White Industries (Qld) v Flower & Hart

[2002] HCATrans 270

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B30 of 2001

B e t w e e n -

WHITE INDUSTRIES (QLD) PTY LTD

Applicant

and

FLOWER & HART (A Firm)

Respondent

Application for special leave to appeal

GLEESON CJ
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 26 JUNE 2002, AT 9.47 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR P.J. DUNNING, for the applicant.  (instructed by Minter Ellison)

MR P.A. KEANE, QC:   If the Court please, I appear with MR G.C. NEWTON, for the respondent.  (instructed by McCullough Robertson)

GLEESON CJ:   Yes, Mr Jackson.

MR JACKSON:   Thank you, your Honours.  Your Honours, this case concerns the ambit of the powers of the Federal Court under two provisions of the Federal Court of Australia Act, namely sections 43 and 51A.  They relate to the power of the court to make an award of interest in relation to, to put it shortly, costs.

Your Honours, may I indicate very briefly the ultimately simple facts that are involved in the case first, before going to the issues.  Your Honours, the position is this:  the respondents, as solicitors, were found to have instituted proceedings unreasonably, with substantially no prospects of success, for a purpose which was an abuse of process and conducted the litigation in a manner designed to obstruct and delay.  The applicant sought orders that its costs, which were unrecoverable from the plaintiff in the case, and interest on the sums expended by them as costs over the years be paid by the respondent.

The proceeding was dealt with in two parts:  first, there was an order that they be paid the costs themselves, which were agreed at $1.65 million.  May I take your Honours to page 1 of the application book, where you will see that referred to in paragraphs 1 to 2.  Your Honours will see that after that order for the payment of a sum in respect of costs was made, there was an unsuccessful appeal and the interest question, referred to by Justice Goldberg in paragraph 2, remained to be determined.  The basis upon which the order for payment of the $1.65 million had been made, appears from Justice Goldberg’s reasons at page 13, paragraph 26.  Your Honours will see, in the last few lines of it:

the reason why the order has been made in the present proceeding is because of the abuse of process and breach of duty to the Court –

et cetera.

Now, your Honours will then see that his Honour held that section 43 itself, the ordinary costs provision, did not confer power to award interest.  That is at page 7, paragraph 12.  But he went on to hold that there was power to do so, pursuant to section 51A, and could I take your Honours to page 8, where your Honours will see in paragraph 13 section 51A set out and also at paragraph 16, at the bottom of that page, and then one goes on to the top of the next page where his Honour said:

In the present case there is a particular application made for costs which is predicated, not upon White’s success in the principal proceeding . . . but rather upon a particular claim –

and your Honours will see that elaborated upon through the remainder of that paragraph.

Finally in relation to his Honour’s reasons, at page 11, paragraph 22, your Honours will see that he refers to the “cause of action” in terms of section 51A(1) and then goes on to say, at about line 52, that he saw:

no warrant for construing s 51A(1) narrowly so as to exclude from its operation an award of costs where those costs are awarded –

not as a consequence of success –

but rather as a consequence of that party obtaining an order for those costs because of a separate and distinct claim or cause of action which has arisen as a result of the conduct of the party against whom the costs order is sought.

GLEESON CJ:   Well he uses the expression there as a “separate and distinct claim or cause of action”.

MR JACKSON:   Yes.

GLEESON CJ:   The section talks about a cause of action.

MR JACKSON:   Yes, your Honour, and what I was going to say was this: if one looks at what was done by the Full Court ‑ and may I introduce it in that way ‑ it appears essentially to have held ‑ and your Honours will see this at page 53 paragraph 58, at the bottom of the page, that it was accepted for:

present purposes that the proceedings commenced by –

our notice of motion against the respondents –

were proceedings for the recovery of money within the meaning of the subsection.

And then their Honours went on to say, at the top of the next page:

were those proceedings in respect of a cause of action?

Your Honours, the view that they were not “in respect of”, normally a fairly widely construed term, a cause of action appears to have been on the basis that although there was an ability to claim against the respondents by reason of their conduct, their conduct being something that amounted to an abuse of process, that that was something that did not amount to a cause of action, because section 43 of the Act appeared to confer a discretion in relation to costs.  Your Honours will see that at paragraph 59 on page 54 and, in particular, perhaps if one starts at the third line, going through to the references to Oshlack v Riochmond River Council.

Your Honours, in our submission, the jurisdiction of the Federal Court was enlivened, in relevant respects, when relief was sought against the solicitors.  The relief sought was based on the facts set out in the notice of motion and accompanying documents.  They amounted to a cause of action.  The description of the moneys sought as costs was an accurate generic description of the amount of money claimed based on the cause of action and, in our submission, there was no reason why section 51A(1) did not apply.

The notion, also, that no interest can be obtained in cases where the making of an award or – I am sorry, I was speaking a little more generally, your Honours – the notion, which appears to lie behind the Full Court’s view that no interest can be obtained in cases where the making of an award or the quantification of an award involves an element of judicial discretion, imposes, in our submission, a significant limitation on both section 43 and section 51A.  Your Honours, that notion does not seem to sit well with the decision of the Queensland Court of Appeal in a case to which is at page 45 of the supplementary volume, Chong v Chong, which recognises that a cause of action may exist, notwithstanding that relief is discretionary.

May I take your Honours directly to the passages.  At page 47 of the supplementary book, your Honours will see this was an application for criminal compensation, the relevant provision which allows the grant of it appears in paragraph [4] on the preceding page.  Your Honours will see then at paragraphs [7] to [10] on page 47 that Justice Demack, whose judgment this one is, particularly in paragraph [10], refers essentially to the fact that there may be a discretion involved does not mean there is not a cause of action.  To the same effect, your Honours, is at page 58 Chief Justice De Jersey and your Honours will see, in particular, paragraph [4] on page 58.

Your Honours, we would submit, in any event, if one leaves aside altogether the terms of section 51A and one looks at the terms of section 43, which your Honours will see at the commencement of the book of authorities, it is wide enough, in our submission, to allow the award of interest in a case of this kind.  It is not a power expressed to be subject to any limitation.  May we take your Honours to the reference to a decision of the English Court of Appeal in Andrews v Barnes, which is in the supplementary volume, page 6, which dealt with the question of the position about costs after the Judicature Act.  It is a case that has been referred to twice in this Court:  one in Knight v FP Special Assets, the other in Oshlack, and what appears in that case at page 11 of the book, your Honours will see in the second new paragraph on page 11, it shows:

An examination of the older General Orders of the Court made, not under any statutory authority, but from the general and inherent authority of the Lord Chancellor, will shew that the Court exercised a most wide discretion not only as to the circumstances under which costs were to be awarded, but apparently as to the measure and fullness of the costs.

Your Honours will then see set out a variety of phrases taken from the orders of the court indicating what might be done.  It was said in the Full Court in this case that that does not mean interest was involved, but, your Honours, when one comes to the last items, about point 8 on the page, references to “double costs”, “treble costs and quadruple costs”, one is going beyond a notion of there simply being some concept of indemnity.  Indeed, on the next page, about a quarter of the way down the page, your Honours will see the observation more apposite to a case like this:

Lastly, in the particular case now before us of the failure of the Plaintiffs, we find the Orders of 22nd August . . .  providing that the plaintiff should pay the defendant “his full costs . . . and in case the Court upon the hearing shall find the suit to have been vexatious, the Court shall give additional costs against a plaintiff, to be pronounced‑

et cetera.  Your Honours, a provision or expression suggesting that there was no limitation to amounts actually expended.

GLEESON CJ:   Could I take you back to section 43 for a moment.

MR JACKSON:   Yes, your Honour.

GLEESON CJ:   This is past history, but I would just like to understand.  This was an award of costs?

MR JACKSON:   Well, your Honour, it is a question of what it was.  What was done ‑ ‑ ‑

GLEESON CJ:   What I was wondering was, they were the solicitors on the record, were they?

MR JACKSON:   They were the solicitors on the record.  His Honour found that they had instituted the proceedings for, to put it shortly, improper purposes.

GLEESON CJ:   Now the jurisdiction to award costs, obviously, was held to include jurisdiction to order that the solicitors on the record pay the costs?

MR JACKSON:   Yes, your Honour.

GLEESON CJ:   Could it have gone further?  Could some third party have been ordered to pay the costs?

MR JACKSON:   Yes, your Honour, that is Knight v FP Special Assets, this Court’s decision, and Oshlack, of course, too, is a case of a similar nature, again in this Court.  So, your Honour, if I could just put it shortly, what occurred was that the respondents, in effect, started litigation which they should not have done.  They should not have done; the person for whom they were acting in the end had no money and could not pay the costs.  We then start proceedings against them to obtain – and this could have been done either by an action in the Supreme Court or by proceedings in the Federal Court, which were where the original proceedings had been, in order to obtain an amount of those costs and interests.

GLEESON CJ:   There is some suggestion somewhere in the submissions of your opponents that one particular course was taken rather than the other to avoid some limitation problem.

MR JACKSON:   Well, your Honour, that could not avoid the whole of the problem, at worst, because most of the payments are made after any particularly limitation period, could have arisen.  I am sorry, I am putting that badly, but it could apply at best to a very small part of the claim.  Indeed, we make submissions in our response about the irrelevance of it for particular reasons set out there.

Your Honour, the remaining thing I wanted to say was just this, that if one goes to what was said in this Court in Oshlack v Richmond River Council 193 CLR 72– it is a loose copy, your Honours – Justices Gaudron and Gummow at pages 88 to 89, in paragraphs 41 to 44, your Honours will see, in a sense, a “protest” – if I could put it in inverted commas – against the notion that the power to award costs is (a) limited or (b) not capable of further development and consideration.

Your Honours, may I say two further things:  the first is simply this that this Court in The Commonwealth v SCI Operations Pty Ltd 192 CLR 285 at page 316 in paragraphs 72 to 73, your Honours will see Justice Gummow in paragraph 72 says there is not an independent right to obtain interest, but then goes on to say, as your Honours will see in paragraph 74:

is not a case where the assertion is that the appellant’s breach of contract or negligence has caused –

and your Honours will see the matters there set out and a reference to “compensation”.

Finally, your Honours, the view of the Federal Court that section 43, and provisions like it, do not give power to order interest on costs, has not been followed in New South Wales.  Your Honours will have seen from the reasons that there was a decision of the Justice Rogers, then Chief Justice in the Commercial Division in the Supreme Court of New South Wales, in which he had held that one could do so.  The Supreme Court Act was then amended to give a specific power to do it, but later decisions of members of the Supreme Court in that State have taken the view that there was power, in any event.  Could we give your Honours two references:  the first is Woods v Woods at page 220 of the supplementary volume.  At page 225, Justice Hamilton in paragraph [18] refers to the reasoning of the primary judge in this case, in relation to section 43.  He discusses that and I will not take your Honours through the detail of it, and other cases in New South Wales, and then goes, at page 228 paragraph [26], to refer to the “amplitude of the discretion” in the decisions of this Court and then, at paragraph [28] at page 229, says in the third line that:

In my view the decision of Rogers CJ Comm D was correct –

and it was supported by section 76.

GLEESON CJ:   Translating that to the present case, does that mean that Chief Judge Rogers would have made the order under section 43?

MR JACKSON:   Yes, he had done so in earlier cases, your Honour.  Your Honours, to the same effect is a decision of Justice Einstein, which is at page 17, Australian Development Corporation v White Constructions at pages 22 to 23 and your Honours will see paragraph 15, at the bottom of page 22 and at the top of page 23, the reference to section 76.

Your Honours, in our submission, the issue is one of considerable importance in relation to the administration of the Federal Court and the orders that it has power top make.

GLEESON CJ:   Mr Keane.

MR KEANE:   If your Honours please, if we may go directly to the first point agitated orally by our learned friend – that is in relation to section 51A ‑ we make the submission that the decision below does not depend upon the proposition that a cause of action, which seeks to invoke discretionary relief, thereby ceases to be a cause of action, generally speaking.  Rather, the decision is that the applicant here only ever sought the exercise of the discretionary power conferred by section 43, there being no proceedings for the recovery of any money in respect of a cause of action, as required by section 51A of the Act.  In that regard, your Honours, section 51A contemplates a cause of action for the recovery of money anterior to the proceedings.  That, in our respectful submission, is affirmed distinctly in The Commonwealth v SCI at page 300 in the judgment of Justice Gaudron and in the judgment of your Honour Justice McHugh and Justice Gummow at paragraph 42.  At the top of page 300, your Honours, 192 CLR, in the judgment of Justice Gaudron, in the second sentence:

More significantly for the issues in this appeal, it cannot be construed as conferring a discretion to award interest independently of the existence of a cause of action or for a period prior to the date on which the cause of action arose.

And then in the judgment of your Honour Justice McHugh and Justice Gummow at page 306, paragraph 42, which comes over from the page, where the point is made that when the proceedings commenced “no cause of action had arisen”.  In the present case, their Honours in the Full Court, for the reasons which they elaborate, from page 50, paragraph 48, through to paragraph 59, are, in our respectful submission, correct in concluding that the section “cannot be construed as conferring a discretion to award interest independently of the existence of a cause of action” which subsists prior to, and independently of, the proceedings.

In this case, in so far as the applicant seeks to read section 51A in aid of section 43, for the reasons that their Honours below elaborated, there is no cause of action for an order under section 43.  One can see that because one cannot plead the facts which give rise to the right, independently of any relief that the Court might order.  In other words, the proceedings themselves, if our learned friend’s submission is correct, have to be the cause of action.  The claim for costs has to be the cause of action.  Our submission is that the decision of the Full Court below is not attended by sufficient doubt to warrant the grant of special leave on that ground.

As to section 43, your Honours, our learned friend’s contention that one can squeeze out of the language of section 43, which confers a jurisdiction to award costs in all proceedings before the Court, a further power to compensate one for being out of pocket in respect of costs, firstly, notwithstanding all the super abundant language in relation to the power as to costs that our learned friends have referred to, in the authorities, there has never been a case where those provisions have been relied upon to compensate someone for being out of pocket as to the costs.

GLEESON CJ:   It is suggested against you that there are a number of New South Wales’ decisions.

MR KEANE:   Your Honour, as to those, the decision in Woods v Woods was decided certainly without reference to the Full Court’s judgment in this case and plainly obiter, in any event, because section 95(4) of the New South Wales Supreme Court Act was added expressly to confer a power to order interest.  So those observations by Justice Hamilton are, in our respectful submission, at best obiter and were entirely unnecessary for the decision in the case.

In relation to the decision of Chief Justice Rogers, that view was a view, of course, expressed about the New South Wales Supreme Court Act – the context may matter.  For the purposes of this case, Justice Goldberg at first instance was not minded to follow it and, in our respectful submission, correctly, having regard to the context in which section 43 appears.  All four judges, who have considered the point in the present case, at pages 3 and 7 and then 48 to 50, have rejected the submission that one can squeeze such a power out of section 43, principally for two reasons:  firstly, section 43 deals specifically and only with costs, and it is not incidental to or necessary for the exercise of that power to award costs, that there be regarded somehow implicitly in it a power to make orders to compensate people for being out of pocket as to their costs; and, secondly, the Federal Court Act, makes specific provision in relation to the award of interest in section 51A and section 52.

So that having regard to that context, in our respectful submission, the notion that where there are specific provisions which deal with interest, that another provision which deals specifically with costs also implicitly confers a power to award costs, is, in our respectful submission, not entirely orthodox.

Your Honours, in relation to the other point that our learned friends made in relation to the notion that there was a claim that might have been brought as a claim for damages for the tort of abuse of process, in our respectful submission, for the reasons we have put in our written outline, but also for the reasons summarised by the Full Court below, from page 44 lines 45 to 60 to page 46 lines 36, it is our submission that this was always put as a claim solely for relief under section 43.  The basis for the exercise of the discretion, though, being a breach of duty to the court, but not a cause of action that created rights in favour of our learned friend’s client.

The proof of that pudding can be seen, in our respectful submission, in the first of these cases that went to the Full Court of the Federal Court, that is Caboolture Park v White Industries (1993) 45 FCR 224 and in that case your Honours will see at page 227 – firstly, your Honours should note from page 226 the terms of the relief that was sought, halfway down the page, after the reference to the terms of the notice of appeal that the matter first came before the Full Court of the Federal Court as an application for leave to appeal from an order for costs ‑ ‑ ‑

GLEESON CJ:   This is at page 227?

MR KEANE:   Page 226, I am sorry, your Honour; I wanted to take your Honours back just to show how the proceeding came before the Full Court of the Federal Court.  At 226 your Honours will see the terms of the notice of appeal.  There actually was an appeal, in respect of the costs order, made in favour of the present applicant against Caboolture Park, the appeal being to substitute, for that order, an order against the respondents.  It was then apprehended that the appropriate course was to file a further motion. That was done, and when that was being argued, at page 227, in the long paragraph that follows the heading “The submissions in Flower & Hart”, we draw your Honours’ attention to the point made in the last six lines that so far as a remedy was available it lay “in tort for abuse of process” and if that remedy were pursued it “would be statute barred”.

Their Honours say nothing about that, but their Honours go on to conclude at page 230 that the relevant jurisdictional basis for the court to proceed is section 43.  Your Honours will see that in the second full paragraph of text on the page and the third full paragraph of text on the page and explicitly at 231, at about point 5, the paragraph that begins:

Having regard to the provisions of s 43 there is in our view no need to consider whether the “inherent jurisdiction” of the Court can be called in aid –

so that the case proceeded thereafter, explicitly as a case under which the court’s power derived from section 43 and in so far as it was never brought and it has never been agitated as a case for damages for the tort of abuse of process.  We point out that if it were, then it seems to be accepted, or it was accepted, as your Honours will see at page 41 lines, 30 to 35, by counsel then appearing for the applicant, that such a cause of action would have

been completed on 23 December 1986.  The proceedings against the respondents not having been brought until May 1993, the limitation period expired on respect of that cause of action.  Really, in so far as the case is said to be a suitable vehicle for the agitation of this point, in our respectful submission, it does not answer the problem to say there may have been other moneys expended at some later point in time.  The cause of action is complete once some money is spent.

So that, in our respectful submission, the court below was plainly right in relation to the construction of section 51A, was plainly right in relation to its rejection of the attempt to link section 43 with 51A and, in our respectful submission, there cannot be any serious doubt that section 43, appearing in an Act which deals specifically elsewhere with the award of interest and in limited terms, does, in itself, confer a power to compensate someone for being out of pocket for costs and finally, so far as the last point is concerned, the case is not a suitable vehicle to agitate it.  Those are our submissions, if the Court please.

GLEESON CJ:   Thank you, Mr Keane.  Yes, Mr Jackson.

MR JACKSON:   Your Honours, may I say in relation to the question of when the damage was suffered, it is right to say that the first damage was suffered when the proceedings were started and that may well be six years before the proceedings were started in the Federal Court, the present proceedings.  However, damage, and new damage, continued to be suffered as the principal action proceeded, each time there was another step taken.  In pursuance of the activities, there were different facts amounting to a different cause of action.  So, your Honours, in our submission, that is why we say that it may be an answer to a part of the claim, but it is really only a very small part of it.

Could I go then to section 51A, your Honours.  Of course, your Honours, there has to be a cause of action for section 51A(1) to be applicable.  That is what the provision says.  But here, the cause of action, in our submission, had arisen.  If I could take your Honours to two passages:  the first is to the actual terms of the notice of motion that we filed.  Your Honours will see that in the application book at page 32 and what it was, it commences about line 69:

the present respondent filed a notice of motion in that action seeking the following orders:

and then, paragraph (2):

That, in addition to the costs orders made –

initially –

Flower & Hart pay all of White Industries (Qld) Pty Ltd’s costs of the action other than those costs that are solely referrable –

et cetera –

such that White Industries (Qld) Pty Ltd are completely indemnified by Flower & Hart for these costs and interest on these costs.

Your Honours, they are described as costs, of course, but what is spoken about is a sum which is to be quantified by that description, together with interest.

The second thing, your Honours, is that if one looks at the facts, “Was there a cause of action?”  Our learned friend’s argument says, “Yes, there was”, we would submit.  If one goes to the supplementary volume at page 140, your Honours will see a reference at the top of the page to the allegations in the:

amended statement of facts and contentions –

and that goes on, your Honours, to the heading about line 42, setting out, in short, an extract from what is in the facts and contentions, showing the reason why there was an entitlement to orders that these costs be paid.

Your Honours, the last thing I would seek to say is this that it is clear, of course, that the power to make an order for costs is a power to make an order in relation to, for example, indemnity costs.  Indemnity costs, the whole purpose of making such an order, is to do the thing which may be described as compensating a party for the outgoings that have taken place.  Our learned friends said, costs are not compensatory, but, in many respects they are.

GLEESON CJ:   We are of a view that there are insufficient prospects of success of an appeal to warrant a grant of special leave in this matter, and the application is refused with costs.

AT 10.22 AM THE MATTER WAS CONCLUDED