Roy Hill Holdings Pty Ltd v Samsung C&T Corporation
[2015] WASC 458 (S)
•3 MAY 2016
ROY HILL HOLDINGS PTY LTD -v- SAMSUNG C&T CORPORATION [2015] WASC 458 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 458 (S) | |
| Case No: | CIV:2781/2015 | ON THE PAPERS | |
| Coram: | LE MIERE J | 3/05/16 | |
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff to pay costs of defendant on party and party basis | ||
| B | |||
| PDF Version |
| Parties: | ROY HILL HOLDINGS PTY LTD ROY HILL IRON ORE PTY LTD ROY HILL INFRASTRUCTURE PTY LTD SAMSUNG C&T CORPORATION |
Catchwords: | Costs Application for a stay of proceedings under International Arbitration Act 1974 (Cth) Whether costs should be awarded on indemnity basis for proceedings brought in breach of arbitration agreement Turns on own facts |
Legislation: | International Arbitration Act 1974 (Cth), s 7 |
Case References: | A v B [2007] EWHC 54 (Comm); [2007] 1 Lloyds LR 358 Ansett Australia Ltd v Malaysian Airline System Berhad [No 2] [2008] VSC 156 Australian Maritime Systems Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52(S) Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 797 J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) [No 2] [1993] FCA 42; (1993) 46 IR 301 John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [No 2] [2015] NSWSC 564 KNM Process Systems SDN BHD v Mission New Energy Ltd formerly known as Mission Biofuels Ltd [2014] WASC 437(S) Pipeline Services WA Pty Ltd v Atco Gas Australia Pty Ltd [2014] WASC 10(S) Quancorp Pty Ltd v McDonald [1999] WASCA 101 Re Ikon Group Ltd [No 3] [2015] NSWSC 982 Roy Hill Holdings Pty Ltd v Samsung C&T Corporation [2015] WASC 458 Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [No 2] [2015] FCA 1046 Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(2) |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
ROY HILL IRON ORE PTY LTD
Second Plaintiff
ROY HILL INFRASTRUCTURE PTY LTD
Third Plaintiff
AND
SAMSUNG C&T CORPORATION
Defendant
Catchwords:
Costs - Application for a stay of proceedings under International Arbitration Act 1974 (Cth) - Whether costs should be awarded on indemnity basis for proceedings brought in breach of arbitration agreement - Turns on own facts
Legislation:
International Arbitration Act 1974 (Cth), s 7
Result:
Plaintiff to pay costs of defendant on party and party basis
Category: B
Representation:
Counsel:
First Plaintiff : No appearance
Second Plaintiff : No appearance
Third Plaintiff : No appearance
Defendant : No appearance
Solicitors:
First Plaintiff : Corrs Chambers Westgarth
Second Plaintiff : Corrs Chambers Westgarth
Third Plaintiff : Corrs Chambers Westgarth
Defendant : Pinsent Masons (Aust)
Case(s) referred to in judgment(s):
A v B [2007] EWHC 54 (Comm); [2007] 1 Lloyds LR 358
Ansett Australia Ltd v Malaysian Airline System Berhad [No 2] [2008] VSC 156
Australian Maritime Systems Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52(S)
Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 797
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) [No 2] [1993] FCA 42; (1993) 46 IR 301
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [No 2] [2015] NSWSC 564
KNM Process Systems SDN BHD v Mission New Energy Ltd formerly known as Mission Biofuels Ltd [2014] WASC 437(S)
Pipeline Services WA Pty Ltd v Atco Gas Australia Pty Ltd [2014] WASC 10(S)
Quancorp Pty Ltd v McDonald [1999] WASCA 101
Re Ikon Group Ltd [No 3] [2015] NSWSC 982
Roy Hill Holdings Pty Ltd v Samsung C&T Corporation [2015] WASC 458
Sino Dragon Trading Ltd v Noble Resources International Pte Ltd [No 2] [2015] FCA 1046
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(2)
- LE MIERE J:
Judgment dismissing Samsung application
1 The defendant (Samsung) applied for an order that this proceeding be stayed pursuant to s 7(2) of the International Arbitration Act 1974 (Cth) and the parties be referred to arbitration. On 4 December 2015 I ordered that the proceeding be stayed and the parties referred to arbitration: Roy Hill Holdings Pty Ltd v Samsung C&T Corporation [2015] WASC 458. I ordered that the parties file and serve submissions in relation to costs and the question of costs orders be determined on the papers. I have decided that Roy Hill should pay Samsung's costs on a party and party basis for the following reasons.
Parties' positions
2 Samsung says that Roy Hill should pay its costs of the application on an indemnity basis. Roy Hill says that it should pay Samsung's costs on the ordinary party and party basis.
Principles
3 Samsung submits that as a matter of general principle a party commencing legal proceedings in relation to a dispute falling within an arbitration agreement should be ordered to pay reasonable costs actually incurred, that is indemnity costs, by an innocent party applying for a stay of those proceedings. In its reply submissions Samsung says that the court has a general discretion as to costs but the starting point in these circumstances is that indemnity costs should be ordered as opposed to the starting point being that costs should be ordered on a part and party basis. Samsung says that the unsuccessful party, Roy Hill, has an onus to show why indemnity costs should not be awarded.
4 Roy Hill says that the proposition that there is a general principle that a party commencing legal proceedings in relation to a dispute falling within an arbitration agreement should be ordered to pay the costs incurred by a party successfully applying for a stay of those proceedings on an indemnity basis is wrong. Roy Hill says that the court has a general discretion with respect to orders relating to costs and the accepted starting point in all cases is that costs should be ordered on an ordinary basis. Costs should only be awarded on an indemnity basis if there are special or unusual features in the case to justify departure from ordinary practice and the onus of establishing the special or unusual feature is on the party seeking the indemnity costs order.
Authority
5 There are two competing lines of authority as to the proper approach to costs on a successful application to stay proceedings commenced in breach of an arbitration agreement. In A v B [2007] EWHC 54 (Comm); [2007] 1 Lloyds LR 358 (A v B) Colman J advocated the following general approach:
Provided that it can be established by a successful application for a stay or an anti-suit injunction as a remedy for breach of an arbitration or jurisdiction clause that the breach has caused the innocent party reasonably to incur legal costs, those costs should normally be recoverable on an indemnity basis [11].
- That approach was approved and applied by Martin CJ in Pipeline Services WA Pty Ltd v Atco Gas Australia Pty Ltd [2014] WASC 10(S) (Pipeline Services) and KNM Process Systems SDN BHD v Mission New Energy Ltdformerly known as Mission Biofuels Ltd [2014] WASC 437(S) where the Chief Justice said:
In Pipeline Services WA Pty Ltd v Atco Gas Australia Pty Ltd, I applied the reasoning of Colman J in A v B to conclude that as a guide to the exercise of discretion in relation to the costs of an application for a stay of a dispute falling within an arbitration agreement, a party commencing legal proceedings in breach of the arbitration agreement should generally be ordered to pay all costs reasonably incurred by an innocent party applying for a stay of those proceedings. However, I emphasise that the principle was no more than a guide, and that the ultimate exercise of the discretion in any particular case would depend critically upon its particular circumstances. Nevertheless, for the reasons which I then expressed, that guiding principle provides an appropriate starting point for the consideration of the order most appropriately made with respect to the costs of those proceedings [2].
7 The conflict between these single judge decisions was confronted by Mitchell J in Australian Maritime Systems Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2016] WASC 52(S). Mitchell J said that the conflict between the single judge decisions had not been resolved by any decision binding on his Honour, or by the decision of an intermediate appellate court which his Honour was bound to follow unless satisfied it is plainly wrong. His Honour concluded it was therefore necessary to identify the proper approach by reference to first principles. Having considered the arguments in favour of the general approach that fairness ordinarily requires an award of indemnity costs in litigation commenced in breach of an arbitration agreement his Honour disagreed with the proposition that the court should adopt the general approach advocated in A v B and Pipeline Services. His Honour said at [25] that the court should not adopt the general approach of awarding indemnity costs where proceedings commenced in breach of an arbitration agreement are stayed. I find the reasoning of Mitchell J persuasive. Furthermore, the preponderance of authority is against the general approach advocated in A v B and Pipeline Services.
8 The costs of an application for a stay of a dispute falling within an arbitration agreement will ordinarily be awarded against the unsuccessful party on a party and party basis unless the successful party can establish special circumstances. Special circumstances, if they exist, are to be found in the facts of the case. The fact that a party commences legal proceedings in breach of an arbitration agreement and unsuccessfully resists an application for a stay of the proceedings does not, of itself, constitute special circumstances.
Special circumstances
9 Samsung says that the circumstances of this case justify an order for indemnity costs. Samsung relies upon the following factors. First, on 6 November 2015 Samsung put Roy Hill on notice that the arbitration clause applied and that if Roy Hill elected to persist with their application Samsung would seek indemnity costs. Secondly, after Roy Hill commenced legal proceedings, Samsung promptly applied for a stay of the proceedings before taking any substantive step in the proceedings and the only steps taken by Samsung were in support of its application for a stay. Thirdly, as soon as Samsung's application for a stay was brought, Roy Hill should have reconsidered their forensic strategy having regard to the real likelihood that a stay of proceedings would be ordered. Fourthly, not only did Roy Hill persist in their opposition to Samsung's application for a stay but they relied on a range of arguments, many of which could be described as technical and some of which were worthy of being described as 'redolent of desperation': see [2015] WASC 458 [22] - [36], [39] - [41] and see also Pipeline Services [32]. Fifthly, Roy Hill's failure in opposing the application for a stay was absolute. Not only was every argument as to the inapplicability of cl 8.4(d) of the Deed rejected, they also failed in establishing that the relief they sought was urgent within cl 42.4 of the EPC Contract.
10 It is sufficient to enliven the discretion to award indemnity costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 797, 400 (Woodward J); J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) [No 2] [1993] FCA 42; (1993) 46 IR 301, 303 [5] (French J); Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(2) [10] (Pullin JA & Kenneth Martin J).
11 Indemnity costs may be awarded where an action has been commenced or continued in circumstances where the plaintiff, properly advised, should have known that the action had no prospect of success but a court must not be too ready to find that a case was hopeless: Quancorp Pty Ltd v McDonald [1999] WASCA 101 [7] (Wheeler J); Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 (Miluc) [84] - [85] (Newnes JA, Murphy JA & Hall J agreeing). What is apparent at the end of a trial may not have been so obvious beforehand. Whether or not a case was hopeless is not to be determined with the benefit of hindsight: Miluc [85].
12 Roy Hill advanced arguments based on the construction of the EPC Contract and Amendment Deed No 4. Whilst I rejected Roy Hill's arguments I am not satisfied that they were hopeless in the relevant sense. Similarly, whilst I rejected Roy Hill's arguments that Samsung had waived any argument that the dispute is not one to which the arbitration clause in the EPC Contract applies and Roy Hill's characterisation of the dispute in this proceeding, Roy Hill's contentions were not hopeless in the relevant sense.
13 It is relevant that the application was for a stay of proceedings brought in breach of an arbitration agreement and that I found that the proceedings were commenced in breach of the arbitration agreement. However, I am not persuaded that there are special circumstances in this case justifying an indemnity costs order. The appropriate order is that Roy Hill pay Samsung's costs on a party and party basis.
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