Sutton v BearingPoint Inc (No.2)
[2017] FCCA 1474
•3 July 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SUTTON v BEARINGPOINT INC (No.2) | [2017] FCCA 1474 |
| Catchwords: BANKRUPTCY – Costs application – whether costs follow the event – whether costs for Application in a Case be made on an indemnity basis. |
| Legislation: Federal Circuit Court of Australia Act 1999 (Cth), s.79 Federal Circuit Court Rules 2001 (Cth), rr.21.02, 21.15, 21.16 |
| Cases cited: Minister for Immigration and Border Protection v SZTQS [2015] FCA 1069; (2015) 148 ALD 507 |
| Applicant: | MARY SUTTON |
| Respondent: | BEARINGPOINT INC |
| File Number: | SYG 2851 of 2015 |
| Judgment of: | Judge Nicholls |
| Hearing date: | 10 May 2017 |
| Date of Last Submission: | 10 May 2017 |
| Delivered at: | Sydney |
| Delivered on: | 3 July 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr MJ Lewis |
| Solicitors for the Applicant: | Gilbert + Tobin Lawyers |
| Counsel for the Respondent: | Mr A Shearer |
| Solicitors for the Respondent: | Ashurst Australia |
ORDERS
The applicant (in the substantive proceedings) pay the respondent’s (in the substantive proceedings) costs of, and incidental to, the substantive proceedings, to be taxed if not agreed.
There be no order as to costs for the Application in a Case filed on 11 April 2017.
CERTIFICATION
Pursuant to Rule 21.15 of the Federal Circuit Court Rules 2001 (Cth), the proceedings reasonably required the employment of an advocate by the respondent.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2851 of 2015
| MARY SUTTON |
Applicant
And
| BEARINGPOINT INC |
Respondent
REASONS FOR JUDGMENT
On 16 March 2017 I handed down judgment in relation to an application made by Ms Mary Sutton to set aside a bankruptcy notice, alleging that the bankruptcy notice served on her by BearingPoint Inc (“BPI”) was an abuse of process. BPI was successful in its response to that application. I made an order on that date dismissing Ms Sutton’s application to set aside the bankruptcy notice.
On 11 April 2017, BPI filed an Application in a Case (“AIC”), seeking orders that Ms Sutton pay BPI’s costs in relation to the proceedings instituted by Ms Sutton as mentioned above, and costs on an indemnity basis in relation to the AIC. The AIC was accompanied by the affidavit of Mr Dylan Carl Peter Rogers, Solicitor, made on 11 April 2017. The orders sought in the AIC were opposed by Ms Sutton. The AIC was set down for hearing on 10 May 2017.
Both parties were represented by counsel at the hearing of the AIC. The affidavit of Mr Rogers of 11 April 2017 was read subject to parts of [11], that is, the eighteenth to twentieth words in the first line of [11] were not read (there was no objection from Ms Sutton). BPI also read the affidavit of Cheyne James Clarke, Solicitor, of 9 May 2017, which annexed the judgment handed down in the proceedings on 16 March 2017, and a transcript of those proceedings (no objection from Ms Sutton).
The background to the current dispute is as follows. When judgment on Ms Sutton’s application was handed down on 16 March 2017, she was represented by counsel (Mr MJ Lewis), and BPI by a solicitor (Mr D Rogers). The following exchange occurred (see the affidavit of Mr Clarke at page 3 of annexure “B”):
“[His Honour]: And I will make that order. Any other order that anybody else is seeking? No?
[Mr Lewis]: Not for my part, your Honour.
[Mr Rogers]: Not from us, your Honour.
[His Honour]: Okay. All right. Well, then, the order that I make is that the application made on 19 October 2015 and further amended on 20 November 2015 is dismissed, and I thank you both. If there’s nothing further.
[Mr Lewis]: May it please.
[His Honour]: Thank you. You are all excused. Call the next matter.”
At [11] of his affidavit, the solicitor (Mr D Rogers) explained (see the affidavit of Mr Rogers of 11 April 2017):
“At the time that His Honour inquired as to whether additional orders were sought, I had not [not read] read the Judgment and was not aware that an order as to costs had not been made. I did not seek an order as to costs on the basis that, absent some submission having been made for some other position to apply, costs typically follow the event as part of the usual orders following the final determination of a proceeding. I assumed that the Judgment would deal with costs on that basis, and it was only when I obtained the Dismissal Order that I confirmed that such an order had not been made.”
BPI’s position was that an application for costs has been made consistent with r.21.02 of the Federal Circuit Court Rules 2001 (Cth) (“the FCC Rules”) which is in the following terms:
“Rule 21.02
Order for costs
(1) An application for an order for costs may be made:
(a) at any stage in a proceeding; or
(b) within 28 after a final decree or order is made; or
(c) within any further time allowed by the Court.
(2) In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.”
BPI submits that as the successful party, costs of the proceedings should be ordered in its favour consistent with the proposition that “costs follow the event”, and further, no substantial reason has been provided by Ms Sutton to argue against the making of the costs order in the “usual way”.
Ms Sutton’s position was that BPI’s failure to seek a costs order at the time of the handing down of the judgment, and despite opportunity to do so, requires an explanation, or reason, why the Court should now exercise its discretion to award costs in BPI’s favour. Ms Sutton relied on a number of authorities in support of this argument (see further below at [28]).
In the meantime, it is well to be reminded of the following. The Court’s power to award costs in this matter derives from s.79 of the Federal Circuit Court of Australia Act 1999 (Cth) (“the FCCA Act”). The Court has jurisdiction to award costs in proceedings before it.
The exercise of the Court’s jurisdiction is discretionary “[e]xcept as provided by the Rules of Court or any other Act” (s.79(3) of the FCCA Act).
No such provision in any other Act appears relevant to the current case.
Rule 21.02 of the FCC Rules deals with the making of orders for costs. I do not understand this rule to seek to fetter the discretion pursuant to s.79 of the FCCA Act, but rather to establish a procedural framework within which the discretion may operate.
I do not accept, as reasonable in the circumstances of what occurred at the handing down of the judgment in this matter, the explanation given by BPI’s solicitor as to why a costs order was not sought, or pressed, at that time.
I accept BPI’s argument that it is the case that costs orders are generally made by Courts against the unsuccessful party. However, I did not understand BPI’s reference to the concept of “costs follow the event” to urge the Court to apply this concept in some “fettered” fashion.
Rather, I understood the reference to it to be that there was some reasonable expectation on the part of BPI’s solicitor, that the Court would have addressed the matter of costs in its judgment.
There are at least four points that stand against that explanation. First, at the time of the handing down of the judgment, the Court pronounced the order dismissing Ms Sutton’s application. No order as to costs was pronounced.
Even if some reference to costs had been made in the judgment (plainly BPI’s solicitor did not have the opportunity to read it), in circumstances where an express pronouncement of the order by the Court dismissing the application was made, this should have reasonably alerted BPI’s solicitor of the need to seek a similar “pronouncement” of a costs order.
Second, the Court made specific invitation to the parties regarding any other orders sought, and in context, any orders other than the order dismissing the application. Even if there was some expectation that the matter of costs was addressed in the judgment, that “invitation”, at the very least, could not have been reasonably misunderstood as anything other than a “request” as to whether any party sought any order as to costs.
Third, and of perhaps greatest importance, even if there had been some mistaken expectation that costs were addressed in the judgment or some “omission” in this regard by BPI’s solicitor, Ms Sutton had not been heard on the question of costs.
“Costs” may indeed “follow the event”, but that does not mean that the unsuccessful party should be denied the opportunity to be heard on costs. The exercise of the Court’s discretion must be reasonable, and the Court must act judicially. This requires that the usual requirements of procedural fairness should be observed (Minister for Immigration and Border Protection v SZTQS [2015] FCA 1069; (2015) 148 ALD 507 (“SZTQS”)).
Fourth, even if there was some expectation on the part of BPI’s solicitor that “costs follow the event” meant that some reference to a costs order may have been made in the judgment, what remains is that there had been nothing from BPI in the course of the proceedings to indicate the terms of that order. For example, did BPI seek a fixed costs order, an order as agreed or assessed, or, as it has now articulated, an order that costs be awarded to it as agreed or taxed? The answer is none of these.
Having said all that however, Ms Sutton’s argument against the making of the costs order now, is in essence said to be because of BPI’s failure to take the opportunity afforded at the handing down of the judgment, to seek costs orders. In the circumstances, this does not assist Ms Sutton’s position.
This is because, as BPI correctly argues, the FCC Rules permit any such application for costs be made or pressed within 28 days of the date of the handing down of the judgment.
As set out above, r.21.02 of the FCC Rules provides the procedural framework within which the Court may exercise its discretion as to whether to award costs in the form of any such costs order.
Nothing in the FCC Rules, or elsewhere, limits a party’s capacity to make any such application to the time of the handing down of the judgment. That limb of Ms Sutton’s argument therefore does not assist her.
However, Ms Sutton’s argument was not based solely on that assertion. She referred to three authorities to argue that, in consideration of the background set out above, the discretion to award costs should be exercised with great caution having regard to the importance of the public interest in the “finality” of litigation.
That is, as I understood it, the relevant, appropriate or convenient time to have sought or pressed the order for costs was at the time of the handing down of the judgment. While the FCC Rules permit any such application to be made at a later time, up to 28 days from the date of the handing down of judgment, greater caution should be employed. This was said to be particularly so, as the party against whom costs were sought (in this case, Ms Sutton), was put to the additional burden of attending to this matter of costs at a time later than the more “convenient” time of the handing down of judgment.
Ms Sutton relied on three authorities. First, Aktas v Westpac Banking Corporation Limited [2010] HCA 47; (2010) 241 CLR 570 (“Aktas”) at [6] as follows:
“As Mason CJ rightly said in Autodesk Inc v Dyason [No 2], the exercise of the jurisdiction to reopen a judgment and to grant a rehearing ‘is not confined to circumstances in which the applicant can show that, by accident and without fault on the applicant's part, he or she has not been heard.’ The jurisdiction is, however, to be exercised with great caution, having regard to the importance of the public interest in the finality of litigation. That Mason CJ dissented in the result in that case does not deny the accuracy of the propositions just made.”
Second, Ms Sutton relied on Hewlett-Packard Pty Ltd v GE Capital Finance Pty Ltd [2003] FCAFC 278 (“Hewlett-Packard”) at [13] as follows:
“We conclude by making the following observation. Order 62 r 3 of the Federal Court Rules empowers the Court to exercise its powers and discretions as to costs at any time, including after the conclusion of a proceeding. Nonetheless it is in the public interest and in the interests of the parties to any appeal, that issues concerning the costs of the appeal should be resolved, where possible, together with the appeal…”
Third, Ms Sutton relied on WestpacBanking Corporation v Wittenberg (No 3) [2016] FCAFC 51 at [9] as follows:
“Normally it is to be expected that a party will deal with costs during the course of the proceedings or at least indicate clearly that it desires an opportunity to make further, and later, submissions on costs (see ACCC v Daniels Corporation Pty Ltd [2001] FCA 936; Hewlett Packard Pty Ltd v GE Capital Finance Pty Ltd [2003] FCAFC 278 at [13]; Grygiel v Baine [No. 2] [2005] NSWCA 434; Tristar Steering and Suspension Australia Ltd v Industrial Relations Commission of New South Wales (No 2) [2007] FCAFC 95; (2007) 159 FCR 274 at [26]; Shahid v Australasian College of Dermatologists (No 2) [2008] FCAFC 98 at [11]; Siminton v Australian Prudential Regulation Authority (No 2) [2008] FCAFC 113 at [4]; Harding v Deputy Commissioner of Taxation [2008] FCA 1516; (2008) 172 FCR 469 at [13]).”
In this context, Ms Sutton raised the following argument. BPI was “well represented”. When the judgment was handed down, BPI was represented by a solicitor in the employ of the firm of solicitors “on the record” for BPI. The judgment was “received” prior to the Court asking if any other orders were sought.
In their written submissions filed on 24 November 2016 in relation to the substantive matter, BPI stated (at [81] – [82]):
“[81] The proceedings should be dismissed with costs.
[82] Should any other result obtain, BearingPoint would seek to be heard on costs following the delivery judgment.”
Ms Sutton’s submission was that BPI’s representative should have come to the handing down prepared to address the question of costs (one way or the other, depending on the result), given that it was open that Ms Sutton may have been successful in the proceedings.
Ms Sutton’s further submission was that she was therefore entitled to assume, in that circumstance, that a “forensic” decision had been made not to press costs.
Ms Sutton described BPI’s use of r.21.02 of the FCC Rules as an attempt to seek a “procedural indulgence” and to address, after the event, a matter that should have been addressed at the handing down of the judgment.
BPI’s response to Ms Sutton’s reliance on the authorities referred to above, is as follows. BPI submits that whatever else was said in Hewlett-Packard, the Court made clear (at [8]):
“Section 43 of the Federal Court of Australia Act, 1976 (Cth) vests in the Court a wide discretion as to costs. Nonetheless the ordinary rule that, in the absence of special circumstances, costs follow the event is well established (Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 per Toohey J at 48, 136; Ruddock v Vadarlis [2001] FCA 1865; 115 FCR 229 per Black CJ and French J at [9] – [25]).”
BPI argues that what may be added to that, is that following that part of that judgment relied on by Ms Sutton (as set out above), the Court, in referring to a Rule similar to r.21.02 of the FCC Rules stated
(Hewlett-Packard at [13] and see [29] above):
“…Order 62 r 3 of the Federal Court Rules empowers the Court to exercise its powers and discretions as to costs at any time…”
The principle enunciated in Hewlett-Packard also derives from earlier authority of Hughes v Western Australian Cricket Association (Inc) [1986] FCA 382; (1986) ATPR 40-748 per Toohey J (see above at [36]).
BPI also sought to distinguish Aktas. In that case, unlike the current circumstances, the Court made a costs order at the time of handing down judgment. Ms Sutton’s reference to [6] of the reasons for judgment in that case, must be understood in the context of one of the parties having subsequently applied to vary that order. It is in that context that the references to the public interest and finality in litigation are to be properly understood.
Similarly, in Hewlett-Packard the Court was concerned with an application to vary a costs order already made (see Hewlett-Packard at [1]).
BPI’s solicitor’s evidence (see [11] of the affidavit of Mr Rogers of 11 April 2017), as to what occurred at the handing down of the judgment was not challenged, and therefore must be accepted. However, that does not mean it necessarily follows that it provides a satisfactory explanation for what occurred.
For the reasons set out above, I find that BPI should have reasonably been on notice that the question of costs (to be awarded one way or the other, depending on the result) in the circumstances of this case, would arise on the handing down of the judgment.
Costs may well be said to “follow the event”. But that is not to be strictly applied in every case. To take that view would seek to fetter the exercise of the Court’s discretion in this regard. Nor does this concept operate to deprive the unsuccessful party in the substantive proceedings of the opportunity to be heard on costs. In the current case, that opportunity did not arise at the end of the substantive hearing.
Having said that however, I do not accept, on the evidence presented, that it can be said that BPI made a “forensic decision” not to pursue a costs order.
In any event, in whatever way BPI’s failure to press a costs order at the handing down of the judgment is characterised, what remains is that r.21.02 of the FCC Rules “extends” the time within which such action can be initiated by the successful party.
Ms Sutton’s references to the authorities set out above do not succeed in supporting her argument. I agree with BPI that there is a distinction to be drawn between an application for costs pursuant to r.21.02 of the FCC Rules made after the handing down of the judgment, and an attempt after the making of a costs order at the handing down of the judgment to vary such a costs order.
The issue in the current case is that given costs ordinarily follow the event, are there any special circumstances justifying some other order, other than the order that BPI should receive its costs (see also Hughes v Western Australian Cricket Association (Inc) [1986] FCA 382; (1986) ATPR 40-748 per Toohey J at 48, 136 and Ritter v Godfrey [1920] 2 KB 47).
There are circumstances where costs do not follow the event. That is, there are circumstances justifying some other order. However, in the current case, there is nothing evident in the conduct of BPI either before or during the conduct of the substantive proceedings to warrant not making the order (Cummings v Lewis (Wilcox J, Federal Court of Australia, 29 May 1992, unreported) at [22]).
Nor can I see, further to the consideration above, that the public interest is engaged in the circumstances (see Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72).
In all, BPI was wholly successful in the “substantive” proceedings. BPI pressed its application for a costs order consistent with the FCC Rules. In this case, “costs” should “follow the event”. I agree with BPI that Ms Sutton has not raised a matter of substance, such that the discretion should not be exercised in BPI’s favour. I will make an order for costs. Further, there is nothing to argue against the term of the order being that costs are to be as agreed or upon taxation as sought in BPI’s AIC.
BPI has also sought an order that Ms Sutton pay its costs of the AIC on an indemnity basis. BPI relies on the annexures to the affidavit of Mr Rogers of 11 April 2017 (essentially correspondence between solicitors for the parties), to submit that BPI’s solicitors sought the consent of Ms Sutton, through her solicitors, on three occasions. That is, 17 March 2017 (the day after judgment was handed down), 22 March 2017 and 27 March 2017 for Ms Sutton’s consent to a costs order in favour of BPI based on the concept that costs “follow the event”.
The submission was that Ms Sutton’s response to these requests was not to put any substantive reason why, in the circumstances, “costs” should not “follow the event”, but rather to seek further information in relation to matters that did not go to whether the costs order should be made.
In short, BPI’s position is that it acted reasonably in seeking to resolve the matter of costs, without the Court’s intervention. BPI submits that Ms Sutton acted unreasonably in the position she conveyed in response.
There is no doubt that the Court has the discretion to award costs on an indemnity basis. I do not understand there to be a fixed rule as to when that discretion might be exercised. While there are a range of factors on which such orders may be made, what is common is some irregularity in the conduct of the case. For example, an abuse of process or misconduct of the parties.
While not articulating the complaint precisely in these terms, I understood BPI to seek indemnity costs because Ms Sutton did not take genuine steps to resolve the dispute as to costs (Nair-Smith v Perisher Blue Pty Ltd (No 3) [2013] NSWSC 1736). In short, BPI submits that in relation to the matter of costs, Ms Sutton’s solicitors adopted an unreasonable position in correspondence with BPI’s solicitors, who adopted a reasonable position.
It is important to note that BPI’s explanation, through its solicitor, as to why costs were not pressed at the handing down of the judgment relied on an expectation that, in anticipation of the concept of “costs follow the event”, the Court would have dealt with the matter of costs in the judgment.
Why that expectation persisted after the Court indicated at the handing down of the judgment that only one order (not a costs order) would be made, was not explained.
For immediate purposes, in relation to indemnity costs, BPI’s explanation for what occurred at the handing down of the judgment was not that some “honest mistake” or “oversight” had occurred. Rather, the expectation was that given that “costs follow the event”, the Court would have, or should have, dealt with costs in the judgment.
Plainly, there are circumstances often seen where judgments address the matters of costs. But in circumstances where Ms Sutton, as the unsuccessful party, had not been heard on costs, to have then awarded costs against her “in the judgment”, would have been a denial of procedural fairness (SZTQS). Again, in my view, in the circumstances, BPI’s position appears to seek to make the exercise of the Court’s discretion irrelevant.
It is in this light that the correspondence on which BPI now relies must be seen. What occurred at the handing down of the judgment plainly influenced the subsequent correspondence between the parties’ solicitors.
BPI’s solicitors acted the day after the handing down of the judgment to seek consent to a costs order in BPI’s favour. The terms of that proposed order are annexed to the affidavit of Mr Rogers and were as follows:
“1. The Applicant is to pay the Respondent’s costs of and incidental to this proceeding, to be taxed if not agreed.”
The approach by BPI’s solicitors to Ms Sutton’s solicitors could not, in my view, be reasonably described as “requesting an indulgence” as described in Ms Sutton’s solicitor’s letter of 22 March 2017, in light of r.21.02 of the FCC Rules (see the affidavit of Mr Rogers of 11 April 2017 at annexure “D”). However, it was reasonable, in the circumstances set out above, and particularly in light of what is set out at [59] – [61] above, for Ms Sutton to question why there appeared to have been a change in the approach of BPI to the matter of costs. The “explanation” was provided in BPI’s letter of 22 March 2017.
Plainly, the approach by BPI to Ms Sutton was to reach some agreement as to the quantum of costs, and if no such agreement could be reached, then costs were to be subject to taxation.
In my view, it was not unreasonable of Ms Sutton’s solicitors to seek further information in the circumstances. If BPI was seeking some agreement as to the quantum of costs, and the basis on which they were claimed, then it was reasonable of Ms Sutton’s solicitors to seek information so as to properly seek further instructions from her. In the circumstances, BPI’s application for costs on an indemnity basis for the AIC is to be refused.
BPI did not specifically seek an order in the AIC for costs in the alternative on a party/party basis (see “Orders sought” in the AIC). However, I did consider whether such an order should nonetheless be made pursuant to BPI’s request in the AIC as to “other orders” that the “Court may deem fit to make” (see order 3 in “Orders sought” in the AIC).
It was reasonable for Ms Sutton’s solicitors to seek further information about the nature of, or amount sought, in the costs proposal. While it cannot be said that BPI’s approach to Ms Sutton in relation to a costs order was an “indulgence”, nonetheless, some satisfactory attempt to address the information requested may have avoided the need for the AIC. Had BPI reasonably provided some information as requested, any subsequent failure by Ms Sutton to reasonably respond may indeed have founded the basis for a costs order. In all, there should be no order as to costs for the AIC.
Finally, at the hearing of the AIC, BPI’s counsel formally asked that the Court consider a certification as to the appropriateness of counsel “in this matter”. I understood that to be a reference to the “substantive” proceedings.
Rule 21.15 of the FCC Rules does allow the Court to certify the employment of an advocate as “reasonable”. Rule 21.16 further states that “the amount payable for counsel to appear is the daily hearing fee and advocacy loading in accordance with Parts 1 and 2 of Schedule 1”.
In the current circumstances, given the nature of the arguments put forward on behalf of Ms Sutton, and as those arguments were explained by counsel at the hearing, it is appropriate to certify that it was reasonable of BPI to employ an advocate on its behalf. I will grant that certification.
I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of Judge Nicholls
Date: 3 July 2017
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