Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2)

Melbourne City Investments Pty Ltd (MCI) applied for leave to appeal against interlocutory orders made by a judge of the Federal Court concerning class member registration and opt out in a shareholder class action brought by Mr Brian Jones against Treasury Wine Estates Limited (TWE). The respondents, TWE and Mr Jones, now apply for indemnity costs of and incidental to MCI’s application for leave to appeal. The Court has a broad power to award costs in proceedings, including indemnity costs, under section 43 of the Federal Court of Australia Act 1976 (Cth) (the Act). In exercising the discretion to award costs, the Court must take account of any failure by a party to comply with the overarching purpose of the civil procedure provisions, to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. The principles relevant to an award of indemnity costs are well-established. An order for indemnity costs requires that some special or unusual feature arises. Indemnity costs are not punitive but are designed for compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs. Such circumstances may include where allegations are made which ought never to have been made, where the case is unduly prolonged by groundless contentions, and where the applicant, properly advised, should have known that he had no chance of success or persists in what should on proper consideration be seen to be a hopeless case. In broad terms an order for indemnity costs requires that some special or unusual feature arises: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). Indemnity costs are not punitive but are designed for “compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales (2002) 188 ALR 659 at 665 (Gray J, with whom Carr and Goldberg JJ agreed). Such circumstances may include where allegations are made “which ought never to have been made”, where the case is “unduly prolonged by groundless contentions” (Ragata Developments Pty Ltdv Westpac Banking Corporation [1993] FCA 115 at [15], [17] (Davies J)), and where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltdv International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (Woodward J)) or “persists in what should on proper consideration be seen to be a hopeless case” (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303 (French J)). The application for leave to appeal was made against the backdrop that MCI had brought two shareholder class actions against TWE. On 22 December 2014 the Court of Appeal of the Supreme Court of Victoria dismissed the First MCI class action as an abuse of process. MCI then commenced the Second MCI class action against TWE in the Supreme Court, making identical allegations. That proceeding was transferred to this Court. On 5 July 2016 the primary judge held that the Second MCI class action was an abuse of process and made orders to permanently stay the proceeding. MCI then applied to the primary judge to set aside the finding of abuse of process and to lift the permanent stay. The opt out and class registration orders to which the application for leave to appeal relates were made on 23 March and 5 April 2017 in a shareholder class action brought by Mr Jones against TWE (the Jones class action). The Jones class action makes essentially the same allegations as the MCI class actions. MCI brought the application for leave to appeal in its capacity as a class member in the Jones class action. MCI argues that it was not unreasonable for MCI to bring the application for leave to appeal because:(a)on 5 April 2017 the primary judge dismissed MCI’s application to send a supplementary opt out notice to class members in the Jones class action, which was before his Honour refused to lift the permanent stay of the Second MCI class action on 1 May 2017. MCI contends that, while it may have been within his Honour’s knowledge that he intended to refuse to reopen the finding of abuse of process, MCI could not have known that; (b)the opt out notice ordered by the primary judge informed class members that if they wished to challenge the opt out and class member registration orders they could do so by writing to the solicitors for Mr Jones. MCI argues that it would be contrary to the interests of justice and to the policy underpinning Part IVA of the Act for the Court to sanction MCI (by awarding indemnity costs against it) for having taken up the Court’s own invitation to challenge the opt out orders; and(c)the subject matter of the application for leave to appeal – whether the opt out orders of the primary judge were liable to have the effect of misleading class members – warranted serious consideration by the Full Court which gave detailed reasons. The application for leave to appeal was clearly hopeless, and it was unreasonable for MCI to have brought it. The Court was satisfied that MCI had no real prospect of success in the application for leave to appeal, and that it was not open to MCI to rely on the Court’s invitation to challenge the opt out orders in the Jones class action as a reason for not being sanctioned for bringing the hopeless application for leave to appeal. The Court considered that an order for indemnity costs was appropriate in the circumstances of the present case. The Court ordered that the applicant pay the costs of the First and Second Respondents of and incidental to the application for leave to appeal, doing so on an indemnity basis.