FEDERAL COURT OF AUSTRALIA

Nichol v Discovery Africa Limited (No 2) [2017] FCAFC 39

ORDERS

THE COURT ORDERS THAT:

1.    In lieu of order 3 of the orders of Justice Gilmour in WAD 87 of 2014, given on 23 December 2015, there be orders that:

The costs of the summary judgment application be in the cause.

2.    The respondent do pay 50% of the costs of the applicant on the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    In Nichol v Discovery Africa Limited [2016] FCAFC 182, Mr Nichol was granted leave to appeal and the appeal was allowed. Provision was made for brief submissions to be filed concerning costs. Mr Nichol had not succeeded on most grounds of appeal and, to the extent that he did succeed, it was on a ground which was not particularly obvious from the grounds of appeal.

2    Mr Nichol submits that because of his ultimate success, costs should follow the event in accordance with the usual principles: Yanner v Eaton (1999) 201 CLR 351 (at 412). He succeeded in having the orders of the primary judge set aside. He contends that although there were several grounds of appeal, all the substantive grounds turned on the interpretation of Pt 2D.2 Div 2 of the Corporations Act 2001 (Cth). Mr Nichol argues that consideration of those provisions and the factual context of the case was required even if he had only advanced the ground of appeal on which he ultimately succeeded. On that basis he contends there was not a disproportionate amount of time and cost in the appeal devoted to unsuccessful arguments.

3    Nonetheless, it is accepted by Mr Nichol that where there are discrete and severable issues which have added to the cost of the proceedings in a significant and readily discernible way, then the Court may exercise its discretion to adjust an order for costs.

4    Mr Nichol argues that although there were several grounds of appeal, the substantive grounds fell into three groups. Namely, the primary judge erred because there were serious questions to be tried about whether:

(1)    Discovery Africa gave Mr Nichol a benefit in connection with his retirement from an office in Discovery Africa for the purpose of s 200B of the Act;

(2)    If so, the benefit was exempt under s 200F or s 200H of the Act; and

(3)    Section 200J of the Act excludes equitable defences or estoppel.

5    Mr Nichol accepts that he failed on the first and third issues, but argues that he succeeded on the second.

6    Mr Nichol’s main point is that the consideration of circumstances surrounding the commencement and cessation of his office of managing director of Discovery Africa was necessary for the determination of all issues.

7    In a broad way, it is clear that Mr Nichol had expressly contended there was a serious question to be tried as to whether the benefit conferred on him was exempt under s 200F(2)(a)(ii) of the Act and he did submit that the appeal should succeed because there was a real prospect that the payment in question was made under an agreement between Discovery Africa and Mr Nichol. While supplementary submissions were required in relation to the calculation of the exempt amount for the purposes of s 200F(2)(a)(ii) of the Act, Mr Nichol says he did not initially develop this topic because it had not been raised by way of a notice of contention by Discovery Africa. Moreover, he argues that the calculation of the exempt amount was manifestly a question of fact about which there was a serious question to be tried, as was ultimately found by the Court. An appropriate concession from Discovery Africa on that issue would have negated the need for supplementary submissions on that factual issue.

8    Mr Nichol accepts that if the Court considers that there should be a reduction, it should be to a reasonable portion, say, 30%. To the extent that the Court considers it appropriate to make further orders as to the cost of the application before the primary judge, Mr Nichol submits that as between Discovery Africa and Mr Nichol, the costs of the summary judgment application should be in the cause.

9    The contentions of Discovery Africa are more ambitious. Discovery Africa argues that the appropriate costs orders are that:

(1)    Mr Nichol pay Discovery Africa’s costs of the application at first instance;

(2)    Mr Nichol pay Discovery Africa’s costs of the appeal, save for the costs of the supplementary submissions; and

(3)    Discovery Africa pay Mr Nichol’s costs of the supplementary submissions.

10    Discovery Africa advances those contentions on the basis that of the 10 separate grounds and multiple sub-grounds of appeal advanced by Mr Nichol, the Court concluded there was an arguable defence in respect of only one argument, which in the Court’s view “was not strikingly obvious on the papers”. Discovery Africa contends that the appeal was unfocussed and unreasonably prolonged the proceedings such that Mr Nichol should be disentitled to an award of costs.

11    More specifically, it is argued that the Court’s analysis in respect of Mr Nichol’s sole successful argument was restricted to a narrow consideration of the proper construction of s 200B(1) and s 200F(2)(a)(ii) of the Act and whether the “benefit” given to Mr Nichol was “under an agreement” between Discovery Africa and Mr Nichol. Discovery Africa makes the point that that argument only became apparent on hearing oral argument from counsel in response to a discussion seeking clarification from the Bench, which necessitated preparation of supplementary submissions.

12    It is not the case, Discovery Africa argues, that the sole issue on which the appeal turned required consideration of the circumstances surrounding payment of a benefit by Discovery Africa to Mr Nichol, nor the proper construction of other matters which were raised on the appeal, namely:

(a)    section 31A of the Federal Court of Australia Act 1976 (Cth);

(b)    section 200B(1) and s 200B(1A) of the Act regarding the interposition of an entity between the director and the entity giving the benefit;

(c)    section 200H, s 200AB of the Act and reg 2D.2.02(2)(d) of the Corporations Regulations 2001 (Cth) – whether the Fair Work Act 2009 (Cth) would be contravened;

(d)    section 200J of the Act in respect of raising equitable defences; and

(e)    all of these provisions in respect of the estoppel defence.

13    On those matters, Discovery Africa argues that Mr Nichol failed and caused the litigation at first instance and on appeal to take longer and be more burdensome for Discovery Africa than might have been required.

14    As the argument on which Mr Nichol succeeded was not raised at first instance, Discovery Africa relies on Snedden v Republic of Croatia (No 2) [2009] FCAFC 132 for the submission that a successful party on appeal may be refused costs, or have the costs recoverable reduced, where the appeal succeeded on a ground not raised in the court below. At first instance Mr Nichol ran a positive case submitting that the benefit “was given under an agreement between Discovery Africa and himself before he became employed by Baru Singapore”. He did not submit that this was an inappropriate issue for summary determination, but rather, maintained the contention that the fact was actually established thereby necessitating preparation of supplementary submissions. Mr Nichol succeeded on matters raised in those supplementary written submissions and Discovery Africa accepts it should pay the costs of those submissions.

CONSIDERATION

15    There are competing factors.

16    On the one hand:

(a)    the appeal was rendered unnecessarily complicated and costly by reason of a significant number of unsuccessful grounds of appeal.

17    On the other hand:

(b)    not only did Mr Nichol ultimately succeed on his appeal in establishing that there was a triable issue, but also the potential complexity of that issue meant that the issue was not readily suited to a summary judgment application and might have been better dealt with by an expeditious hearing on the narrow point of fact.

18    These countervailing considerations are finely balanced. There should be a reduction in the costs award which would normally follow the event, having regard to the first of these considerations. However, taking into account the second consideration, the orders sought by Discovery Africa reflect too great a counter balance.

19    It is appropriate that costs of the summary judgment application at first instance be in the cause and that Mr Nichol have 50% of his costs of the appeal. The Court so orders.

Associate:

Dated:    3 March 2017