Susan Pender Jewellery Pty Ltd v Mirage (Operations) Pty Ltd & Anor [1997] FCA 44 (4 February 1997)

C A T C H W O R D S

PROCEDURE - costs - offer of compromise made - offer having a component for party and party costs - whether a Calderbank offer - unreasonableness of non-acceptance of offer not demonstrated.

Trade Practices Act 1974 s 82

Federal Court of Australia Act 1976 s 51A

Federal Court Rules O 62 rr 15, 36A

Cummings v Lewis (1993) 41 FCR 559

Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534

Hughes v West Australian Cricket Association (Inc) [1986] ATPR 40-748

Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166

Henderson v Amadio (unreported, 22 March 1996, Heerey J)

Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR

225

Calderbank v Calderbank [1975] 3 All ER 333

Smallacombe v Lockyer Investment Co Pty Limited (1994) 42 FCR 97

J S Hayes & Assoc Pty Limited v Kimberley- Clark Australia Pty Limited (1994) 52 FCR 201

SUSAN PENDER JEWELLERY PTY LTD v MIRAGE (OPERATIONS) PTY LTD & ANOR

No VG 241 of 1989

SPENDER J

BRISBANE

4 FEBRUARY 1997

IN THE FEDERAL COURT OF AUSTRALIA )

QUEENSLAND DISTRICT REGISTRY ) No. VG 241 of 1989

GENERAL DIVISION )

BETWEEN : SUSAN PENDER JEWELLERY PTY LTD

Applicant

AND : MIRAGE (OPERATIONS) PTY LTD

First Respondent

AND : BAILLIEU KNIGHT FRANK (GOLD COAST) PTY LTD

Second Respondent

CORAM: Spender J

PLACE: Brisbane

DATE: 4 February 1997

MINUTES OF ORDER

THE COURT ORDERS THAT the second respondent pay to the applicant its costs of and incidental to the proceedings, including reserved costs, those costs to be taxed if not agreed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

QUEENSLAND DISTRICT REGISTRY ) No. VG 241 of 1989

GENERAL DIVISION )

BETWEEN : SUSAN PENDER JEWELLERY PTY LTD

Applicant

AND : MIRAGE (OPERATIONS) PTY LTD

First Respondent

AND : BAILLIEU KNIGHT FRANK (GOLD COAST) PTY LTD

Second Respondent

CORAM: Spender J

PLACE: Brisbane

DATE: 4 February 1997

REASONS FOR JUDGMENT

This is the remaining question, of costs, in litigation in which the applicant was successful in obtaining judgment against the second respondent for damages under s 82 of the Trade Practices Act 1974 ('the TPA') assessed in the sum of $56,800.00 and was awarded a further $51,000.00 by way of interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) ('the Act'), making a total award of $107,800.00.

I gave judgment in the above terms on 5 August 1996. An appeal limited to the question of damages and interest was dismissed by a Full Court of the Federal Court (Sackville, Kiefel, Finn JJ) on 7 November 1996.

When judgment was given on 5 August 1996, at the request of the parties, the question of costs was reserved, after an indication from the bar table that there might have been some offers of compromise made before judgment which would have affected the question of costs.

On 9 August 1996, the solicitor who appeared for the second respondent on that day, in addition to the matters that had been mentioned as relevant to any costs order that might be made, also sought to make submissions not only on offers that had been made, concerning the conduct by the applicant of its case, but she also sought to "make submissions in accordance with the directions given for submissions on costs, with regard to the interest component that has been awarded. We say that we have not had the opportunity to address the question of interest that should be awarded and say that the factors which go to costs also go to the interest and we would like the opportunity to address that in written submissions".

I then indicated that the question of the whether to award interest and, if so, at what rate had been issues in the trial. I indicated:

" I do not think it is appropriate at all to reopen the question of whether I should compensate the applicant for being held out of its money from the time of loss until now, and, as to the rate of interest that I imposed, I adopted 12% because that was the rate in Mr Calabro's report."

Mr Calabro was an expert called on behalf of the second respondent. I indicated that in my view I was functus officio in relation to the question of loss and its appropriate calculation. I then said that no doubt the respondent, if it chooses, can have regard to the circumstances of the interest payment and its quantum, if it wants to, in relation to any question of costs, indicating that the question of interest and the period over which it was allowed "may have a relevance on the question of costs ...".

Submissions on costs by the second respondent were filed on 20 August 1996, by the applicant on 4 September 1996 and by the second respondent in reply on 16 September 1996.

The Full Bench, in giving judgment on 17 November 1996 said on the question of interest:

" Mr Cooper initially submitted that his Honour should have afforded the appellant an opportunity to make submissions on interest. However, the amended application specifically sought interest and, as Mr Cooper acknowledged, it was open to the appellant to make submissions at the trial on whether there was 'good cause' to depart from the usual rule stated in s 51A. "

The Full Court concluded that nothing referred to by the appellant suggested that the discretion concerning the application of s 51A of the Act had miscarried or that an error of law had been committed in its application.

The applicant submits that it should be awarded its costs upon a party and party basis up to and including 28 July 1994, and from 29 July 1994 upon a solicitor/client basis.

For the second respondent it was submitted that there were disentitling circumstances in the case for the applicant, being its tardy behaviour in the prosecution of the action, the changing and evolving nature of its case and the nature and quantum of the damages claimed, and that the damages in fact achieved from the judgment were substantially lower than that which the applicant sought to recover.

Further, in the second respondent's written submissions, reliance is placed on delays, said to be not its responsibility, as requiring an interest award which should reflect the applicant's own responsibility for the manner in which the litigation was conducted. It was submitted that if the interest were reduced by $8,000.00, the applicant will then have failed to recover a judgment in excess of $100,000.00 and the provision of O 62 r 36A(i) of the Federal Court Rules would apply unless the applicant persuaded the court to make an order to the contrary.

In my opinion, the question of the appropriate award of interest was a live issue at the trial and it is not possible to revisit that question under the guise of submissions concerning costs.

In those circumstances, in my opinion, O 62 r 36A of the Federal Court Rules has no application.

The central operative provision concerning the exercise of the discretion as to costs in this Court is s 43 of the Act which provides:

" (1) Subject to subsection (1A), the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want to jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.

...

(2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge. "

This section confers a wide discretion upon the Court with respect to costs, but that discretion is not unfettered: Cummings v Lewis (1993) 41 FCR 559 at 602 et seq, Sheppard and Neaves JJ agreeing at 568 with reasons and conclusions of Cooper J on costs.

Some of the circumstances in which an order for costs might be less than full were discussed by Mason CJ in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 544 and by Toohey J at 565.

The Federal Court Rules do not purport to qualify that discretion. The only rule to which reference is necessary is O 62 r 15, whereby, when costs are reserved, those costs follow the event "unless the Court or a Judge otherwise orders".

Toohey J in Hughes v West Australian Cricket Association (Inc) [1986] ATPR 40-748 at 48,136 set out in a summary way what his Honour understood to be the effect of decisions both of Australian and English courts on the way in which the discretion is to be exercised. His Honour said:

" 1. 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.

2. 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.

3. 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.

There is no difficulty in stating the principles; their application to the facts of a particular case is not always easy. Also it is necessary to keep in mind the caveat by Jacobs J in Cretazzo v Lombardi at p 16. His Honour sounded what he described as 'a note of cautious disapproval' of applications to apportion costs according 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. His Honour commented:

' But trials occur daily in which the party, who in the end if 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. ' "

In Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 at 169, Burchett J, considering the case of a successful defendant who had failed in respect of some issues, said:

" It does not necessarily follow that the costs orders otherwise appropriate should be affected. A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs. Ultimately, the question is one of discretion and judgment. "

In Henderson v Amadio, an unreported judgment of 22 March 1996 of Heerey J, his Honour, having referred to these observations by Burchett J at 494 said:

" In my respectful opinion the same reasoning applies to a successful plaintiff who fails on some issues. To extend Burchett J's military metaphor, the plaintiff is not to be regarded as culpable because he attacked at points of the defendant's fortifications other than the place where success came. He is not to be forced, at his peril in respect of costs, to abandon every flank attack. "

There is jurisdiction to award costs on an indemnity basis: Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 536; (1993) 46 FCR 225. One circumstance which might justify such an award is the imprudent refusal of an offer to compromise: Colgate Palmolive at 233.

Applying the guidance of these observations to the exercise of the statutory discretion conferred by s 43 of the Act, in the circumstances of this case, there is no basis in my view for denying to the applicant any portion of its costs by virtue of its success being less than it sought, or by having regard to the evolution of the case, or to the nature and quantum of the damages claimed.

With respect to the complaint of delays by the applicant, it is true that in the period from December 1991 until 16 September 1992, there was delay for which the applicant is responsible. However, in respect of what is said to be delay from 21 July 1994 to 13 February 1995, the applicant had, on 21 July 1993, asked that the proceedings be set down for trial and in dealings with the Court, had indicated that the matter was ready for trial. It was submitted that in those circumstances this period did not represent a period of delay by the applicant. In a sense that is right, in that the applicant was telling the Court that the matter was ready for trial, but as later discovery amongst other important aspects indicated, there were respects in which the applicant's claim to be ready for trial was wrong.

I do not regard any tardiness on the part of the applicant in pursuing its claim, as properly calling for a reduction in the costs to which it might otherwise be ordered. This conclusion is fortified by the observation that in a number of respects it can validly be asserted that the second respondent was reluctant to bring the matter to trial. In response to a notice of motion dated 18 January 1994 by the applicant seeking orders that the matter be set down for trial, the second respondent indicated its intention then to seek to deliver interrogatories, and raised for the first time in correspondence the issue of the transfer of the matter to the District Court and indicated that the trial would last ten days.

Finally, in respect of the second respondent's submissions, it was said that this is a matter which could and should have been initiated or determined in the District Court. It was submitted that the costs awarded should be substantially reduced to reflect the fact that this type of case could have been heard in the District Court and the lower level of costs that would have been obtained if the matter had been heard or determined in that Court. The fact of the matter, however, is that cross-vesting to the District Court was something that could have been sought by either party in the proceedings (or by the Court of its own motion). No such application was made by the second respondent or by the applicant. I do not think the fact that a judgment of the Federal Court is within the monetary range of the District Court provides a basis on which a successful applicant ought to be deprived of its ordinary costs.

On the other hand, in the circumstances of this case, I am not prepared to make an order that part of the applicant's costs be on a solicitor/client basis.

In a "without prejudice" letter of 21 July 1994, the applicant offered to settle these proceedings on the basis of $80,000.00 for the claim and interest and $35,000.00 for costs. The second respondent would then abandon any claim against the applicant in relation to costs orders already made in the action and each party would execute a notice of discontinuance. That letter contained a reference to the fact that it might be produced to the Court in relation to the issue of costs. The letter was of the type considered in Calderbank v Calderbank [1975] 3 All ER 333 at 342, with the important difference that the letter in Calderbank did not require any estimate of what the costs component might be.

In the detailed reference to authority by Sheppard J in Colgate-Palmolive at 232-3 (supra), and to the principles which his Honour distilled from the authorities to which he referred at 232, it can be said that an imprudent refusal of an offer to compromise can justify the exercise of the Court's discretion to award costs other than on a party and party basis.

The second of the guidelines referred to by his Honour is:

" 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."

I accept that O 23 of the Federal Court Rules which governs the making of offers of compromise does not exclude consideration of Calderbank letters: Henderson v Amadio Pty Ltd (22 March 1996, unreported, Heerey J). I referred to some relevant aspects of such an offer in Smallacombe v Lockyer Investment Co Pty Limited (1994) 42 FCR 97.

Hill J, in J S Hayes & Assoc Pty Limited v Kimberley- Clark Australia Pty Limited (1994) 52 FCR 201 at 206, indicated that the making of an offer of compromise is simply one of many factors which may be taken into account by the Court in exercising its judicial discretion to award costs.

The applicant submitted that the second respondent's unreasonable conduct in attempting to delay the proceedings and its refusal to have the matter resolved by mediation, were further factors inclining to the grant of costs on a solicitor/client basis. I have already indicated that the question of delay was not a one-way street. I do not think that a refusal to engage in mediation is a factor in the circumstances of this case which should bear on the question of solicitor/client costs.

Having regard to the nature of the terms of the offer of compromise, which is analogous to the all-up offer in Smallacombe, and different from the kind of offer in Calderbank, and different from the kind of offer in Messiter v Hutchinson (1987) 10 NSWLR 525, I do not think there are in this case special circumstances to justify the making of an order other than the usual order as to costs on a party and party basis. I do not think an offer that requires an assessment of party and party costs (as opposed to an offer to pay taxed or agreed costs) should be considered. In any event, there is no evidence in this case as to whether the offer of the applicant, viewed as a whole, was greater or less than the total of claim, interest and party and party costs at the time of the offer.

In the circumstances of this case, the order as to costs that I make is that the second respondent pay to the applicant its costs of and incidental to the proceedings, including reserved costs, those costs to be taxed if not agreed.

I certify that this and the eleven (11) preceding pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.

Associate

Date: 4 February 1997.

Counsel for the applicant : Mr D A Savage

instructed by : Freehill Hollingdale & Page

Counsel for the second respondent : Mr D R Cooper

instructed by : Creswicks

Dates of Hearing : 5, 9, 20 August; 4, 16 September 1996