The Guide Dog Owners' and Friends' Association Inc v Guide Dog Association of New South Wales and Act
[1998] FCA 827
•17 JULY 1998
FEDERAL COURT OF AUSTRALIA
COSTS – proceedings involving charitable organisations – whether public interest litigation – whether circumstances are such that no costs order should be made.
COSTS - indemnity costs – Calderbank letter – whether indemnity costs should be ordered where Calderbank offer refused.
Federal Court of Australia Act 1976 (Cth), s 43.
Fasold v Roberts (No 2) (FCA/Sackville J, 11 September 1997, unreported), cited.
John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 (Hill J), followed.
MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 4) (1996) 70 FCR 236 (Lindgren J), followed.
Oshlack v Richmond River Council (1998) 152 ALR 83 (H Ct), cited.
THE GUIDE DOG OWNERS’ AND FRIENDS’ ASSOCIATION INC V GUIDE DOG ASSOCIATION OF NEW SOUTH WALES AND ACT AND ROYAL GUIDE DOGS ASSOCIATIONS OF AUSTRALIA
NG 948 OF 1996
SACKVILLE J
SYDNEY
17 JULY 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 948 of 1996
BETWEEN:
THE GUIDE DOG OWNERS’ AND FRIENDS’ ASSOCIATION INC
APPLICANTAND:
GUIDE DOG ASSOCIATION OF NEW SOUTH WALES AND ACT
FIRST RESPONDENTROYAL GUIDE DOGS ASSOCIATIONS OF AUSTRALIA
SECOND RESPONDENTJUDGE:
SACKVILLE J
DATE OF ORDER:
17 JULY 1998
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The order of the Court made on 3 July 1998, staying Order 2 of the orders made on 26 June 1998, be discharged.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 948 of 1996
BETWEEN:
THE GUIDE DOG OWNERS’ & FRIENDS’ ASSOCIATION INC
APPLICANTAND:
GUIDE DOG ASSOCIATION OF NEW SOUTH WALES & ACT
FIRST RESPONDENTROYAL GUIDE DOGS ASSOCIATIONS OF AUSTRALIA
SECOND RESPONDENT
JUDGE:
SACKVILLE J
DATE OF ORDER:
17 JULY, 1998
WHERE MADE:
SYDNEY
REASONS FOR JUDGMENT
In a judgment delivered on 26 June 1998, I held that the applicant (“GDOFA”) had failed to establish that the respondents had contravened s 52 of the Trade Practices Act 1974 (Cth) or had passed off their organisations and services as those of GDOFA. I dismissed the application and ordered that GDOFA pay the respondents’ costs. I stayed that order for seven days to allow the parties, if so advised, to file written submissions proposing different orders as to costs.
In the event, GDOFA and the respondents filed written submissions seeking orders different from those I proposed to make. On 3 July 1998, pending consideration of those submissions, I stayed the costs order until further order.
GDOFA accepted that the discretion to make an award of costs conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) is ordinarily exercised in favour of the successful party: Oshlack v Richmond River Council (1998) 152 ALR 83 (H Ct) at 101, per McHugh J, at 120-121 per Kirby J. However, GDOFA submitted that there were exceptional or special circumstances that took this case outside the ordinary principle.
The circumstances identified by GDOFA included the following:
The parties are charities and the litigation “has an element of public interest”.
GDOFA obtains most of its funds from public donations and a costs order can be satisfied only by “diverting” those funds from their intended use, namely, to assist blind persons.
The purpose of the litigation was to circumvent future disputes among the parties to the litigation relating to donations and bequests.
The respondents belatedly relied on affidavits prepared in the course of the hearing and on other material which limited GDOFA’s opportunity to make reasonable inquiries.
GDOFA submitted that these factors warranted an order that each party pay its own costs.
For their part, the respondents relied on a “Calderbank” letter sent on 1 April 1998. The letter was in these terms:
“This is a Calderbank letter.
Our clients hereby offer to settle the proceedings between our respective clients on the basis that there be judgment in the following terms, namely:
1.The Application is dismissed.
2.All costs orders made in the proceedings are vacated;
3.Each party is to pay its own costs of the proceedings.
Our clients’ offer herewith will remain open for acceptance by your client for a period of twenty-eight (28) days from the date of this letter.”
The respondents pointed out that a Calderbank letter is a relevant matter for the Court to take into account in determining costs awarded on an indemnity basis: John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 (Hill J), at 204-205; MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 4) (1996) 70 FCR 236 (Lindgren J), at 238-239. The respondents contended that it was unreasonable for GDOFA to have rejected the offer. Accordingly, the Court should make an order that GDOFA pay costs on a party and party basis until 29 April 1998 (the date the respondents’ offer closed) and costs on an indemnity basis thereafter.
I deal first with GDOFA’s submissions, leaving to one side the Calderbank letter. It is true that GDOFA derives much of its revenue from public donations, although, as the respondents pointed out, the evidence suggests that a substantial proportion of GDOFA’s revenue is derived from its considerable investments. I also accept that one of the motives of those managing GDOFA’s affairs in bringing the litigation was to eliminate possible disputes as to the intended destination of donations or bequests designed to benefit organisations assisting blind persons.
But I do not think that these proceedings can fairly be described as public interest litigation. The evidence showed that Mrs Gration exercises and has exercised very powerful influence over the affairs of GDOFA. She sees herself as central to the organisation. I do not accept that Mrs Gration and GDOFA were motivated solely by concern for the public interest in bringing the proceedings. Their motivation included protecting the perceived interests of GDOFA and vindicating its attempt to appropriate for its own purposes expressions such as “seeing eye dogs” that I have held are generic terms. GDOFA certainly wanted to eliminate potential disputes about donations or bequests, but on its terms. It also sought exemplary damages from the respondents. The fact that organisations enjoy charitable status does not mean that their controllers are immune from self-interest. If it be relevant, the circumstances of this case are very different from those considered by the High Court in Oshlack: see the findings of the primary Judge summarised at 88-89, per Gaudron and Gummow JJ.
It is also to be borne in mind that the costs of these proceedings ultimately will be borne by donors and benefactors of the three organisations, past, present and future. There is no obvious reason why those supporting the respondents, neither of which initiated or sought the legal proceedings, should bear the financial burden as distinct from those who have supported GDOFA. As I said in the judgment, the best that can be done for prospective donors and benefactors at this stage is to ensure that they are fully informed as to the nature, costs and outcome of the litigation.
Nor do I think that the late filing of affidavits provides a reason for departing from the usual principle that the successful party or parties should be awarded costs. The affidavits prepared in the course of the hearing elaborated on matters addressed, albeit in inadmissible form, in earlier affidavits. The new material neither introduced fresh issues into the case nor prolonged the hearing. Its introduction did not unfairly prejudice GDOFA.
It follows that I do not accept GDOFA’s submission that there should be no order as to costs. I now turn to the respondents’ application for an order for indemnity costs as from the expiration of the offer contained in the letter of 1 April 1998.
In Fasold v Roberts (No 2) (11 September 1997, unreported), I summarised the principles relating to Calderbank letters as follows (at 7):
“The view which has been taken in this Court is that the mere writing of a Calderbank letter does not of itself justify an order for costs in favour of a successful party being taxed on a solicitor and client or an indemnity basis. The making of an offer of compromise is one of the factors to be taken into account in the exercise of the Court’s judicial discretion: John S Hayes & Associates Pty Ltd v Kimberley-Clark Australia Pty Ltd [at 205-206]. In MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 4) [at 238-239], Lindgren J held that it was not appropriate to award indemnity costs unless the conduct of the party against whom the order is sought is plainly unreasonable. His Honour pointed out that a Calderbank letter may be less protective of the offerees’ position than an offer of compromise and payment into Court made pursuant to FCR, O 23.”
While I think that there is some force in the respondents’ submissions, on balance I do not think that GDOFA’s refusal to accept the respondents’ offer warrants an order for costs on an indemnity basis. I bear in mind that, whatever view might be taken about GDOFA’s actions in using publicly donated funds to support an ultimately unsuccessful claim against another charity, “[c]osts are awarded to indemnify a successful party in litigation, not by way of punishment of an unsuccessful party”: Oshlack, at 84, per Brennan CJ. Viewed from the perspective of the applicable legal principles, I do not think that the case could
“be said to be one run in wilful disregard of known facts or clearly established principle or to be a case in which allegations were made which ought never to have been made, or to involve some feature from which it might be deduced that it could be said that this was a case where the applicant would have had no chance of success.”
John S Hayes v Kimberly-Clark, at 206, per Hill J.
Accordingly, GDOFA should pay the respondents’ costs on a party and party basis. The only order that now needs to be made is to discharge the order made by me on 3 July 1998 staying Order 2 of the Orders made on 26 June 1998.
I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville
Associate:
Dated: 17 July, 1998
Counsel for the Applicant: Mr R J Ellicott QC and Mr D B Studdy Solicitor for the Applicant: Eakin McCaffery Cox Counsel for the Respondent: Mr R B S Macfarlan QC and Mr A Leopold Solicitor for the Respondent: Holman Webb Date of Hearing: 4-12 May, 1998 Date of Judgment: 17 July, 1998
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