CMC (Australia) v "Socofl Stream" (includes corrigenda dated 21 February 2000) [2000] FCA 82 (21 February 2000)

Last Updated: 22 February 2000

FEDERAL COURT OF AUSTRALIA

CMC (Australia) v "Socofl Stream" [2000] FCA 82

COSTS - apportionment between issues - success on one issue - payable forthwith

Federal Court of Australia Act 1976 (Cth) s 43

Federal Court Rules O 62 r 3(2)

Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748, referred to

Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261, referred to

Cretazzo v Lombardi (1975) 13 SASR 4, referred to

Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545, referred to

Telstra Corp Ltd v First Netcom Pty Ltd [1998] FCA 656, referred to

CMC (AUSTRALIA) PTY LTD v THE SHIP "SOCOFL STREAM"

N 80 OF 1999

MOORE J

21 FEBRUARY 2000

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 80 of 1999

BETWEEN:	CMC (AUSTRALIA) PTY LTD ACN 002 007 427 Plaintiff
AND:	THE SHIP "SOCOFL STREAM" Defendant
JUDGE:	MOORE J
DATE OF ORDER:	21 FEBRUARY 2000
WHERE MADE:	SYDNEY

CORRIGENDUM

On page 5 of this judgment, in the last line, the words "10 February 2000" should be replaced with "21 February 2000", so that the line reads:

"Date of Judgment: 21 February 2000"

Associate:

Date: 21 February 2000

FEDERAL COURT OF AUSTRALIA

CMC (Australia) v "Socofl Stream" [2000] FCA 82

COSTS - apportionment between issues - success on one issue - payable forthwith

Federal Court of Australia Act 1976 (Cth) s 43

Federal Court Rules O 62 r 3(2)

Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748, referred to

Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261, referred to

Cretazzo v Lombardi (1975) 13 SASR 4, referred to

Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545, referred to

Telstra Corp Ltd v First Netcom Pty Ltd [1998] FCA 656, referred to

CMC (AUSTRALIA) PTY LTD v THE SHIP "SOCOFL STREAM"

N 80 OF 1999

MOORE J

21 FEBRUARY 2000

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 80 of 1999

BETWEEN:	CMC (AUSTRALIA) PTY LTD ACN 002 007 427 Plaintiff
AND:	THE SHIP "SOCOFL STREAM" Defendant
JUDGE:	MOORE J
DATE OF ORDER:	21 FEBRUARY 2000
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. That Sovcomflot pay CMC (Australia) Pty Ltd's costs of the strike out application.

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	N 80 of 1999

BETWEEN:	CMC (AUSTRALIA) PTY LTD ACN 002 007 427 Plaintiff
AND:	THE SHIP "SOCOFL STREAM" Defendant

JUDGE:	MOORE J
DATE:	21 FEBRUARY 2000
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 On 18 October 1999 I gave judgment dismissing an application by Sovremenniy Kommercheskiy Flot ("Sovcomflot") seeking an order striking out an application by CMC (Australia) Pty Ltd ("CMC") brought as proceedings in rem under the Admiralty Act 1988 (Cth) ("the Act"). The strike out application was based on the contention that the Court lacked jurisdiction to entertain CMC's application. I ordered that the strike out application be dismissed with costs. At a later directions hearing two issues concerning the question of costs were raised. While it would be open to the Court to treat costs issues as settled by the original order: see Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 572, it appeared to be common ground that I could reconsider the order I earlier made. Indeed on 25 October 1999 I made an order setting aside the earlier costs order.

2 Counsel for Sovcomflot submitted that any order as to costs should reflect the fact that it had been successful on one of the two material issues that it had raised in the strike out application. That is, Sovcomflot had established that Kamchatka Shipping Company ("Kamchatka") was not a demise charterer of the Socofl Stream ("the Vessel") on 5 February 1999 when CMC commenced the proceedings. It was in relation to this issue that evidence was to be called from a Russian witness who attended the hearing though was ultimately not cross examined for reasons which I need not detail in this judgment.

3 Counsel for Sovcomflot referred to Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748. In that case, Toohey J described the discretion to award costs as follows (at 48,136):

"Section 43(2) of the Federal Court of Australia Act 1976 vests the award of costs "in the discretion of the Court or Judge". The Federal Court Rules do not purport to qualify that discretion. The only rule to which reference is necessary is O62, r15 whereby, when costs are reserved, those costs follow the event "unless the Court or a Judge otherwise orders".

The discretion must of course be exercised judicially. There are decisions, both of Australian and English courts, that throw light on the way in which the discretion is to be exercised. I shall not refer to those decisions in any detail; I shall simply set out in a summary way what I understand to be their effect.

Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v Godfrey [1920] 2 KB 47.

Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v Farquhar [1893] 1 QB 564.

A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v Lombardi (1975) 13 SASR 4 at p. 12."

These principles were discussed by a Full Court in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261. In that case the Court said (at 271-2):

"The propositions enunciated in [Hughes] are subject to the further consideration that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case: Cretazzo v Lombardi (1975) 13 SASR 4 at 12. In Trade Practices Commission v Nicholas Enterprises Pty Ltd (No. 3) (1979) 42 FLR 213; 28 ALR 201, Fisher J regarded the discretion to apportion costs as one to be exercised only in the most exceptional circumstances. Nevertheless he accepted that where a considerable part of the trial is taken up in determining issues upon which a party fails, it is a proper exercise of the discretion to reduce the costs allowed to that party. Generally speaking, and notwithstanding the considerations referred to by Toohey J and the other authorities mentioned above, the demands of the community for greater economy and efficiency in the conduct of litigation may properly be reflected in a qualification of the presumption that a successful party is entitled to all its costs."

In the above passage, the Full Court refers to Cretazzo v Lombardi (1975) 13 SASR 4. In that case Jacobs J said (at 16):

"... I would wish to sound a note of cautious disapproval of applications, which are being made with increasing frequency, to apportion costs according only to the success or failure of one party or the other on the various issues of fact or law, which arise in the course of a trial.

[...]

But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues."

4 While plainly the Court has a discretion to reflect in a costs order the fact that a party succeeded on one issue but ultimately failed in the proceedings generally, there are no special features of this case which, in my opinion, would justify such an order being made. Sovcomflot's application was a strike out application alleging the Court did not have jurisdiction. On that ultimate issue it failed. The issue on which Sovcomflot succeeded was not an issue that one could have reasonably expected CMC to have conceded. I do not propose to apportion costs in the way proposed.

5 I now turn to the question of whether the costs to which CMC is entitled should be paid forthwith. Order 62 r 3(2) states:

"Where the Court makes an order in any proceeding for the payment of costs the Court may require that the costs be paid forthwith notwithstanding that the proceeding is not concluded."

6 The discretion in O 62 r 3(2) has been discussed in several decisions of this Court. These were surveyed by Branson J in Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545 and by Einfeld J in Telstra Corp Ltd v First Netcom Pty Ltd [1998] FCA 656. Circumstances relevant to the exercise of the discretion include whether there is likely to be a long period between the interlocutory and final decisions, whether the issues determined by the interlocutory decision are discrete from the primary issues at trial, the nature of the interlocutory application, and the effect of its determination on the main proceedings. In general, the interests of justice may require a departure from the ordinary practice of ordering payment of costs at the conclusion of the proceedings.

7 In the present case CMC submits that a discrete issue has been decided finally and an order should be made given the financial burden CMC has suffered in contesting the strike out application. CMC also points to the financial position of the company which indicates it will be able to satisfy any costs order if it ultimately fails in the proceedings. CMC also relies on the fact that it is probable Sovcomflot has insurance to cover its legal costs in proceedings such as these.

8 The various matters relied on by CMC provide some support for a departure from the general rule that costs be payable at the end of the proceedings. However, the proceedings have now been on foot since February 1999, they are fast approaching a point where there will be a final hearing and judgment. Indeed the matter has been fixed for hearing on 10 and 11 April 2000. Unless the matter is settled before then, judgment will be given by the middle of this year. If CMC is successful it will be able to obtain its costs comparatively shortly thereafter. If it is unsuccessful then the relevant adjustments can be made at that time. On either approach what costs are payable by whom and in what amount will be finally resolved in the next few months. Accordingly, I do not propose to order that the costs be payable forthwith.

9 I simply order that Sovcomflot pay CMC's costs of the strike out application.

I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Associate:

Dated: 21 February 2000

Counsel for Sovcomflot:	Dr A S Bell
Solicitor for Sovcomflot:	Thynne & McCartney
Counsel for CMC (Australia) Ltd:	Mr P E King
Solicitor for CMC (Australia) Ltd:	James Neill
Date of Hearing:	25 October 1999
Date of Judgment:	10 February 2000