitors and that it had been advised and represented by counsel throughout the proceedings. It was suggested that the applicant should have known the case was hopeless. The solicitor for the respondent submitted that the case was akin to the New South Wales Court of Appeal decision in Eid v Wollondilly Retirement Village Pty Limited [2003] NSWCA 109 at [34] per Tobias JA (with whom Mason P and McColl JA agreed). Mr Oliveri suggested that in that case there was an application that the solicitor and barrister who ran the case pay the costs on an indemnity basis. Tobias JA expressed the view that:
“In the circumstances the arguments of the appellants advanced before us never had any prospect of succeeding so that the appellants should also be ordered to pay the respondent’s costs of the appeal on an indemnity basis.”
However, as stated by Sheppard J in Colgate Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225 at [24], where the court orders the costs of one party be paid by another party to the litigation, the ordinary rule is for payment of costs on a party/party basis.
His Honour described the payment of costs on a party and party basis as “settled practice” which was “entrenched in Australia” (at [24]) and suggested:
“In consequence of the settled practice which exists the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (1887) 39 Ch D 133 at 141 said the Court had a general and discretionary power to award costs as between solicitor and client as and when the justice of the case might so require. Woodward J in Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1998) 81 ALR 397 appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston (1982) 1 All ER 41 at 58 namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice.
The circumstances which in this instance are said to warrant the Court exercising its discretion to award costs on an indemnity basis are that the applicant is a firm of solicitors and advanced a case which, it is submitted, it should have known never had any prospect of succeeding. While there is authority to support the view that commencing proceedings for an ulterior motive, with a wilful disregard for known facts or clearly established law, or making allegations which ought never to have been made may be such as to warrant the exercise of the discretion to award costs on an indemnity basis (see the cases discussed by Sheppard J in Colgate Palmolive Co at [16] – [24]) I am not persuaded that this is such a case. The fact that similar (although not identical) arguments about the giving of a second s.188 authority had not succeeded in the different circumstances considered in Deputy Commissioner of Taxation v Johns [2005] FCA 1143 does not establish that the applicant never had any prospect of success in this instance.
I note in that respect that the respondent’s application for summary dismissal of the abuse proceedings on the basis that the application disclosed no reasonable cause of action or was an abuse of process was dismissed. The authority of Eid v Wollondilly Retirement Village Pty Limited does not assist the respondent. Contrary to the respondent’s suggestion costs were not sought or ordered against a solicitor or barrister in that case. Nor, in any event, is there such an application in this case. The respondent seeks that the applicant pay costs as a party – not as the legal representative of a party. The part of the judgment in Eid relied upon by the respondent simply related to the costs of an appeal in circumstances where the Court of Appeal was of the view that the arguments the appellants had advanced before the Court never had any prospects of succeeding. As indicated, this is not such a case.
Further, in light of the chronology of this case set out above, it cannot be said that the applicant’s conduct of the litigation was such as to warrant an order for costs on an indemnity basis (see Graham Barclay Oysters Pty Limited v Ryan (No.2) [2000] FCA 1220. Insofar as there was any delay in this matter attributable to the applicant (for example in being late in filing submissions or points of claim) it is not such as to warrant making an order for indemnity costs. Indeed, much of the delay and additional expense was attributable to the respondent.
No special or unusual feature has been established such as to warrant the award of costs on an indemnity basis. Insofar as the respondent recovers costs it should be costs on a party/party basis.
While the respondent’s primary contention was that he should recover costs on an indemnity basis for all of the proceedings including the unsuccessful application for summary dismissal, in the alternative it was submitted that if the Court was not minded to award him indemnity costs in relation to any part of the proceedings, he was still entitled to his costs on a party/party basis in relation to all of the proceedings, including his unsuccessful application for summary dismissal as it was a part of the whole case.
It was submitted for the respondent that the costs should follow the event (in the sense of the outcome of the principal litigation) and that there were no special circumstances justifying some other order. It was contended that the applicant’s case was at all times very vague and that as the matter progressed it kept on adding things to it and sought to include further evidence by notices to produce and foreshadowed subpoenas. In these circumstances it was contended that the only costs order should be that the applicant pay the first respondent’s costs taxed as agreed and in the absence of agreement taxed in accordance with the Federal Court Rules.
Rule 21.04 of the Federal Magistrates Court Rules 2001 and Order 62 Rule 15 of the Federal Court Rules each provide that “If the costs of a motion, application or other proceeding are reserved, the costs reserved follow the event unless the Court otherwise orders”. In the absence of the counsel who had prepared written submissions, the solicitor for the applicant contended that the “event” referred to in these rules was the “event” of any interlocutory application and court appearance and that on the five occasions on which costs were reserved in 2005, the applicant had in effect “won” and in that sense the costs should follow the “event” for each such occasion.
It was further submitted that the evidence before the Court indicated that the solicitors for the respondent conducted the proceedings on an acknowledged unfunded basis and that it was therefore incumbent on the respondent to conduct the proceedings in a timely and efficient manner to enable it to be brought on as quickly and cheaply as possible.
It was suggested for the applicant that while the respondent was entitled to his costs other than reserved costs, in lieu of costs orders for and against each of the applicant and the respondent, it would be appropriate for the Court to order that the applicant and the first respondent each pay their own costs of the whole of the proceedings other than as already dealt with by the Court in relation to ground 1 of the application. It seems that what is sought by the applicant is an order that has the effect that each party bear a liability for costs because, while the respondent ultimately succeeded, he was said to have failed on the summary dismissal application and the notice of motion. The applicant is of the view that it should have its costs for the occasions on which costs were reserved in light of the respondent’s conduct and delay. Hence it was said to be appropriate not merely to deprive the respondent of some proportion of his costs but to make an order which reflected the applicant’s “success” on the occasions on which costs were reserved.
However in O’Keeffe Nominees Pty Limited v BP Australia Limited and Trade Practices Commission (Intervener) (1995) 128 ALR 718 Spender J confirmed at [11] that the “success” of a litigant referred to by Toohey J in Hughes at [9] and set out above:
…is directed to success in the principal proceedings. As Gummow J noted in NSW Dairy Corporation v Murray Goulburn Co-operative Limited (1989) 86 ALR 549; (1989) ATPR 46, 49 ‘the event’ can be considered as the commercial result, so that a successful applicant may recover all his costs where the objective sought by litigation is achieved, even though the applicant does not succeed on every issue in the litigation.”
Spender J rejected an argument that the outcome of an interlocutory step (in that case a motion by the Trade Practices Commission seeking to intervene in relation to which costs had been reserved) constituted the “event” within Order 62 Rule 15. His Honour stated at [38] that the general proposition that a successful party should have its costs “is directed to a consideration of the litigation as a whole and it is going too far to say that it necessarily applies to every interlocutory step in the principal proceedings” and continued that the “event” referred to in Order 62 of Rule 15 “refers to the outcome of the principal litigation and requires that in that litigation there be an order made concerning costs” (at [39]). His Honour referred with approval to Woods v Walsh (1989) 22 FCR 204 at 206-7 per Lee J suggesting that the effect of Order 62 Rule 15 “is to make reserved costs of interlocutory proceedings costs in the cause of the successful party in the principal proceedings unless some other order is made in respect of them.”
Lee J held that “the event” to which Order 62 Rule 15 refers is the outcome of the principal proceedings. Also see Field v The Great Northern Railway Company (1878) 3 ExD 261 and Creen v Wright (1877) 2 CPD 354.It is also relevant to note that Order 62 Rule 33 of the Federal Court Rules provides that an order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order. In Bailey v Beagle Management Pty Limited [2001] FCA 60 the Full Court of the Federal Court indicated that the policy behind Order 62 Rule 3 was that, in the ordinary course, costs awarded in interlocutory proceedings need not be paid until the conclusion of the proceedings, when set-offs could be made in light of the ultimate orders for costs. This recognises that in some circumstances it may be appropriate that the party who succeeds in the principal litigation may nonetheless be ordered to meet the costs of the other party in relation to interlocutory proceedings in which the first party was unsuccessful.
It is therefore necessary to determine whether the circumstances are such that, despite his ultimate success in the principal proceedings, some order other than that the respondent recover the reserved costs should be made. I note that in Brott v Grey Cooper J adopted the approach that it was for the ultimately unsuccessful applicant to show a basis why the parties who were ultimately successful should be denied reserved costs. As indicated, it is not disputed that the costs order should reflect an intention that the respondent should recover the costs of the proceedings other than the costs reserved on 24 October 2005,
3 November, 8, 12 and 16 December 2005.
I have borne in mind that it is rare for a successful party to litigation to be ordered to pay the unsuccessful party’s costs unless the situation is such that it can be said that the successful party’s conduct lengthened the proceedings unnecessarily, caused unnecessary issues to be canvassed or otherwise increased the costs of the litigation (see for example MacDougall v Curleveski (1996) 40 NSWLR 430).
On 24 October 2005 the respondent sought, without prior notice to the applicant, summary dismissal of the applicant’s application filed on 12 October 2005. Such summary application necessitated a hearing on 24 October 2005 in which the first respondent, as the applicant for summary dismissal, was unsuccessful.
It is contended for the applicant that it should have its costs of the unsuccessful summary dismissal application brought by the respondent as a discrete event on the basis that that part of the costs should “follow the event” of the application made on that day. The hearing of this application necessitated an adjournment of the principal proceedings. While not the “event” in the sense of the principal proceedings, it was a discrete proceeding (unlike an adjournment application) not merely an interlocutory step in the proceedings. The summary dismissal application was brought by the respondent as an alternative to an adjournment application. There was, however, a discrepancy between the service copy of the application in the abuse proceedings and the unfiled copy provided to the respondent, which had been brought to the attention of the applicant’s solicitor. Further, the applicant had served submissions one day late and had not filed and served a schedule identifying evidence relied on (apart from the schedule of objections to the respondent’s affidavits). On the other hand, the respondent had not filed any written submissions in the principal proceedings as ordered. The application for summary dismissal was made orally. It did not require either party to do additional preparation, although it protracted the hearing time.
On balance I consider that the circumstances are such in relation to the costs of 24 October 2005 as to warrant an ultimate costs order which has the effect that the respondent does not recover his costs of that day. The costs order should be such that the applicant’s “success” in the summary dismissal application, which occupied much but not all of the hearing time on that day as well as all the other circumstances described above are taken into account. The manner in which this should best be done is considered further below.
On 3 November 2005 the applicant commenced its case in the abuse proceedings in which it was ultimately unsuccessful. In the ordinary course of events the respondent should have the costs of such part of the principal proceedings in which he was ultimately successful.
The hearing was adjourned that afternoon at the request of counsel for the respondent after the evidence to be relied upon by the applicant was identified and discussed. Counsel for the applicant was agreeable to filing and serving points of claim as requested by counsel for the respondent. The circumstances are not such that the applicant should recover the costs of the day.
In relation to the directions hearing of 8 December 2005, I note first that the applicant was itself late in filing material. It brought the matter back to Court for directions to try to have the hearing adjourned when the respondent did not subsequently file material it had been ordered to file. The applicant was unsuccessful in the application for an adjournment. The respondent contended that there was no reason why the applicant should get costs when it had been unsuccessful in having the hearing set for 12 December 2005 adjourned and submitted generally that the material relied on by the applicant was material from other proceedings and that it should not be entitled to get its costs as a result of what it did in other proceedings.
However the directions hearing would not have been necessary if the respondent had filed points of defence and complete affidavits relied upon. Moreover, it was initially indicated that the respondent sought to rely on all the affidavits that had been filed by the respondent in the various proceedings in this Court. While he ultimately retreated from this position and relied on two affidavits only, as counsel for the applicant contended, some costs were thrown away because of the state of preparedness of the respondent, particularly having regard to the fact that the applicant had prepared its case upon materials which had been served and had filed objections to evidence said to be relied upon by the respondent. The costs of 8 December 2005 were incurred where both parties had failed to comply with the Court’s orders. The main significance of the events of that day is that it put the respondent on notice of the applicant’s concern about his state of readiness for the hearing on 12 December 2005. Each party should bear its own costs of the directions hearing.
It was submitted for the respondent that, although the applicant would no doubt raise the fact that an adjournment on 12 December 2005 was required as a result of the state of the affidavit evidence drafted by the respondent himself, the client had panicked (although there was no evidence before the Court to support this claim) and had prepared his own affidavit material and filed it as a reaction and that it was not so unreasonable to proceed in this way that the Court should take it into account when ordering costs. It was suggested that this was part and parcel of what happened in litigation and that the applicant should be ordered to pay the respondent’s costs despite any defaults by the respondent, on the basis that special circumstances had not been established to justify some other order (see Brott v Grey [2000] FCA 1836). In particular, it was contended that the conduct of the respondent was not such as to unreasonably prolong the proceedings and submitted that he did everything in his power to have the matter heard. While I would not go so far as to characterise the respondent’s conduct as “misconduct”, it was nonetheless such as to unreasonably prolong the proceedings and increase the costs. The adjournment of the hearing on 12 December 2005 was necessary because of the state of the respondent’s evidence despite the fact that the issue of the respondent’s preparedness was brought to the respondent’s solicitor’s attention on 8 December 2005. The applicant should not be required to meet the respondent’s costs of that day. The ultimate costs order should reflect the fact that the applicant’s costs of the day were thrown away.
The costs of 16 December 2005 related to a notice of motion brought by the respondent seeking to bring forward the hearing in circumstances where a January 2006 date had previously been offered by the Court. The hearing was rescheduled, although not to the date sought by the respondent. It would not be just and reasonable to require the applicant to meet the respondent’s costs of 16 December 2005.
In this somewhat difficult case, it is necessary for the Court to consider all of the circumstances in exercising its discretion to ensure as far as possible that justice is done by whatever order as to costs is made. There is considerable difficulty in any assessment of the time attributable to particular issues. Yet the respondent failed in his applications for summary dismissal and the adjournment of the hearing on 12 December 2005 was primarily attributable to the respondent (albeit that the applicant had been late in filing points of claim). I am satisfied that there are special circumstances justifying some order other than that the applicant pay the costs of the respondent in relation to the five occasions on which costs were reserved. However, as Toohey J considered in Hughes v Western Australian Cricket Association (Inc), it would be unsatisfactory to attempt to apportion issues or aspects of the proceedings and leave the fixing of costs on these issues to a taxing officer, and this would impose an excessive burden on the parties in a case of this nature and magnitude.
While it is relevant that the respondent succeeded ultimately in resisting the application of the applicant, not only did he fail in the preliminary interlocutory proceedings for summary dismissal, he did so in circumstances where he should not have the costs of this issue. There should be some compensation to the applicant for the time taken in meeting this application and the additional costs incurred because of the adjournment on 12 December 2005, albeit that may be achieved indirectly. I bear in mind that the conduct of the respondent (in initiating the summary dismissal application and the notice of motion, in failing to file documentation as ordered and in its state of preparedness) not only added to the costs he now seeks to recover from the applicant but also put the applicant to extra expense. Yet the applicant also failed to file documentation as ordered and, importantly, some of the costs incurred on these days in which costs were reserved were attributable to the proceedings in which the respondent was ultimately successful.
As in Cummings v Lewis (see Wilcox J at first instance, unreported Federal Court of Australia, NG668 of 1989 at [28]) “computation of a precise figure is impossible” (also see the Full Court in Cummings v Lewis at 602 – 603). In all the circumstances, making as best I can a broad judgment as to what is reasonable, rather than making orders that each party pay the costs, or a proportion of the other party’s costs, in relation to particular occasions on which costs were reserved,
I consider it fair and reasonable to order that the applicant pay the costs of the respondent save and except the costs reserved on 24 October,
3 November, 12 December, and 16 December 2005 which reserved costs shall be borne by each party.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 19 May 2006
18
5