Rasomen Pty Ltd (tas Shell Fairview Park) v The Shell Co of Australia Ltd

[1997] FCA 536

CATCHWORDS

COSTS  -  indemnity costs  - ordinary rule that costs paid on party and party basis  -  whether special or unusual feature in case to justify departure from ordinary rule  -  no point of principle involved.

Federal Court Rules O35 r7, O62 r12

TJM Products Pty Ltd v A & P Tyres Pty Ltd (1987) 17 FCR 390
Re Wilcox; ex parte Venture Industries Pty Ltd (1996) 66 FCR 511
Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225

RASOMEN PTY LTD (trading as SHELL FAIRVIEW PARK) v
THE SHELL COMPANY OF AUSTRALIA LIMITED

No. SG 88 of 1995

CORAM:      BRANSON J
PLACE:         SYDNEY (video link to Adelaide)
DATE:           20 JUNE 1997

IN THE FEDERAL COURT OF AUSTRALIA     )
SOUTH AUSTRALIA DISTRICT REGISTRY     )          No. SG 88 of 1995
GENERAL DIVISION  )

BETWEEN:              RASOMEN PTY LTD         
  (trading as SHELL FAIRVIEW PARK)
  Applicant

AND:  THE SHELL COMPANY
  OF AUSTRALIA LIMITED
  Respondent

CORAM:      BRANSON J
PLACE:         SYDNEY (video link to Adelaide)
DATE:           20 JUNE 1997

REASONS FOR DECISION

The Shell Company of Australia Limited, the successful respondent to this proceeding, has sought an order that the applicant pay its costs of the proceeding on an indemnity basis.

The background to this application is as follows.

On 13 December 1996 I delivered judgment in this matter upholding an application by the respondent that the applicant’s application be dismissed on the basis that there was no case for the respondent to answer.  The respondent on that day sought an order for costs, including reserved costs, on the usual basis but with liberty to the respondent to apply with respect to costs.  It was explained that depending on a study of my reasons for judgment the respondent might wish to apply for indemnity costs.  The applicant conceded that the costs order actually sought on that day by the respondent was prima facie an appropriate order.  However, it sought an order that consideration of the question of costs be adjourned into the New Year to allow it to consider any reasons for judgment.

Having considered the submissions of counsel with respect to costs, I made an order which contained the following provisions with respect to the costs of the proceeding:

“1.       ...

2.The respondent is to recover against the applicant its costs of these proceedings (including those costs reserved on 13 February 1996, 21 March 1996 and 27 November 1996) to be taxed if not agreed;

3.Paragraph 2 of this order is not to take effect until Monday 10 February 1997;

4....

5.The parties ... have liberty to apply with respect to costs.”

The intention behind the making of the above provisions was to avoid the running up of further costs in the event that both parties, after consideration, accepted the appropriateness of par 2 of my order.  I assumed a common understanding on 13 December 1996 that if either party was to exercise the liberty to apply with respect to costs it would do so before par 2 took effect on 10 February 1997.  No doubt it would have been better if I had expressly so ordered.

On 28 February 1997 (i.e. 11 weeks after the making of the order of 13 December 1996) the respondent filed a notice of motion giving notice that it would on 19 March 1997 move the Court for orders as follows:

“1.       That the applicant pay the costs of the respondent incurred after 8 December 1995 to include all costs, except insofar as they are shown by the applicant in these proceedings to be in an unreasonable amount or to have been unreasonably incurred, so that, subject to the above exceptions, the respondent can be completely indemnified by the applicant for its costs.

2.That in the alternative the applicant pay the costs of the respondent in an amount fixed by the Court.

3.That the order for costs in paragraph 1 include the costs of and incidental to this application.

4.Such further or other orders as this Honourable Court deems fit.”

It may be noted that the notice of motion does not expressly seek an order to have par 2 of the order of 13 December 1996 varied or set aside.

The respondent moved the Court for an order for indemnity costs on 19 March 1997.  No argument was advanced in support of an order for costs in a fixed amount.  As at 19 March 1997 my order of 13 December 1996 had not been entered.  I was not asked to make, and I did not make, any interim order forbidding the applicant from drawing up such order.  The order was subsequently drawn up by the applicant’s solicitor and entered on 24 April 1997.

The costs order made by me on 13 December 1996 was plainly an order for the applicant to pay the respondent’s costs of the proceeding on a party and party basis (Federal Court Rules O62 r12).  Such order came into force on 10 February 1997.  From that date it was open to the respondent to take the necessary steps to enter and enforce such order.

It was contended by the respondent, as I understand it, that my order of 13 December 1996 should be construed as giving it leave at any time to seek to vary or set aside par 2 of the order.  Alternatively the respondent placed reliance on Federal Court Rules O35 r7 which empowers the Court to vary or set aside an order before it has been entered.

My order of 13 December 1996 has now been entered.  I presume that this was done to facilitate the prosecution of an appeal against the judgment pronounced by me on 13 December 1996.  Were I satisfied that the applicant had caused the order to be entered for the purpose of frustrating the Court’s jurisdiction to vary or set aside par 2 of the order I would order that the entry and sealing of my order of 13 December 1996 be struck out (TJM Products Pty Ltd v A & P Tyres Pty Ltd (1987) 17 FCR 390).

I propose to consider the respondent’s application for an order for costs on an indemnity basis initially on the basis that there is no question as to the power of the Court in the circumstances that have here arisen to make such an order.

This proceeding was commenced on 21 November 1995. On the same day the applicant filed a notice of motion seeking interim relief under s21(3) of the Petroleum Retail Marketing Franchise Act 1980 (Cth) (“the Petroleum Franchise Act”) pending determination of an application under s21(1) of that Act. The Court was moved for an order giving such interim relief on 4 December 1995. On 8 December 1995 I dismissed with costs the application for interim relief. My reasons for decision disclose that I did so on the basis that I was not satisfied on the evidence led before me on the application for interim relief that there was a serious question to be tried as to whether the applicant was “a party to a franchise agreement” within the meaning of s21(1) of the Petroleum Franchise Act. Only a party to a franchise agreement is entitled to make an application pursuant to s21 of the Petroleum Franchise Act.

On the application for interim relief the applicant contended that a letter dated 28 January 1988 received by it from the respondent resulted in a unilateral contract between the parties which made the applicant a party to a relevant franchise agreement within the meaning of the Petroleum Franchise Act. Alternatively it contended that in the events which had happened the respondent was estopped from retreating from an implied promise to grant to the applicant a relevant franchise agreement. I was not satisfied that the evidence before me on the interim application raised a serious question as to either of these contentions.

The applicant pressed its claim for final relief on the basis of the same contentions as it had relied upon on its claim for interim relief.  In doing so it placed some evidence before the Court additional to that relied upon for the purpose of the interim application.  However, as is recorded above, ultimately I accepted the submission made to me on the close of the applicant’s case that there was no case for the respondent to answer.  I did so principally on the basis that even with the evidence additional to that led on the application for interim relief, the applicant had not overcome the evidentiary difficulties which I had identified in my reasons for decision on the application for interim relief.

In Re Wilcox; ex parte Venture Industries Pty Ltd (1996) 66 FCR 511 the Full Court of this Court confirmed that an application for indemnity costs should be considered in accordance with the well established principles discussed by Sheppard J in Colgate- Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225. One such principle is that the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis.

In this case the respondent places reliance upon my reasons for decision on the application for interim relief.  It contends that -

“from an early stage in these proceedings the applicant was put on notice of the evidentiary difficulties in its case and that if those deficiencies were not rectified the applicant would not succeed in these proceedings”.

It may be noted that the respondent only seeks an order for indemnity costs in respect of costs incurred after the date of my refusal of interim relief.

The respondent further contends that if properly advised the applicant should have known that it had no chance of success in the proceeding and that “it appears the proceedings were continued in wilful disregard of known facts and/or clearly established law”.  It asserts further that “it is possible to infer they [i.e. the proceedings] were continued following the failure to obtain an interlocutory injunction for an ulterior or extraneous purpose, namely to secure a settlement from Shell”.  I am not able to be satisfied on the evidence before me either that the proceeding was continued in wilful disregard of known facts or clearly established law or that it was continued for an ulterior or extraneous purpose.  I am satisfied, however, that if properly advised the applicant should have known that it had, at best, only a limited chance of success in the proceeding.

Is this of itself a sufficient ground to order costs on an indemnity basis?  The case seems to me to be a borderline one.  However, on balance I am not satisfied that the weaknesses in the applicant’s case are sufficient to amount to a “special or unusual feature in the case” sufficient to justify the Court from departing from the usual practice (Colgate-Palmolive Company v Cussons Pty Ltd at 233).

It is thus unnecessary for me to reach a concluded view on the question of the Court’s power now to vary or set aside par 2 of my order of 13 December 1996.

The application for an order that the applicant pay the costs of the respondent incurred after 8 December 1996 on an indemnity basis is dismissed.

I certify that this and the preceding six (6) pages are a true copy of the reasons for decision of the Honourable Justice Branson.

Associate:

Date:

Counsel for the applicant:  Mr R.W.R. Parker QC with Mr B.J. Tremaine
Solicitor for the applicant:  B.J. Tremaine

Counsel for the respondent:                  Mr D.J. Bleby QC with Mr S. Wisking
Solicitors for the respondent:                Finlaysons

Date of hearing:  19 March 1997