|
FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT
SYDNEY
|
SYG 835 of
2008
Applicant
And
JETSWAN PTY LTD T/AS CASH CONVERTERS
BLACKTOWN ABN 91 971 227 677
|
First Respondent
Second Respondent
REASONS FOR JUDGMENT
Background
- On
17 September 2010, I dismissed the application in this matter and made the
following orders:
- (1) The
application filed on 13 February 2008 is dismissed.
- (2) The
Applicant file submissions on costs by 18 October 2010.
- (3) The
Respondent file submissions on costs by 25 October 2010.
- The
solicitors for the Respondents filed written submissions on
27 October 2010
seeking orders that the Applicant pay the Respondent’s costs until 11 am
29 January 2009 on a party-party basis
and costs on an indemnity basis for all
costs incurred thereafter. The Respondents read and rely on the affidavit of
Aaron Paul
Dearden sworn 27 October 2010 on the question of costs.
- The
solicitors for the Applicant filed written submissions on
4 November 2010
opposing the costs orders sought by the Respondent and requested the Court to
make the usual costs order. The Applicant
reads and relies upon the affidavit
of Peter Vassallo affirmed on
28 October 2010.
Legislative provisions
- These
proceedings were brought under the Human Rights and Equal Opportunity
Commission Act 1986 (Cth) which does not have any special provisions
relating to costs.
- The
Court has jurisdiction to award costs under s.79(2) of the Federal
Magistrates Act 1999 (Cth) (“the FM Act”). Pursuant to s.73(3)
of the FM Act the Court has a discretion to order costs subject to the
Federal Magistrates Court Rules 2001 (Cth) (“the FMCA Rules”)
unless any other Commonwealth Act has specific costs provisions.
- Part
21 of the FMCA Rules govern costs in proceedings before the Court. If the FMC
Rules are silent on an issue, pursuant to r.1.05(3)(b)
and Part 2 of Schedule 3
of the FMC Rules, Part 23 of the Federal Court Rules apply.
- The
FMC Rules provide that unless the Court orders otherwise, costs are to be
awarded in accordance with Part 1 of Schedule 1, in
addition to any
disbursements which are properly incurred (r.21.10).
- The
Respondents submit that r.1.05(3)(b), Part 23 of the Federal Court Rules
apply with regard to offers of compromise. The Applicant concedes that the
Federal Court Rules may apply. However, this is only in circumstances
where the FM Rules are insufficient or inappropriate (r.1.05(2)). The argument
advanced on behalf of the Applicant is that the discretion vested in the Court
to award costs is both sufficient and appropriate,
and for that reason the Court
is not required to apply the Federal Court Rules.
- In
support of the Respondent’s application that the Court award costs on an
indemnity basis, they rely on various settlement
offers exchanged during the
course of the proceedings. The Applicant argued that the Court is required to
exercise its discretion
in accordance with the FM Rules.
Applicant’s submissions
- The
Respondents contend that they have made numerous settlement offers during the
proceedings and the Respondents rely on a Notice
of Offer of Compromise not
accepted by the Applicant dated 28 January 2009. The Respondents submit that
the offer complied with
the form required under o.23 r.3 of the Federal Court
Rules. The offer also satisfied the minimum time period for making an Offer
of Compromise of 14 days under o.23 r.5(3) of the Federal Court Rules.
The offer expired on 13 February 2009. It is submitted that the offer was open
to be accepted for 16 days (not including the day
for making the offer). The
consequences of a Notice of Offer of Compromise are set out in o.23 r.11 of the
Federal Court Rules. The argument advanced is that the relevant rule that
applies in this case is o.23 r.11(6):
- (6)
If:
-
(a) an offer is made by a Respondent
and not accepted by the Applicant;
and
- (b)
the Respondent
obtains an order or judgment
on the claim
to which the offer relates as favourable to the Respondent,
or more
favourable to the Respondent,
than the terms of the offer;
-
then, unless the Court
otherwise orders:
- (c)
the Respondent
is entitled to an order that the Applicant
pay the Respondent's
costs in respect of the claim
incurred up
to 11 am on the day after the day the offer was made, taxed on a
party and party basis; and
- (d)
the Respondent
is entitled to an order that the Applicant
pay the Respondent's
costs in respect of the claim
incurred after
that time, taxed on an indemnity basis.
- It
is submitted that this provision commenced operation on 2 August 2008 and does
not apply to an Offer of Compromise made before
that date: Review 2 Pty Ltd
(in liq) v Redberry Enterprise Pty Ltd (No.2) [2008] FCA 1805 at [20]. As
the Offer of Compromise relied upon by the Respondents in this matter was made
after 2 August 2008 the provision applies to
these proceedings. The purpose of
the provision has been expressed as followed in Granitgard Pty Ltd v
Termicide Pest Control Pty Ltd (No.6) [2010] FCA 381 at [41]
- [41]
Order 23 r 11(6) forms part of a regime the aim of which is to
encourage compromise with the attendant benefits for the parties in
terms of
agreed certainty of outcome, as opposed to the risks of litigation and for the
nation in terms of allowing limited judicial
resources to be deployed in the
resolution of the truly intractable controversies. It does this by encouraging a
Respondent to make
a realistic offer of compromise and encouraging an Applicant
who receives such an offer to accept it lest, if the Respondent obtains
a more
favourable judgement, the Applicant become liable to a greater amount of costs
as a result of the Respondent having a prima
facie entitlement to taxation on an
indemnity basis. One way of viewing cases which have termed an offer “not
genuine”
is to regard them as examples of cases where the offer could be
seen not to advance the underlying purpose of an order such as
O
23.
- In
circumstances where the Applicant has been wholly unsuccessful and the
Respondent has made an offer more beneficial than the court
order, the provision
creates a presumptive or prima facie entitlement to indemnity costs in favour of
the Respondent: Brookfield Multiplex Ltd v International Litigation Funding
Partners Pty Ltd (No.4) [2009] FCA 803 at [11]; Olivayille Pty Ltd v
Flottweg GMBH and Co KGAA (No.5) [2009] FCA 571.
- The
expression “unless a court otherwise orders” in o.23 r.11(6) of the
Federal Court Rules permits the Court to depart from the presumptive
rule. However, the Court must be satisfied there are “compelling and
exceptional
circumstances” before it would permit a departure from the
conventional approach: Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd
[2009] FCAFC 40 at [10]. Even if the Applicant acted reasonably in
rejecting the offer, it is insufficient to displace the operation of the rule:
Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (supra) at [11];
Uniline Australia Ltd v S BriggsPty Ltd (No.2) [2009] FCA 920; (2009) 82 IPR 56 at [45]
– [48].
- The
Applicant’s submission in support of this contention referred me to a
previous decision of mine: Vero Insurance Ltd v Scriven [2010] FMCA 352
where I held that costs should only be awarded on an indemnity basis where
exceptional circumstances are found to exist. At para.
[44] I referred to the
authorities that support that view where I stated:
- [44] It is
only in exceptional circumstances that a court may order that a party pay
solicitor and client or indemnity costs for
example where the action appears to
be an abuse of process: Parker v Meagher [1984] 3 NSWLR 486 or where a party
should have known that they had no chance of success: Fountain Selected Meats
(Sales) Pty Ltd v International Produce
Merchants Ltd (1988) FCA 202; (1988) 81 ALR 397. The
principles were summarised in Colgate-Palmolive Co v Cussons Pty Ltd (above) per
Shepherd J.
- In
Colgate-Palmolive Company v Cusson Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 His Honour
Sheppard J at [24] referred to what may constitute exceptional circumstances.
His Honour stated:
- 24. It
seems to me that the following principles or guidelines can be distilled out of
the authorities to which I have referred:-
- 1. The
problem arises in adversary litigation, i.e. litigation
- as between
parties at arm's length. Different considerations
- apply where
parties may be found to be entitled to the payment
- of their
costs out of a fund or assets being administered by or
- under the
control of a trustee, liquidator, receiver or person
- in a like
position, eg. a government agency or statutory
- authority.
- 2. The
ordinary rule is that, where the Court orders the costs
- of one
party to litigation to be paid by another party, the
- order is
for payment of those costs on the party and party
- basis. In
this Court the provisions of Order 62, rules 12 and
- 19, and the
Second Schedule to the Rules will apply to the
- taxation.
In many cases the result will be that the amount
- recovered
by the successful party under the Order will fall
- short of
(in many cases well short of) a complete indemnity.
- 3. This has
been the settled practice for centuries in England.
- It is a
practice which is entrenched in Australia. Either
- legislation
(perhaps in the form of an amendment to rules of
- Court) or a
decision of an intermediate court of appeal or of
- the High
Court would be required to alter it. No doubt any
- consideration
of whether there should be any change in the
- practice
would require the resolution of the competing
- considerations
mentioned by Devlin LJ in Berry v. British
- Transport
Commission and Handley JA in Cachia v. Hanes on the
- one hand
and by Rogers J in Qantas on the other. The relevant
- passages
from the respective judgments have been earlier
- referred
to.
- 4. In
consequence of the settled practice which exists, the
- Court ought
not usually make an order for the payment of costs
- on some
basis other than the party and party basis. The
- circumstances
of the case must be such as to warrant the Court
- in
departing from the usual course. That has been the view of
- all judges
dealing with applications for payment of costs on
- the
indemnity or some other basis whether here or in England.
- The tests
have been variously put. The Court of Appeal in
- Andrews v.
Barnes (39 Ch D at 141) said the Court had a general
- and
discretionary power to award costs as between solicitor and
- client "as
and when the justice of the case might so require."
- Woodward J
in Fountain Selected Meats appears to have adopted
- what was
said by Brandon LJ (as he was) in Preston v. Preston
- ((1982) 1
All ER at 58) namely, there should be some special or
- unusual
feature in the case to justify the Court in departing
- from the
ordinary practice. Most judges dealing with the
- problem
have resolved the particular case before them by
- dealing
with the circumstances of that case and finding in it
- the
presence or absence of factors which would be capable, if
- they
existed, of warranting a departure from the usual rule.
- But as
French J said (at 8) in Tetijo, "The categories in which
- the
discretion may be exercised are not closed". Davies J
- expressed
(at 6) similar views in Ragata.
- 5.
Notwithstanding the fact that that is so, it is useful to
- note some
of the circumstances which have been thought to
- warrant the
exercise of the discretion. I instance the making
- of
allegations of fraud knowing them to be false and the making
- of
irrelevant allegations of fraud (both referred to by
- Woodward J
in Fountain and also by Gummow J in Thors v. Weekes
- (1989) 92
ALR 131 at 152; evidence of particular misconduct
- that causes
loss of time to the Court and to other parties
- (French J
in Tetijo); the fact that the proceedings were
- commenced
or continued for some ulterior motive (Davies J in
- Ragata) or
in wilful disregard of known facts or clearly
- established
law (Woodward J in Fountain and French J in
- J-Corp);
the making of allegations which ought never to have been
- made or the
undue prolongation of a case by groundless
- contentions
(Davies J in Ragata); an imprudent refusal of an
- offer to
compromise (eg Messiter v. Hutchinson (1987) 10 NSWLR
- 525,
Maitland Hospital v. Fisher (No. 2) (1992) 27 NSWLR 721 at
- 724 (Court
of Appeal), Crisp v. Keng (Supreme Court of New
- South
Wales, 27 September 1993, unreported, Court of Appeal)
- and an
award of costs on an indemnity basis against a contemnor
- (eg Megarry
V-C in EMI Records). Other categories of cases are
- to be found
in the reports. Yet others to arise in the future
- will have
different features about them which may justify an
- order for
costs on the indemnity basis. The question must
- always be
whether the particular facts and circumstances of the
- case in
question warrant the making of an order for payment of
- costs other
than on a party and party basis.
- 6. It
remains to say that the existence of particular facts and
- circumstances
capable of warranting the making of an order for
- payment of
costs, for instance, on the indemnity basis, does
- not mean
that judges are necessarily obliged to exercise their
- discretion
to make such an order. The costs are always in the
- discretion
of the trial judge. Provided that discretion is
- exercised
having regard to the applicable principles and the
- particular
circumstances of the instant case its exercise will
- not be
found to have miscarried unless it appears that the
- order which
has been made involves a manifest error or
- injustice.
The
argument advanced on behalf of the Applicant is that it is not a case where
exceptional circumstances arise.
- The
Applicant further submits that the authorities support the view that the normal
practice of the Court in awarding costs is not
to be lightly departed from. In
Davids Holdings Pty Ltd v Coles Myer Ltd (1995) ATPR 41-383 per Drummond
J at [7]-[8]:
- The Federal
Court has power to award costs on this basis by virtue of s43 the Federal Court
of Australia Act 1976, the Court's status as a court of law and equity and s23
the Federal Court of Australia Act: Colgate Palmolive Co v Cussons Pty Ltd
[1993] FCA 536; (1993) 118 ALR 248 at 252. That the principal proceedings came to an end before
Coles Myer filed this motion is no impediment to the making of the costs
order
sought: Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld.) Pty
Ltd [1993] FCA 471; (1993) 117 ALR 253 at 259-260 and O62, r3(1).
- The usual
order is for recovery by the successful party of party and party costs only:
Colgate Palmolive Co v Cussons Pty Ltd, supra,
at 256-257. The Court will not
lightly depart from the usual course: Hobartville Stud Pty Ltd v Union Insurance
Co Ltd (1991) 25 NSWLR 358 at 370. The authorities are unanimous that there must
be some special or unusual feature which entitles the successful party to
indemnity
costs. See Berry v British Transport Commission (1962) 1 QB 306 at
323; Preston v Preston (1982) 1 All ER 41 at 58; Fountain Selected Meats (Sales)
Pty Ltd v International Produce Merchants Pty Ltd (1988) FCA 202; (1988) 81 ALR 397 at 400-401;
Colgate Palmolive Co v Cussons Pty Ltd, supra, at 254-257, and the authorities
there collected.
- In
Genovese v BGC Constructions Pty Ltd (No 2) [2007] FMCA 601 per His
Honour Lucev FM at [47] states:
- [47] In
determining whether to award indemnity costs the Court has a very wide
discretion, to be exercised judicially.36 What is
an appropriate costs or
indemnity costs order depends on the circumstances of the case.37 The normal
practice, not to be lightly
departed from, is to provide for costs to be on a
party — party basis.38 Nevertheless, there are certain issues to which the
Court will give consideration, and have to weigh, when determining whether to
make, and the extent of, an indemnity costs order,
which should only be made
where the issues establish special or unusual circumstances warranting an
indemnity costs order.39 Those
issues include:
- a) whether
a party should have known that there was no prospect of success in the
case;40
- b) where a
party alleges fraud or forgery, knowing the accusation to be false, or
irrelevant to the issues;41
- c) where a
party precipitately punctuates proceedings by resiling from a previously adhered
to view;42
- d) where a
party acts in a high handed manner;43
- e) whether
the party against whom indemnity costs is sought is a self-represented litigant,
and whether the self-represented litigant
ought escape the consequences of
indemnity costs;44
- f) where a
party proceeds “vexatiously” that is “without sufficient
grounds for the purpose of causing trouble
or annoyance”;45
- g) where a
party proceeds for no good purpose at all due to inertia and
carelessness;46
- h) where a
party persists in the making of allegations which ought not have been made, or
in undue prolongation of groundless contentions;47
- i) where a
party’s conduct causes loss of time to the Court, and to other
parties;48
- j) where a
party imprudently refuses an offer to compromise;49
- k) whether
the award of indemnity costs is sought against a contemnor;50 and
- l) having
regard to the objects of:
- i)
encouraging savings of private costs and avoidance of inherent risks, delays and
uncertainties of litigation;
- ii) saving
public cost necessarily incurred in litigation which events demonstrate to have
been unnecessary; and
- iii)
indemnifying one party where the real cause and occasion of the litigation is
the attitude adopted by the other party.51
- The
simple failure to accept an Offer of Compromise may not be grounds for ordering
indemnity costs as indemnity costs are not designed
to punish a successful
litigant: Hamod v State of New South Wales [2002] FCA 424 per Gray J at
[20] where His Honour stated:
- [20]
Indemnity costs are not designed to punish a party for persisting with a case
that turns out to fail. They are not awarded as
a means of deterring litigants
from putting forward arguments that might be attended by uncertainty. Rather,
they serve the purpose
of compensating a party fully for costs incurred, as a
normal costs order could not be expected to do, when the court takes the view
that it was unreasonable for the party against whom the order is made to have
subjected the innocent party to the expenditure of
costs.
- The
submission advanced on behalf of the Applicant is that he has not conducted
himself in a manner which is fraudulent, malicious
or unreasonable so to impose
an indemnity costs order which would act to punish the Applicant in the
circumstances of this case.
Further the Respondents bear the onus of
establishing that the Applicant acted unreasonably in failing to accept the
offer. In
Varas v Fairfield City Council [2009] FMCA 63 per Driver FM at
[9] where His Honour stated:
- [9] There
is no general rule that a successful party in a litigation is entitled to an
order for costs but in the ordinary course
a successful party can expect to
receive a costs order and there needs to be some reason to depart from that
general expectation.
The awarding of indemnity costs falls within the general
discretion of the court5.. Indemnity costs may be awarded where a party
has
imprudently refused an offer of compromise6.. There is no automatic
entitlement7.. There is conflicting authority between the
NSW state courts and
the Federal Court on the question of who bears the onus of proof where an offer
of compromise has been made
and rejected. This court should follow Federal Court
authority. In Dais Studio Pty Ltd v Bullet Creative Pty Ltd [2008] FCA 42 at
[6]–[11] Jessop J said 8.:
- What
follows from a consideration of Calderbank and of Cutts v Head themselves is
that, necessarily, those cases articulated no proposition
which linked a
party’s entitlement to indemnity costs with a settlement offer previously
made by that party, and rejected by
the other party. In my view, if the
rejection of such an offer is to ground a claim for indemnity costs, it must be
by reason of
some circumstance other than that the offer happened to comply with
the Calderbank principle.
- The second
general observation which should be made requires me to advert to the
authorities upon which Sheppard J relied in Colgate-Palmolive.
That case did not
involve the rejection of an offer of settlement. His Honour’s reference to
"an imprudent refusal of an offer
to compromise" was contained within a
statement of general "principles or guidelines" that he distilled from certain
authorities
which had decided claims for indemnity costs. The authorities to
which his Honour referred in relation to an imprudent refusal were
Messiter v
Hutchinson (1987) 10 NSWLR 525, Maitland Hospital v Fisher (No 2) (1992) 27
NSWLR 721 and Crisp v Keng an unreported judgment of the NSW Court of Appeal
given on 27 September 1993. I would, however, and with respect
to Sheppard J,
echo the note of caution expressed with respect to the use of those authorities
by Hill J in John s Hayes & Associates
Pty Ltd v Kimberly-Clark Australia
Pty Ltd (1994) 52 FCR 201 , 204. As Hill J pointed out, the authorities do not
appear to sustain the proposition that the "imprudent" refusal of an offer to
compromise should incline the court, in an appropriate case, to make a costs
order on an indemnity basis. Messiter did not involve
a claim for indemnity
costs. Both Maitland and Crisp did, but the claim in each case arose under the
NSW equivalent of O 23 r 11(4)(d)
of the Federal Court Rules, under which a
presumptive entitlement to indemnity costs arises where a plaintiff succeeds for
an amount more than a sum for which
he or she had previously offered to settle.
Although the defendant’s rejection of such an offer might, perhaps in the
light
of subsequent events, be viewed as "imprudent", it was not by reason of
that circumstance, but rather by reason of the presumption
expressed in the
rules of court, that the plaintiff in each of Maitland and Crisp sought costs on
an indemnity basis (in the former
instance, successfully, and in the latter
instance, unsuccessfully).
- In Sanko
Steamship Ltd v Sumitomo Australia Ltd (No 2) (1995) 63 FCR 227 293, a money
judgment had been given in favour of the cross claimant on its cross claim. In
an unreported judgment given on 7 February
1996, Sheppard J himself dealt with
an application for indemnity costs. That application was unsuccessful. In the
course of dealing
with it, Sheppard J referred to his own judgment in
Colgate-Palmolive, to the judgment of Hill J in John S Hayes, and to other
judgments.
His Honour said that Hill J had expressed his agreement with the
observation that there was "no authority supporting the proposition
that the
mere writing of a Calderbank letter would justify an order for costs in favour
of a successful party being taxed on a solicitor
and client or an indemnity
basis". Sheppard J agreed with that observation.
- The matter
was put beyond doubt by the judgment of the Full court in Black v Lipovac [1998] FCA 699; (1998)
217 ALR 386, 432. The Full court referred to a line of authority in the court
which supported the proposition that the mere refusal of a Calderbank
offer does
not of itself warrant an order for indemnity costs, and that the offeror needs
to show that the conduct of the offeree
was unreasonable. That line of authority
included John S Hayes. After adverting to apparently contrary authority
elsewhere, the Full
Court said (217 ALR at 432–433 [218]):
- In reality
there is not a substantial difference between the two views; both accept that
the reasonableness of the conduct of the
offeree, viewed in the light of the
circumstances which existed when the offer was rejected, is relevant to the
exercise of the discretion
to award indemnifying costs. To the extent there is a
difference, we would prefer the by now well established line of authority in
decisions of single judges of this court. However, we would not, with respect,
necessarily endorse the view of Sheppard J in Sanko
that the conduct of the
offeree has to be "plainly unreasonable". To adopt an especially high standard
of unreasonableness would
operate as a fetter on the discretion to award
indemnity costs and diminish the effectiveness of the Calderbank offer as an
incentive
to settlement. There is in our view force in the comments of Byrne J
in the Supreme Court of Victoria in Mutual Community Ltd v Lorden
Holdings Pty
Ltd (unreported, SC(Vic), Byrne J, No 10561/90, 28 April 1993, BC9303878) at
12–13:
- The policy
of the court is to encourage litigating parties to undertake genuine settlement
negotiations and, for that purpose, to
face up to serious offers of settlement
...
- The
response of a litigant in receipt of an offer of settlement will always be
affected by the prospect that the sum which the court
might order including
party and party costs may be less advantageous than the terms of the
offer.
- Experience,
however, shows that this prospect alone is not always sufficient to compel a
litigant to face up to the offer. The further
prospect of a super-added costs
penalty if a reasonable offer be not accepted is a salutary inducement to an
offeree to undertake
this often painful task.
- The
requirement, expressed in Black v Lipovac, that the conduct of the offeree in
rejecting an offer of settlement be unreasonable
effectively makes a Calderbank
situation but an instance of the general approach to which Woodward J referred
in Fountain Selected
Meats, and to which the Full court referred in Hamod. In
the latter case, having quoted from the judgment of Woodward J, Gray J (with
the
assent of the other members of the Full court) said (188 ALR at 665
[20]):
- Indemnity
costs are not designed to punish a party for persisting with a case that turns
out to fail. They are not awarded as a means
of deterring litigants from putting
forward arguments that might be attended by uncertainty. Rather, they serve the
purpose of compensating
a party fully for costs incurred, as a normal costs
order could not be expected to do, when the court takes the view that it was
unreasonable for the party against whom the order is made to have subjected the
innocent party to the expenditure of costs.
- The test,
therefore, is whether the offeree’s rejection of the relevant settlement
offer was unreasonable in the circumstances
then obtaining. It cannot be too
strongly emphasised, however, that the rejection of a reasonable offer is not to
be automatically
regarded as an unreasonable rejection. An example of a case in
which it was held that the offer of settlement had been reasonable,
and should
have been accepted, but that the rejection was not thereby to be regarded as
unreasonable, was Alpine Hardwoods (Aust)
Pty Ltd v Hardys Pty Ltd [2002] FCA 224; (2002) 190
ALR 121. Having opined that the settlement offer in that case was reasonable,
Weinberg J continued (190 ALR at 128 [35]):
- I must bear
in mind, however, the principle stated in Black v Lipovac, namely that the
offeror must show that the conduct of the
offeree in rejecting that Calderbank
offer was unreasonable if there is to be a departure from the ordinary rule that
costs are to
be paid on a party and party basis. The offeree does not bear the
onus of showing why indemnity costs should not be ordered. The
fact that the
offeree was ultimately unsuccessful in the litigation, and could have accepted a
reasonable settlement at an earlier
stage does not of itself show that the
course adopted by the offeree was relevantly unreasonable or
imprudent.
- The
Applicant relies on the following authorities in support of the contention that
the rejection of a settlement offer will not necessarily
lead to an indemnity
costs order: Acubra Pty Ltd v Manningham Medical Centre Pty Ltd (No.2)
[2008] FMCA 1358; John Hayes and Associates Pty Ltd v Kimberley
–Clark Australia Pty Ltd; Black v Tomislav Lipova BHNF Maria Lipovac
[1988] FCA 699 and Dais Studio Pty Ltd v Bullet Creative Pty Ltd
[2008] FCA 42 per Jessup J at [11] where His Honour stated:
- The
Applicant submits that this is not a case where exceptional or special
circumstances exist which enable the Court to exercise
its discretion to award
costs on an indemnity basis.
Respondent’s submissions
- The
Respondent submits that the Applicant has not adduced evidence to demonstrate
the reasons for rejecting the Offer of Compromise
dated 29 January 2009. It is
submitted that there is nothing that demonstrates compelling or exceptional
circumstances to rebut
the presumptive position of indemnity costs. It is
argued that the circumstances that surround the making of the offer and the
reasons
for decision demonstrate that the Applicant acted unreasonably or
imprudently in rejecting the offer. Various correspondence between
the parties
demonstrate the Applicant’s lack of appreciation of the merits of his
claim.
- It
is submitted that the Applicant’s own assessment of his case, sent out in
a letter dated 31 October 2009, to the Respondent’s
solicitors, is at odds
with the Court’s findings (affidavit of Aaron Beerden, annexure AP13). The
Applicant’s letter
demonstrates that the Applicant had an unrealistic view
of the nature of the legal claim and the strength of its evidence. On the
other
hand, in making the offer, the Respondents clearly set out the difficulties of
the Applicant’s case (affidavit of Aaron
Beerden, annexure AP14). Nearly
all of the observations made in the Respondent’s letter were ultimately
vindicated in the
decision.
- It
is argued that the position is a fortiori given that the Applicant had
failed to disclose (despite a Notice to Produce being served on him to produce
the material) and the
Respondent did not know of the Applicant’s
contemporaneous documents explaining the gross inconsistencies in his various
accounts
of what occurred leading up to his demotion and dismissal. Once the
documents had been produced and the Respondent cross examined
the Applicant on
the inconsistencies, the Respondents made an offer inviting the Applicants to
settle the claim on the basis that
the Applicant discontinued his claim with no
order as to costs on 27 May 2009 (affidavit of Aaron Beerden para.[11] and
confirmed
in writing to the Applicant’s legal representatives on 3 June
2009 (affidavit of Aaron Beerden annexure AP16). Even though
it must have been
plain to the Applicant that there were serious questions about the plausibility
and veracity of his evidence on
key matters in light of the production of the
documents and the ensuing cross examination, the Applicant rejected the offer.
Consideration
- It
has been previously decided in this Court that o.23 of the Federal Court
Rules applies pursuant to r.1.05 and schedule 3, Part 2 of the Federal
Magistrates Court Rules 2001: Meka v The Shell Company of Australia Ltd
(No.2) [2005] FMCA 700 per Driver FM at [7] and SZMJQ v Minister for
Immigration & Citizenship (No.2) [2009] FMCA 1137 per FM Raphael at [8].
The FM Rules make specific provisions for awarding costs. However, there is no
specific reference for orders
of costs regarding an offer of compromise.
Consequently, the general discretion to award costs under s.79(3) of the
Federal Magistrates Act 2001 (Cth) does not apply and reference must be
made to the Federal Court Rules which address the issue in o.23. The FM
Rules provide for a prima facie entitlement to costs in accordance with Part 1,
Schedule
1 of those Rules. Rule 1.05 and Schedule 3, Part 2 supplement this
entitlement by allowing the parties to claim indemnity costs
if an offer of
compromise has been made. Pursuant to o.23 of the Federal Court Rules,
the indemnity costs provision is enlivened.
- The
Court must be persuaded that there are “compelling and exceptional
circumstances” not to order indemnity costs. An
element of this issue of
compelling and exceptional circumstances is the issue of public interest. The
argument has been advanced
that it is not in the public interest to award
indemnity costs against Mr Vassallo in proceedings which arise under the
Human Rights and Equal Opportunity Commission Act 1986 (Cth). In
Access for All Alliance (Hervey Bay) Inc. v Hervey Bay City Council
[2007] FCA 974 per Collier J at [27] where her Honour
states:
- [27]
First, it is clear from a number of cases that the fact that the case is
a human rights and/or discrimination case does not of itself
automatically
characterise the proceedings as being in the public interest with the result
that the court should divert from usual
orders as to costs (Sluggett v HREOC [2002] FCA 1060
and Fetherson v Peninsula Health (No 2) [2004] FCA 594). Similar considerations apply where, for
example, the proceedings are instituted by a litigant with a view to protection
of the
environment (Australian Conservation Foundation Inc v The Commonwealth of
Australia [1979] HCA 1; (1980) 146 CLR 493; Save the Ridge Inc v Commonwealth [2006] FCAFC 51; (2006) 230 ALR 411).
In
Ruddock v Vadarlis (No.2) (2001) 115 FCR 229 per Black CJ and French J
(as he then was) at [18]:
- [18]
That a proceeding was brought otherwise than for the personal or
financial gain of the Applicant, and in that sense in the public
interest, does
not detract from the general proposition that ordinarily costs follow the event
and that the primary factor in deciding
on the award of costs is the outcome of
the litigation. It does not follow that the nature and purpose of the
proceedings is irrelevant
nor is the history and purpose of the statute
conferring the discretion to award costs. As discussed earlier in these reasons,
where
a statutory discretion to award costs was created in order to overcome a
pre-existing rule, said to be based on the public interest,
that costs were not
awarded against official complainants in summary criminal proceedings, the fact
that such proceedings were able
to be generically characterised as brought in
the public interest, was of little or no relevance. This was in effect the
decision
in Latoudis v Casey. On the other hand, a trial judge in the Land and
Environment Court of New South Wales operating under the Land and Environment
Court Act 1979 (NSW) was entitled, in deciding not to award costs against an
unsuccessful plaintiff, to have regard to the character of the litigation
as
"public interest litigation" with the "prime motivation" being the upholding of
"the public interest and the rule of law": Oshlack
v Richmond River Council. The
motivation of the unsuccessful plaintiff in pursuing the public interest rather
than personal gain
in proceedings in the Land and Environment Court of New South
Wales was held not irrelevant to the discretion whether to award costs
to the
successful defendant. There was a cautionary note in the joint judgment of
Gaudron and Gummow JJ who said of the term "public
interest litigation" (at
84):
- "That is a
'nebulous concept' unless given, as the primary judge did...further content of a
legally normative nature."
- The
designation "nebulous concept" applied to the public interest is taken from the
judgment of Tadgell J in the Full Court of the
Supreme Court of Victoria in
South Melbourne City Council v Hallam (No 2) (1994) 83 LGERA 307 (at 311). His
Honour's views largely accorded with those expressed in dissent in Oshlack by
McHugh J.
I
am satisfied that this matter, before this Court did not raise important issues
of principal or public interest and was not run
as a test case, but rather
sought personal benefit in the nature of damages. There are a number of
authorities that have addressed
this specific issue: Minns v State of NSW
(No.2) [2002] FMCA 197 per Raphael FM at [13] where his Honour
states:
- [13]
These cases seem to me to establish that if public interest is to be used
to mitigate the normal order for costs then that public
interest must go further
than mere precedent value. There must be a public interest in the subject of the
proceedings and once some
exclusively personal benefit is sought the prospects
of the proceedings having the necessary quality of public interest is much
diminished.
Thus in Ruddock v Vadarlis the public interest was the liberty of
individuals who were unable to take action on their own behalf
to determine
their rights. In Kent v Cavanagh (1973) 1 ACTR 43 it was the erection of a communications
tower on Black Mountain in Canberra. In Oshlack v Richmond River Council the
subject was
a land development at Evans Head. These were cases in which the
usual rule as to costs did not apply but in De Silva v Ruddock, Physical
Disability Council of NSW v Sydney City Council and Sluggett v HREOC the claims
were more personal to the Applicants and the appeal
to the public interest
exception was unsuccessful. Drummond J in Sluggett considered a decision of
my own in Tadawan v State of South
Australia [2001] FMCA 25 in which I had not
awarded costs against an unsuccessful Applicant in a discrimination case. That
decision was given very shortly
after the commencement of legislation which saw
discrimination matters being finally decided in Federal Courts. It was also at
the
commencement of the existence of this court. Up until that time the
preliminary determination of anti-discrimination matters federally
and the final
determination in the states was made in non-costs tribunals. There was concern
in the community that putting these
matters into a costs arena might discourage
potential Applicants from bringing their claims. The decision in Tadawan was
always meant
to be one made on its own facts and it has not been universally
followed in the Federal Magistrates Court. To the extent that it
may be
considered a precedent for the non-imposition of costs orders in
“deserving cases” this should no longer continue.
I am satisfied
that the superior courts have now made it clear what the law should be in
relation to such applications in the anti-discrimination
area and I am content
to follow them.
This
also was addressed in De Silva v Ruddock (as Minister for Immigration &
Multicultural Affairs) [1998] FCA 311; Physical Disability Council of
New South Wales v Sydney City Council [1999] FCA 815 per Madgwick J;
Sluggett v Human Rights and Equal Opportunity Commission [2002] FCA 1060.
These authorities mitigate against any claim that the matter before this Court
was an issue of principal of public interest.
There
is no dispute that the Applicant was wholly unsuccessful in his application but
there is no suggestion that there was no issue
to be tried. I made a comment in
the judgment that the Applicant’s case was not properly pleaded or
particularised nor supported
by evidence. However, the Applicant was
represented by a solicitor and counsel throughout the proceedings and presumably
followed
their advice in respect of the relevant legislation which was relied
upon. The appropriate responses to issues such as the Notice
of Offer of
Compromise served on 28 January 2009.
I
am satisfied that there is no issue of “public interest” raised in
the proceedings and in general terms there is nothing
inherent in the nature of
these proceedings to justify a finding that there are compelling circumstances
to depart from the operation
of o.23r.11(6) of the Federal Court Rules.
Further, although the Applicant has brought his case under the provisions of
the Human Rights and Discrimination legislation, this
does not automatically
establish that the action falls within the categorisation of a “public
interest” case. Nor is
there anything to suggest that it was a
“test case’.
I
am concerned that an order for indemnity costs would act to punish the
Applicant. In reaching to this view I have not been influenced
by the
Applicant’s affidavit detailing his current financial position or the
steps he has taken since his termination by the
Respondents. Clearly indemnity
costs are not designed to punish an unsuccessful litigant: Hammond v New
South Wales (supra). He has not conducted himself in a manner that could be
suggested as fraudulent, malicious or unreasonable and no evidence
or argument
has been advanced to support this. On advice he has pursued his claim but was
unsuccessful, which does not justify the
imposition of indemnity costs which
would do no more than act as punishment. Consequently, I make the cost order on
a party-party
basis.I certify that the preceding
32Error! Style not defined.!Syntax Error,
!Error! Style not defined.Error! Style not defined.!Syntax Error,
!thirty-twothirty-two (32) paragraphs are a true copy of the reasons for
judgment of Lloyd-Jones FM
Date: 24 December 2010
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Federal Magistrates Court of Australia