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Federal Court of Australia - Full Court Decisions |
Last Updated: 4 January 2007
FEDERAL COURT OF AUSTRALIA
Griffiths v Boral Resources (Qld) Pty Ltd (No 2) [2006] FCAFC 196
COSTS - whether order as to costs should be varied - whether
there should be any order as to costs in the proceeding
below
COSTS - whether costs should be set-off against the judgment
debt - whether the court should order that the respondent pay the costs of
the
appeal directly to the legal representatives in circumstances where counsel are
acting pro bono
Held: The respondent should not bear the burden
of the costs below. The respondent should have to pay the applicant’s
costs of and
incidental to the appeal. No order should be made to the effect
that the respondent pay the costs of the appeal directly to the
applicants’
legal representatives.
Federal Court of
Australia Act 1976 (Cth) ss 43 (2), 58
Federal Proceedings (Costs) Act
1981 (Cth) ss 6, 14
Legislative Instruments Act 2003
(Cth)
Federal Court Rules O 80 r 9 (2)
Australian
Competition and Consumer Commission v Commercial and General Publications Pty
Ltd (No 2) [2002] FCA 1349 not followed
Baker v Campbell [1983] HCA 39; (1983)
153 CLR 52 cited
Black-Clawson International Ltd v Papierwerke
Waldhof-Aschaffenburg AG [1975] UKHL 2; [1975] AC 591 cited
Brimaud v Boston
Securities Entertainment Investments Pty Ltd [1998] FCA 1392
considered
Corporate Affairs Commission of New South Wales v Yuill [1991] HCA 28;
(1991) 172 CLR 319 cited
Edwards v Hope (1885) 14 QBD 922
cited
Esso Australia Resources Ltd v The Commissioner of
Taxation (1997) 144 ALR 458 considered
Griffiths v Boral Resources
(Qld) Pty Limited [2006] FCAFC 149 cited
Holder v Searle [1998] FCA 1776 considered
Inn Leisure Industries Pty Ltd (prov liq
appointed) v DF McCloy Pty Ltd (1991) 28 FCR 151 considered
In re A
Debtor No. 21 of 1950 (No 2), ex parte The Petitioning Creditors v The
Debtor [1951] 1 Ch 612 applied
Jamal v Secretary Department of Health
(1988) 14 NSWLR 252 cited
Kostka v Addison [1986] 1 QdR 416
cited
Lockley v National Blood Transfusion Service [1992] 2 All ER 589
cited
In re a Debtor No. 21 of 1950, ex parte The Debtor v Bowmaker Ltd
and another [1951] 1 Ch 313 cited
Reid v Cupper [1915] 2 KB 147
cited
Ruddock v Vadarlis [2001] FCA 1865; (2001) 115 FCR 229 cited
Schokker v
Federal Commissioner of Taxation [2000] FCA 1734; (2000) 181 ALR 597 cited
Worrell v
Power and Power [1993] FCA 551; (1993) 46 FCR 214 distinguished
GE Dal Pont,
Law of Costs, LexisNexis Butterworths, 2003
SR Derham, The Law of
Set-Off, 3rd edn, Oxford University Press, 2003
DAVID
JAMES GRIFFITHS v BORAL RESOURCES (QLD) PTY LIMITED
QUD 311 OF
2005
SPENDER, DOWSETT AND COLLIER JJ
22
DECEMBER 2006
BRISBANE
THE COURT ORDERS THAT:
1. There be no order as to costs in the proceeding below.
2. The respondent pay the appellant’s costs of and incidental to the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the
Federal Court Rules.
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ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
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BETWEEN:
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DAVID JAMES GRIFFITHS
Appellant |
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AND:
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BORAL RESOURCES (QLD) PTY LIMITED
Respondent |
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JUDGES:
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SPENDER, DOWSETT AND COLLIER JJ
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DATE:
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22 DECEMBER 2006
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PLACE:
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BRISBANE
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REASONS FOR JUDGMENT
SPENDER J:
1 I agree with the reasons for judgment of Collier J, and with the orders her Honour proposes.
Associate:
Dated: 22
December 2006
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ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
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BETWEEN:
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DAVID JAMES GRIFFITHS
Appellant |
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AND:
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BORAL RESOURCES (QLD) PTY LIMITED
Respondent |
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JUDGES:
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SPENDER, DOWSETT AND COLLIER JJ
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DATE:
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22 DECEMBER 2006
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PLACE:
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BRISBANE
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REASONS FOR JUDGMENT
DOWSETT J:
2 I agree with the orders proposed by Collier J and with her Honour’s reasons. I wish to add only a few short comments.
3 Firstly, whilst it is desirable that counsel who appears on a pro bono basis be recompensed if that is at all possible, it is equally desirable that a practitioner be paid when he or she appears in expectation of receiving a proper fee. If policy dictates that in the present circumstances any set-off should be barred in order to assist pro bono counsel, then the same course should be adopted if counsel appearing on instructions in the usual way will not otherwise be paid.
4 Secondly, with regard to observations by Heerey J in Australian Competition and Consumer Commission v Commercial and General Publications Pty Ltd (No 2) [2002] FCA 1349, I consider that it would be unwise to encourage a preference for judicial apportionment of costs as against awarding costs according to success on individual issues. Each approach has its merits. Apportionment may make assessment or taxation easier, but it will be based on little more than the trial judge’s general impressions of the case. Judges rarely know much about costs. An issues-based order may be more cumbersome to assess or tax, but it may more accurately apportion costs so that they follow the event.
5 Finally, the general discretion as to costs is precisely that – a
discretion to decide whether a party should pay some or
all of the other
party’s costs. It is not immediately apparent to me that it authorizes
the Court to deprive a party of some
other substantive or procedural right such
as the right of set-off. The position may be different when an order for costs
is made
against a legal practitioner personally. Such an order invokes both the
power to award costs and the power to regulate the conduct
of
practitioners.
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I certify that the preceding four (4) numbered paragraphs are a true copy
of the Reasons for Judgment herein of the Honourable Justice
Dowsett.
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Associate:
Dated: 22 December 2006
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IN THE FEDERAL COURT OF AUSTRALIA
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QUEENSLAND DISTRICT REGISTRY
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QUD 311 OF 2005
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ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA |
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BETWEEN:
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DAVID JAMES GRIFFITHS
Appellant |
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AND:
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BORAL RESOURCES (QLD) PTY LIMITED
Respondent |
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JUDGES:
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SPENDER, DOWSETT AND COLLIER JJ
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DATE:
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22 DECEMBER 2006
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PLACE:
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BRISBANE
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REASONS FOR JUDGMENT
COLLIER J:
6 When judgment was delivered by the Full Court (Spender ACJ, Dowsett and Collier JJ) in favour of the appellant in Griffiths v Boral Resources (Qld) Pty Limited [2006] FCAFC 149, the Court proposed that the respondent pay the appellant’s costs of the appeal and of the proceedings below. Both parties then sought to be heard as to the question of costs.
7 The appellant sought a direction that costs ordered by the Full Court in this matter not be set-off against the judgment debt, which founded the creditor’s petition served on the appellant by the respondent. I note that the debt was for the sum of $60 947.75 for which judgment was given in favour of the respondent in the District Court of Queensland on 21 July 2003.
8 Both appellant and respondent have made submissions concerning the form of the costs order in this case, the respondent in particular seeking a variation of the proposed costs order.
SUBMISSIONS OF THE PARTIES
9 In summary, the appellant submitted:
• The Federal Court has general discretion to award costs under s 43(2) Federal Court of Australia Act 1976 (Cth) (‘the Federal Court Act’).
• Order 80 r 9(2) Federal Court Rules provides that if an order for costs is made in favour of a litigant who is assisted under the scheme created by O 80 r 10, the legal practitioner who has provided the legal assistance is entitled to recover the amount of fees and disbursements that another party is required to pay under the order.
• The appellant asks the Court to adopt a similar approach to that of Heerey J in Australian Competition and Consumer Commission v Commercial and General Publications Pty Ltd (No 2) [2002] FCA 1349 (‘CGP’) where his Honour said:
‘So in a real sense the practitioner appearing under O 80 has a public role, in addition to the usual professional duties owed to his or her client. Where success, total or partial, in the litigation attracts a costs order, I think that practitioner should be entitled to the full fruits thereof. I will therefore order that the order for costs be not subject to any set off in respect of the penalties ordered to be paid.’ (at [37])
• The appellant contends that the appropriate order is that the respondent pay the costs of the appeal and the proceeding below. In respect of the proceeding in the Federal Magistrates Court, once the petition lapsed the only order that should properly have been made was that the respondent’s application for a sequestration order be dismissed with costs. Nothing prevented the respondent making an application to extend the time for the petition to be heard, however they did not do so.
• The appellant therefore argues that its costs should not be set-off against any debt or liability that may be owing to the respondent by the appellant.
• In the alternative, the appellant submits that the respondent pay the costs of the appeal directly to the legal representatives of the appellant.
10 The respondent submitted:
• There should be no order as to the costs of the proceedings below.
• Alternatively, the appellant have the costs of the proceedings below only in respect of the hearings on 15 March 2005, 19 April 2005 and 2 August 2005 (namely the dates when the court requested and heard submissions concerning the application of the slip rule).
• The Federal Magistrate in the proceeding below had followed existing authority, and, were the respondent not disqualified under s 14 Federal Proceedings (Costs) Act 1981 (Cth), it would apply for a certificate under s 6 for its costs of the appeal and any costs it is ordered to pay to the appellant.
• The appellant enjoyed no success at the hearing of the creditor’s petition before the Federal Magistrate, and the decision of the Full Court did not impugn any findings of the Federal Magistrate on the merits.
• In relation to costs, s 43 of the Federal Court Act does not empower the court to make a ‘direction’ which will deny the respondent its rights in respect of a judgment obtained in the District Court of Queensland. The circumstances in CGP were distinguishable because Heerey J in CGP considered there were grounds for concern as to the reason the ACCC had commenced the prosecution in that case.
RELEVANT ISSUES
11 Two issues arise for consideration in relation to the award of costs.
12 The first issue is whether the order as to costs proposed in Griffiths v Boral Resources (Qld) Pty Limited [2006] FCAFC 149 should be made.
13 The second, perhaps more difficult, issue is whether any costs awarded against the respondent should be set-off against the judgment debt owed by the appellant to the respondent. The fact that there is a judgment debt still owing from the appellant to the respondent is not in contention.
COSTS ORDER
14 Ordinarily, the costs of an appeal follow the event. Further, where an appeal succeeds, in the ordinary course the Court will order the respondent to pay the costs of the appeal and the proceeding in the court below: Ruddock v Vadarlis [2001] FCA 1865; (2001) 115 FCR 229 (‘Ruddock v Vadarlis’) at 237, Jamal v Secretary Department of Health (1988) 14 NSWLR 252 at 271-272, and I note similar observations as to this general approach by GE Dal Pont, Law of Costs (LexisNexis Butterworths, 2003) at p 668.
15 However this rule is not hard and fast. As pointed out, for example, by Black CJ and French J in Ruddock v Vadarlis at 235, where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.
16 In CGP Heerey J observed at [32]:
‘In recent times judges of this Court have adopted a broad brush approach, eschewing an isolation of particular issues and allocation of costs thereto. Rather there have been costs orders which recognise the extent to which parties have been significantly successful in the proceeding.’
17 So, for example:
• In Holder v Searle [1998] FCA 1776 where the prosecution failed in two of the three informations it proferred against the defendant, and was only partially successful in respect of the remaining information, Spender J ordered that the prosecutor pay one-third of the defendant’s costs.
• In Brimaud v Boston Securities Entertainment Investments Pty Ltd [1998] FCA 1392 where the applicant was successful in one of three claims against the respondents, and in respect of one of the unsuccessful claims the extent to which the length of the case was increased by the conduct of that issue was not insignificant, Emmett J ordered that the respondents pay 15 per cent of the applicant’s costs of the proceedings.
• In Esso Australia Resources Ltd v The Commissioner of Taxation (1997) 144 ALR 458 where the taxpayer’s success overall was slight, Sundberg J made a broad-brush global order as to costs, determining that the taxpayer should pay five-sixths of the respondent’s costs, and the respondent one-sixth of the taxpayer’s costs.
• In Inn Leisure Industries Pty Ltd (prov liq appointed) v DF McCloy Pty Ltd (1991) 28 FCR 151 the applicant succeeded in one of three claims, however the Court considered in the circumstances of the case that the applicant should recover three-quarters of the costs of the application.
• In CGP itself, Heerey J observed that three-quarters of the trial was taken up with charges which were dismissed, and awarded the defendant half its costs.
18 In my view the Court should endorse a flexible approach to the statutory discretion to make orders as to costs in s 43 of the Federal Court Act. The next question however is whether that approach should be adopted in this case.
19 In this case:
• In my view, it is irrelevant that the respondent would in other circumstances have applied for a costs certificate, as on the facts the respondent was not entitled to apply.
• With the benefit of hindsight, once the petition had lapsed, the only order that could properly have been made by the Federal Magistrate was that the respondent’s application be dismissed. As noted in Griffiths v Boral Resources (Qld) Pty Limited [2006] FCAFC 149 pars [31] and [69], at any time before the petition expired on 11 September 2004 the petitioning creditor was entitled to bring an application to extend time for the hearing of the petition, but did not.
• However in my view the merits of the case before the Federal Magistrate remain unchanged.
20 In the circumstances and in view of the merits of the case below, the respondent should not bear the burden of the costs below. The appropriate order is that no order be made as to costs below, but the respondent should bear the costs of and incidental to the appeal.
SET-OFF
21 The appellant has relied on the decision of Heerey J in CGP, and sought a direction in relation to payment of costs. In that case the ACCC had brought 41 charges against the defendants alleging contravention of s 64(2A) Trade Practices Act 1974 (Cth) (‘TPA’). Heerey J had dismissed those charges but found proved five charges under s 58(b) TPA, and ordered the defendant to pay a penalty of $1000 on each charge. However Heerey J ordered that the prosecutor pay one-half of the defendant’s costs. The defendant had been represented by pro bono counsel under the Court’s pro bono scheme established under O 80 Federal Court Rules. Heerey J said:
‘Rule 9(2) does not say from whom the pro bono practitioner is entitled to recover. Is it from the assisted litigant for whom the practitioner acts, or is it from the party ordered to pay the costs? I think the former is the better view; sub-rule (2) is to be seen as an exception to the general rule of sub-rule (1) (which is in turn an exception to the general law which entitles legal practitioners to contract for the payment of fees for professional services, either absolutely or contingent on the success of litigation... The practice thus far where parties aided under O 80 have succeeded has been to make an order of costs in favour of that party rather than the practitioner: Chancliff Holdings Pty Ltd v Bell [1999] FCA 1783, Baig v Minister for Immigration & Multicultural Affairs [2002] FCA 380, Teenakoon v Minister for Immigration & Multicultural Affairs [2001] FCA 615. Rule 9(2) would then enable the practitioner to recover his or her fees and disbursements from the O 80 client either directly or by way of appropriation of monies received from the other party.
[36] Problems might arise where the party ordered to pay costs seeks to set off that liability against some order for payment in its favour, such as the penalty I have ordered Mr Hassett to pay. In the present case, as it happens, Mr Hassett will be able to pay the penalty amount. However, as a matter of principle, no such set-off should be allowed. For example, if in the present case Mr Hassett had no assets it would seem wrong that the Commission could set off the amount of the penalty against its liability for costs. It is within the general discretion of the Court when dealing with costs to make orders which determine who bears the ultimate burden... There is a substantial public interest in practitioners undertaking the often burdensome obligations of representation under O 80... [37] So in a real sense the practitioner appearing under O 80 has a public role, in addition to the usual professional duties owed to his or her client. Where success, total or partial, in the litigation attracts a costs order, I think that practitioner should be entitled to the full fruits thereof. I will therefore order that order for costs be not subject to any set off in respect of the penalties ordered to be paid.’
22 This is not a case where there is a right of set-off under s 86 Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’). Because the creditor’s petition has been dismissed, the appellant is not a bankrupt. The respondent is not advocating that there is a right of set-off under the Bankruptcy Act.
23 Further, although in appropriate circumstances a solicitor may claim a solicitor’s lien in respect of an award of costs in the Federal Court (note, for example, Worrell v Power and Power [1993] FCA 551; (1993) 46 FCR 214) a solicitor’s lien is not claimed in this case.
24 That the respondent has the right to set-off an order for costs against its judgment debt against the appellant is not in contention. Although often described as an ‘equitable set-off’, as explained by the Court of Appeal in Edwards v Hope (1885) 14 QBD 922, and Reid v Cupper [1915] 2 KB 147, and other cases listed in SR Derham The Law of Set-Off (3rd edn, Oxford University Press, 2003) at 51, set-off was applied by the common law courts long before the Judicature Acts, and the expression ‘equitable set-off’ ‘was used in the sense of justice and fairness, as opposed to a reference to the jurisdiction of the Court of Chancery’. (Derham, 51-52)
25 It is possible in appropriate cases to set off judgments of different courts: Reid v Cupper [1915] 2 KB 147, Kostka v Addison [1986] 1 QdR 416 (where McPherson J set-off monetary awards made by judgments of the Supreme Courts of Western Australia and Queensland). This extends to an order for costs in one judgment as against an award made in another judgment: Reid v Cupper [1915] 2 KB 147 especially per Buckley LJ at 149. Accordingly, it is clearly possible for the respondent to claim a set-off of an award of costs in the Federal Court, against a judgment debt in the District Court of Queensland.
26 A case with similar facts to the one before this court was In re A Debtor No. 21 of 1950 (No 2), ex parte The Petitioning Creditors v The Debtor [1951] 1 Ch 612. In that case the Divisional Court of Chancery had previously allowed a debtor’s appeal against a receiving order made in the County Court, set aside the order on the basis that the bankruptcy proceedings had been defective, and ordered the petitioning creditors to pay the total costs of 72l of the debtor from both the County Court proceedings and the appeal (In re A Debtor No. 21 of 1950, ex parte The Debtor v Bowmaker Ltd and another [1951] 1 Ch 313). The petitioning creditors were however judgment creditors of the debtor in the sum of 409l. 1s. 4d. The debtor’s solicitors told the petitioning creditors that the debtor intended to issue execution against the petitioning creditor for the sum owing in respect of costs. The petitioning creditor applied to the Divisional Court for a stay of execution in respect of that order and indicated that they intended to present another bankruptcy petition.
27 Danckwerts J examined relevant authorities, and considered both the concept of set-off in these circumstances, and the role of a solicitor’s lien in relation to payment of legal fees. He took the view that there was discretion to allow a set-off, and therefore a power to order a stay of the order for payment of costs by the applicants to the debtor. In particular, he said at 618-619:
‘In the circumstances of this case should a stay be directed so as to prevent the debtor issuing execution against his creditor? Prima facie, it seems to me that it is most unfair that the creditor should have to pay his debtor. Sir George Jessel, MR in Pringle v Gloag (10 Ch D 676, 680) said: "If a solicitor says, unless I have a lien I cannot get paid, the answer is he should see before he undertakes a particular business for a client that that client is able to pay him for it: a solicitor is not compelled to work for an insolvent client". On the other hand, it is said that unless the debtor recovers these costs, his solicitor will have no chance of being paid, and that this will discourage solicitors from giving persons who are in danger of being made bankrupt the legal assistance which they need against proceedings wrongfully instituted against them. It is said also that a set-off would enable the creditor to that extent to be paid in full. On the other hand, if the debtor recovers the costs, his solicitor obtains payment in full. It is unfortunate that in successive editions of Williams on Bankruptcy the statement has been repeated that in bankruptcy a set-off is only admissible as regards several orders for costs in bankruptcy, because this statement may have misled those who have to deal with bankruptcy matters. But it is difficult to see why an unpaid creditor should be required to provide for the costs of his debtor’s solicitor, and be subject to the risk of an execution to recover the amount of such costs. Accordingly it seems to me that a stay of execution should be granted in this case.’ (emphasis added)
28 Harman J agreed and said:
‘It seems to me...that as between the parties there can be no equity to refuse a set-off and that to suggest that there is some equity obliging one party to pay the costs of the solicitor to the other is absurd.’ (at 620)
and later:
‘I cannot see any reason why the creditor should pay the costs of his debtor’s solicitor if the latter is unable to do so, nor do I believe that a solicitor accepting the retainer of a person against whom bankruptcy proceedings are pending does so in reliance on the view that petitioner’s solicitor may blunder and thus give him the advantage of an order for costs against the petitioner.’ (at 621-622)
29 In my view the approach taken by the court in In re A Debtor No 21 of 1950 (No 2) is correct, and applicable in this case.
30 In this matter the appellant Griffiths contends, echoing comments of Heerey J in CGP, that there is a substantial public interest in practitioners undertaking the obligation of representation under O 80. I accept that there is such a public interest. I also note comments of French J in Schokker v Federal Commissioner of Taxation [2000] FCA 1734; (2000) 181 ALR 597 where pro bono counsel represented the appellant, and French J observed that it would not be inappropriate for the Commissioner to honour the spirit of O 80, and come to an agreement with counsel for the appellant in relation to the payment of fees.
31 However Heerey J in CGP recognised that, although O 80 r 9(2) does not say from whom the pro bono practitioner is entitled to recover, the better view is that the practitioner is entitled to recover his or her costs from the assisted litigant for whom the practitioner acts, rather than from the party ordered to pay the costs. In my view, this is the correct interpretation of O 80 r 9(2). To stretch the interpretation of O 80 r 9(2) to deprive the respondent of its right of equitable set-off as sought by the appellant in this case would, in my view, be an inappropriate exercise of the discretion of the Court under s 43 Federal Court Act. The power of the Court to exercise its discretion in this way under the Federal Court Rules would need to be very clear, and it is not in this case. In this context I also note the presumption that Parliament does not intend to interfere with basic common law doctrines unless the words of the statute expressly or necessarily require that result (Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] UKHL 2; [1975] AC 591, Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 at 120-122, Corporate Affairs Commission of New South Wales v Yuill [1991] HCA 28; (1991) 172 CLR 319). While obviously the Federal Court Rules do not constitute legislation, it is arguable that the Black-Clawson principle is relevant given that the rules do have force by virtue of the Legislative Instruments Act 2003 (Cth) and s 58 Federal Court Act.
32 By analogy, I note that in the United Kingdom where costs had been awarded against a legally-aided litigant, the Court of Appeal in applying general principles of set-off permitted a set-off of those costs against damages or costs to which the legally-aided litigant had become, or might in future become, entitled in the action, and was of the view that the set-off was no different from and no more extensive than the set-off available to or against parties who are not legally aided: Lockley v National Blood Transfusion Service [1992] 2 All ER 589 (per Scott LJ at 593-594, Sir John Megaw and Farquharson LJ agreeing).
33 Accordingly, in my view the Court should not make the direction sought by the appellant, which would interfere with the equitable right of set-off of the respondent in this case.
34 The appropriate order in this case is that the costs order made in Griffiths v Boral Resources (Qld) Pty Limited [2006] FCAFC 149 should be vacated, and substituted with orders that:
1. There be no order as to costs in the proceeding below.
2. The respondent pay the appellant’s costs of and incidental to the appeal.
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I certify that the preceding twenty-nine (29) numbered paragraphs are a
true copy of the Reasons for Judgment herein of the Honourable
Justice
Collier
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Associate:
Dated: 22 December 2006
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Solicitor for the Respondent:
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Date of Hearing:
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Date of Judgment:
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