Hamersley Iron Pty Ltd v The National Competition Council (No 2) [2008] FCA 779 (27 May 2008)

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1230 OF 2007

AND:

THE NATIONAL COMPETITION COUNCIL
First Respondent

THE PILBARA INFRASTRUCTURE PTY LTD
(ACN 103 096 340)
Second Respondent

JUDGE:	WEINBERG J
DATE OF ORDER:	27 MAY 2008
WHERE MADE:	MELBOURNE

1. The applicant pay the respondents’ costs, to be taxed in default of agreement.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1230 OF 2007

AND:

THE NATIONAL COMPETITION COUNCIL
First Respondent

THE PILBARA INFRASTRUCTURE PTY LTD
(ACN 103 096 340)
Second Respondent

JUDGE:	WEINBERG J
DATE:	27 MAY 2008
PLACE:	MELBOURNE

1 On 5 May 2008 I delivered judgment in this matter: Hamersley Iron Pty Limited v The National Competition Council [2008] FCA 598. I ordered that the application be dismissed and that each party, if so advised, file and serve short submissions regarding costs. Failing the filing of any such submissions, I indicated that I would order the applicant to pay the respondents’ costs, to be taxed in default of agreement.

2 On 12 May 2008 the second respondent, The Pilbara Infrastructure Pty Ltd ("TPI"), filed written submissions in support of a partial claim for indemnity costs. TPI submitted that there were special and unusual features associated with this case, which warranted an order that costs incurred from the commencement of the proceeding until 25 March 2008 be paid on an indemnity basis. It submitted that costs incurred after 26 March 2008 be paid on the normal party-party basis.

3 TPI’s application for indemnity costs rests upon what it says was the applicant’s abandonment of its original case at trial. The application in this matter was filed on 24 December 2007. The primary declaratory relief sought was based upon an alleged estoppel, or "other bar", which TPI claimed prohibited the first respondent, the National Competition Council ("NCC"), from dealing with TPI’s application for an access recommendation under Pt IIIA of the Trade Practices Act 1974 (Cth). TPI says that the application and supporting affidavit did not articulate in any meaningful way the legal or factual basis for the applicant’s case. In response to a letter that the NCC sent seeking better and further particulars, the applicant replied that it relied upon the principles of both issue estoppel and res judicata as the basis for its contention that NCC was estopped, or otherwise barred, from dealing with TPI’s case. TPI was copied into this correspondence.

4 TPI claims that it relied upon the applicant’s letter to the NCC in preparing this case for trial. It says that evidence was procured and prepared for tender on the factual issues that lay behind the issue estoppel question since that doctrine operates only where the factual substrata of the relevant cases are identical. This evidence was tendered by TPI and admitted without objection.

5 On 7 February 2008 when the applicant filed its written outline of submissions for trial, it argued that the NCC was bound by res judicata and issue estoppel. The applicant referred to Blair v Curran (1939) 62 CLR 464, which is, of course, the locus classicus of these doctrines.

6 According to TPI, it was on the basis of the applicant’s written submissions that it prepared its own written submissions to meet the applicant’s assumed case. However, on the morning of the hearing on 26 March 2008, senior counsel for the applicant, without any prior warning to the other parties or the Court, abandoned the issue estoppel argument. Instead, TPI submitted, the applicant reformulated its case in oral argument and put it on two quite different bases. The applicant relied firstly on what senior counsel for the NCC had said to Kenny J when her Honour delivered judgment in Hamersley Iron Pty Ltd v National Competition Council [1999] FCA 867; (1999) 164 ALR 203. Secondly, it relied on what was said to be the proper construction of the declaratory orders thereafter made by her Honour.

7 TPI says that the applicant’s case before me was conducted on this new basis and that the evidence and written submissions of all parties were thereafter rendered almost entirely irrelevant. Moreover, further written submissions were required to be filed by all parties in response to these newly identified issues. It is for that reason that TPI claims that it should be fully indemnified for the substantial costs that it incurred in preparing to meet a case that was commenced, particularised and articulated in written submissions, but then abandoned without warning on the morning of the hearing. TPI accepts that the costs of the hearing itself, and the supplementary submissions that it had to file to meet the applicant’s new case, should be ordered against the applicant on the usual party-party basis.

8 In the alternative, TPI submits that the applicant’s issue estoppel case was always clearly foredoomed to fail. Logically, the res judicata point had to fail as well once issue estoppel was abandoned since the latter, so it was said, was a necessary condition for the existence of the former.

9 In reply, the applicant submits that TPI’s application for indemnity costs should be dismissed. It says that there are no special or unusual features in this case which warrant a departure from the general rule that costs are awarded on a party and party basis. The applicant says that the order, which I foreshadowed on 5 May 2008, should now be made.

10 The applicant denies that it abandoned its original case at trial. It says that the doctrine of res judicata was always part of its case. It was referred to in the letter from its solicitors providing further and better particulars and was the subject of oral address at trial. It was considered at great length in my reasons for judgment, where I described it as the "central plank" of Hamersley’s case.

11 The applicant further submits that the evidence and written submissions were not rendered entirely irrelevant as TPI claims. The affidavit evidence adduced by all parties was referred to at considerable length in my judgment.

12 The applicant argues that the issue regarding the construction of Kenny J’s orders was always part of its case and did not involve a newly identified issue. It refers to correspondence from its solicitors to the NCC in which the solicitors referred to the NCC being "bound" by Kenny J’s orders. Its own outline of submissions plainly flagged the construction argument by referring repeatedly to the actual terms of her Honour’s orders. The issue regarding the construction of those orders was intertwined with whether res judicata was applicable.

13 The applicant concedes that it abandoned issue estoppel. However, it submits that this is not a sufficient basis for ordering indemnity costs. If it were, indemnity costs would be ordered routinely and parties and their legal advisers would be tempted to pursue all issues to judgment rather than face the prospect of indemnity costs for abandoning an issue no longer regarded as tenable. The applicant says that the abandonment of issue estoppel should not be taken as a concession that the doctrine had been unreasonably or improperly raised.

14 The applicant says that its res judicata claim was not one that had no chance of success, a point amply illustrated by the detailed treatment I gave this claim in my reasons for judgment. Nor was the issue estoppel claim necessarily foredoomed to fail. Indeed, the fourth undertaking proffered to the Full Court made express reference to a possible contention that Kenny J’s orders gave rise to an issue estoppel. This was said in response to concerns expressed by Goldberg J that an issue estoppel might arise.

15 Finally, the applicant says that another factor weighing against TPI’s application for indemnity costs is that it sought, and obtained by consent, leave to be joined as a respondent to the proceeding in circumstances where the NCC was a perfectly able contradictor and TPI made many submissions that duplicated those of the NCC.

16 Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a wide discretion in relation to matters of costs. In DSE (Holdings) Pty Ltd v InterTAN Inc [2004] FCA 1251; (2004) 51 ACSR 555, Allsop J observed that the section conferred a broad and ample power which was not to be read down otherwise than in accordance with judicial principle.

17 The principles that govern the award of indemnity costs are well settled: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. Such an order may be appropriate where it appears that the action was commenced or continued in circumstances where the applicant, properly advised, would have known that there was no chance of success. In such a case, an ulterior motive may be presumed. It is also within the discretion of a judge to depart from the ordinary rule of party and party costs where, for example, allegations of fraud have been made that are not sustained or where the conduct of the litigation has been such as to warrant a strong expression of disapproval.

18 In my view, there is no justification in this case for departing from the usual rule that costs be paid on a party and party basis. I accept the applicant’s submissions in that regard. The doctrine of res judicata loomed large throughout and the applicant’s decision to abandon issue estoppel did not bring about any delay or cause any party to incur additional expenditure. The res judicata point was certainly not hopeless.

19 The applicant’s additional submission based upon counsel’s "assurance" to Kenny J at the time her Honour delivered judgment had to be addressed, as indeed it was. However, the failure of this point should be the subject of an order for costs on a party and party basis, and does not warrant an order for indemnity costs.

20 For these reasons, I will order, as foreshadowed, that the applicant pay the respondents’ costs, to be taxed in default of agreement. There will be no order for indemnity costs.

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.

Counsel for the Applicant:	Mr P.W. Collinson SC with Mr S.H. Parmenter

Solicitor for the Applicant:	Allens Arthur Robinson

Counsel for the First Respondent:	Mr P.J. Hanks QC with Mr P.R.D. Gray

Solicitor for the First Respondent:	Australian Government Solicitor

Counsel for the Second Respondent:	Mr N.J. O'Bryan SC with Mr T.J.F. McEvoy

Solicitor for the Second Respondent:	DLA Phillips Fox

Date of Hearing:	26 March 2008

Date of Submissions:	12 and 15 May 2008

Date of Judgment:	27 May 2008