Morgan Belle P/L v API Services (Vic) P/L (No 2) - [2006] SASC 259

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
MORGAN BELLE P/L v API SERVICES (VIC) P/L (No 2)
[2006] SASC 259
Judgment of The Honourable Justice Gray
23 August 2006
PROCEDURE - COSTS
Consideration of question of costs of appeal - order that there be no order as to costs.
Supreme Court Rules r 101.07(5), referred to.
Morgan Belle Pty Ltd v API Service (Vic) Pty Ltd [2005] SASC 488, considered.

MORGAN BELLE P/L v API SERVICES (VIC) P/L (No 2)
[2006] SASC 259
Civil
GRAY J:

This is an application for costs.
The history of the dispute between the parties is set out in Morgan Belle Pty Ltd v API Services (Vic) Pty Ltd.[1]The dispute related to rights arising from the termination of a contract between the parties. The contract provided that that issue was to be determined by arbitration. The arbitrators delivered an award that resolved the dispute. The arbitrators then went on to make an award as to costs. In particular, on 4 May 2005, the arbitrators made an award in respect of the payment of their costs that is of the arbitrators’ expenses. Pursuant to an ex parte summons dated 19 May 2005, Morgan Belle Pty Ltd sought leave to appeal from that aspect of an award of costs.
[1] Morgan Belle Pty Ltd v API Services (Vic) Pty Ltd [2005] SASC 488.
The orders sought on appeal were as follows:
That the appeal be allowed.
That paragraph 1 of the [award as to costs] be varied as follows:
i. That [API Services] bear the fees and expenses of the Arbitrator Ian Nosworthy.
ii. That [API Services] pay [Morgan Belle’s] costs of the appeal.
Morgan Belle, in effect, invited the Court, in the context of determining its appeal, to provide it with substantive relief. It sought to overturn the award of the arbitrators as to costs and to substitute in place of the arbitrators’ award an alternative award.
The Court granted leave to appeal and allowed Morgan Belle’s appeal on the basis that the arbitrators had made an error of law. There had been a denial of procedural fairness. The arbitrators had not allowed either party the opportunity to respond to the written submissions prepared by the other on the issue of costs.
The Court did not, however, substitute the award sought by Morgan Belle for the award made by the arbitrators. The Court remitted the matter to the arbitrators to reconsider the question of costs and made the following orders:[2]
Leave to Appeal is granted. The appeal is allowed. The award as to costs is set aside. The matter is remitted to the arbitrators to reconsider costs once each party has been afforded the opportunity to reply to the submissions of the other. The parties will be able to consider and if they thought appropriate address the possibility that the arbitrators will order that each party pay their proportion of the arbitrators’ expenses.
[2] Morgan Belle Pty Ltd v API Services (Vic) Pty Ltd [2005] SASC 488 at [62].
As directed by the Court, the arbitrators reconsidered the question of costs. In a further award made on 1 May 2006, the arbitrators confirmed the award as to costs as originally made by them. They said:
Having considered all the materials, and without reproducing them in this Award, the Arbitrators in the exercise of their discretion, confirm the earlier Award as to Costs.
[Morgan Belle] claimed $10,000.00 as a licence fee for 1998 to 1999, and the balance of the licence fee for 1997 of $5,000.00. Much time and cost was taken up with this claim, as well as an initial claim for royalties. In the end result, a nominal award only was made for breach of agreement without any specific damage having been proved.
[Morgan Belle] did not succeed on its claim for royalties or licence fees.
Therefore a very significant part and costs of the proceedings was taken up with claims in respect of which [Morgan Belle] failed.
There can be no doubt that the parties have now had ample notice of the order which the Arbitrators considered was appropriate at the time of the award of costs on 4 May 2005. A great deal of additional submissions have been considered and authorities referred to, quite apart from those mentioned in the decision of Gray J. The exercise of our discretion reflects the view which we have expressed above, and we made then and now confirm an order which we thought then and now was appropriate. Nothing we have heard or read since then persuades us that the order we made was inappropriate. It was made for the reasons indicated and which it serves no good purpose to repeat.
The previous Order for costs made on 4 May 2005 is therefore confirmed.
The order of the Court as to the costs of Morgan Belle’s appeal was reserved pending the reconsideration by the arbitrators of their original award as to costs. I now come to consider the issue of costs of the appeal.
The appeal was allowed only to the extent that the Court identified, on the part of the arbitrators, a denial of procedural fairness to both parties. Morgan Belle otherwise failed to secure the substantive relief it had sought, a substituted award as to the costs of the arbitration. To that extent, its appeal was unsuccessful.
API Services submitted that through no fault of its own, it has had to incur the costs of the appeal to establish that procedural fairness had been denied by the arbitrators to both parties. It further submitted that is has also had to incur the additional costs associated with the making of further submissions to the arbitrators upon the matter being remitted for what turned out ultimately to be no different outcome.
API Services contended that it was inequitable for it to bear the costs of what were ultimately futile proceedings pursued by Morgan Belle where Morgan Belle failed to secure the substantive relief it was seeking from the Court. API Services submitted that the costs should be determined by the outcome in respect of which they were reserved, namely the reconfirmation by the arbitrators, over the objection of Morgan Belle, of the decision as to costs originally made.
In the result, Morgan Belle was partially successful on the issues argued on the appeal. However, Morgan Belle was unsuccessful in having this Court re-exercise the arbitrators’ discretion. The point of the appeal insofar as it was successful was to accord procedural fairness to parties. API Services resisted that aspect of the appeal unsuccessfully.
In all the circumstances, I have reached the conclusion that there should be no order as to costs of the application for leave to appeal, nor in respect of the appeal itself.
The order of the Court is that there be no order as to costs in respect of the application for leave to appeal dated 19 May 2005 and in respect of the appeal itself.