Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International N.V. (No 2) [2007] FCAFC 121 (13 August 2007)

Last Updated: 20 August 2007

FEDERAL COURT OF AUSTRALIA

Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International N.V. (No 2) [2007] FCAFC 121

COSTS – whether circumstances justify departure from the ordinary rule that costs follow the event – where certain ground of appeal abandoned at the hearing – apportionment of costs



Federal Court of Australia Act 1976 (Cth), s 43

Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 cited






















FEDERAL TREASURY ENTERPRISE (FKP) SOJUZPLODOIMPORT AND FEDERAL PUBLIC UNITARY ENTERPRISE EXTERNAL ECONOMIC UNION SOJUZPLODOIMPORT (FGUP VO) v SPIRITS INTERNATIONAL N.V. AND DIAGEO AUSTRALIA LIMITED
NSD 1918 OF 2006

BLACK CJ, ALLSOP AND MIDDLETON JJ
13 AUGUST 2007
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1918 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	FEDERAL TREASURY ENTERPRISE (FKP) SOJUZPLODOIMPORT First Appellant FEDERAL PUBLIC UNITARY ENTERPRISE EXTERNAL ECONOMIC UNION SOJUZPLODOIMPORT (FGUP VO) Second Appellant
AND:	SPIRITS INTERNATIONAL N.V. First Respondent DIAGEO AUSTRALIA LIMITED Second Respondent

JUDGES:	BLACK CJ, ALLSOP AND MIDDLETON JJ
DATE OF ORDER:	13 AUGUST 2007
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The first respondent pay the appellants’ costs of the first respondent’s motion before the primary judge.
2. The first respondent pay the appellants’ costs of the appeal other than the appellants’ costs of and associated with the ground set out in paragraph 3 of the notice of appeal.
3. The appellants pay the first respondent’s costs of and associated with responding to the ground set out in paragraph 3 of the notice of appeal, such costs to be set off against the costs payable by the first respondent pursuant to orders 1 and 2 above.

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	NSD 1918 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	FEDERAL TREASURY ENTERPRISE (FKP) SOJUZPLODOIMPORT First Appellant FEDERAL PUBLIC UNITARY ENTERPRISE EXTERNAL ECONOMIC UNION SOJUZPLODOIMPORT (FGUP VO) Second Appellant
AND:	SPIRITS INTERNATIONAL N.V. First Respondent DIAGEO AUSTRALIA LIMITED Second Respondent

JUDGES:	BLACK CJ, ALLSOP AND MIDDLETON JJ
DATE:	13 AUGUST 2007
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 On 28 March 2007 the Full Court handed down judgment in this proceeding. Terms used in this decision should be understood as they were used in the previous reasons of the Full Court.

2 The Full Court ordered that the parties to the appeal file written submissions as to the costs of the appeal and of Spirits’ motion before the primary judge filed on 23 November 2005. After considering the submissions of the parties the Full Court now gives its reasons and orders in relation to costs.

3 The second respondent acted as an observer in the appeal. No order for costs is sought against it and it will bear its own costs.

4 FKP and FGUP submitted that the costs of the appeal and of Spirits’ motion should follow the event, and that the appropriate order is that Spirits pay the costs of the appeal and of the motion before the primary judge.

5 Spirits submitted that no order should be made as to the costs of the appeal as between FKP and FGUP and Spirits, or alternatively there should be an apportionment of costs of the appeal. Spirits accepted that FKP and FGUP are entitled to the costs of the motion before the primary judge.

6 The discretion conferred by s 43(2) of the Federal Court of Australia Act 1976 (Cth) to make orders for costs is unfettered except by the principle that it be exercised judicially. However, in the absence of circumstances justifying some other order, costs ordinarily follow the event and a successful litigant is entitled to an order for its costs. FKP and FGUP submit that there are no circumstances in this case which would justify a departure from the ordinary course.

7 Spirits elected to bring a motion, at an early stage of the proceedings, seeking, in effect, an order for discovery by the Russian Federation. The primary judge made such an order over the opposition of FKP and FGUP.

8 There were essentially two grounds of appeal. The first ground, which was abandoned during the hearing of the appeal, was that the primary judge’s decision to require, in effect, a foreign state, which was not a party to the proceedings, to provide discovery was beyond power of the court. The second ground was that the order, even if within power, was inappropriate in the circumstances.

9 There was considerable argument before us as to whether the Russian Federation was the ‘real’ applicant/plaintiff in the cross-claim. Further argument centred upon the applicability of the authorities relied upon by the primary judge, in relation to which it was contended by Spirits that there was a principle that discovery should be required from a person not named as a party if that person was the ‘real’ plaintiff: Willis & Co v Baddeley [1892] 2 QB 324 and Abu Dhabi National Tanker Co v Product Star Shipping Ltd [1991] 2 Lloyd’s Rep 508.

10 We accept that reliance was placed by Spirits on these cases and in light of the primary judge’s finding that FKP and FGUP were nominal applicants, it was incumbent on FKP and FGUP to raise this matter on appeal.

11 In allowing the appeal, the Full Court held that the approach adopted in Arhill Pty Ltd v General Terminal Co Pty Ltd (1990) 23 NSWLR 545 and Stemcor (Australasia) Pty Ltd v Oceanwave Line SA [2004] FCA 391 ought to have guided the exercise of his Honour’s discretion and that the judge did not act with the caution that the principled exercise of the discretion required where there is an intrusion upon the sovereignty of a foreign State. The appropriateness or otherwise of the trial judge’s order did not turn upon a resolution of the arguments as to whether the Russian Federation was the ‘real’ applicant/plaintiff in the cross-claim, or the applicability of Willis [1892] 2 QB 324 or Abu [1991] 2 Lloyd’s Rep 508, but upon "different and broader considerations".

12 Whilst FKP and FGUP made submissions generally as to the exercise of the Court’s discretion to make the order complained of, the point on which the Full Court eventually allowed the appeal emerged only during the course of the hearing, then based upon one ground of appeal. It is fair to say that the point was not argued in the same way before the learned primary judge. Nevertheless, it is clear that the order made by the primary judge has always been opposed by FKP and FGUP on the basis that it was not an appropriate order.

13 However, FKP and FGUP abandoned the lack of power ground, and whilst the issue of the Court’s power to make the order did not occupy much hearing time, it was raised as a question of substance in the written submissions and needed to be dealt with by the parties. Spirits needed to prepare in anticipation of the power argument being presented to the Full Court. In these circumstances there is reason to discount an order to be made otherwise in favour of a successful litigant.

14 On this basis, we consider that the costs should be apportioned as between the lack of power ground and the other ground of the appeal.

15 It is sometimes preferable in these circumstances to avoid leaving the quantification and fixing of costs to taxation. An allocation of costs in the case of a mixed result can rarely be achieved with mathematical precision and such is not necessary: Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272 per Gummow, French and Hill JJ. Unfortunately, we do not have any appropriate material to estimate the amount of costs or time spent on the preparation and consideration of each relevant ground of appeal, and so cannot make any percentage apportionment of the costs. Therefore, we must leave the quantification and fixing of costs to taxation in default of agreement between the relevant parties.

16 For these reasons, and having regard to the matters accepted by the parties, we will make orders that:

(a) Spirits pay FKP and FGUP’s costs of Spirits’ motion before the primary judge;
(b) Spirits pay FKP’s and FGUP’s costs of the appeal other than FKP’s and FGUP’s costs of and associated with the ground set out in paragraph 3 of the notice of appeal; and
(c) FKP and FGUP pay Spirits’ costs of and associated with responding to the ground set out in paragraph 3 of the notice of appeal, such costs to be set off against the costs payable by Spirits pursuant to (a) and (b) above.

I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Black and the Honourable Justices Allsop and Middleton.

Associate:
Dated: 13 August 2007

Counsel for the Appellants:	D K Catterns QC, C Dimitriadis
Solicitor for the Appellants:	Allens Arthur Robinson
Counsel for the First Respondent:	R Cobden SC, P W Flynn
Solicitor for the First Respondent:	Mallesons Stephen Jaques
Solicitor for the Second Respondent:	Freehills
Date of Hearing:	16 November 2006
Date of Judgment:	13 August 2007