FEDERAL COURT OF AUSTRALIA

Ashby v Slipper [2014] FCA 973

THE COURT ORDERS THAT:

1.    The indemnity costs order made on 17 August 2012 is vacated.

2.    There is no order as to costs in relation to the Interlocutory Application filed on 23 June 2014.

3.    The Interlocutory Application filed on 10 September 2014 is dismissed.

4.    There is no order as to costs in relation to the Interlocutory Application filed on 10 September 2014.

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

REASONS FOR JUDGMENT

1    There has been long outstanding in this Court a proceeding commenced by Mr James Ashby against Mr Peter Slipper. An Originating Application was first filed on 20 April 2012. An Amended Originating Application was filed in May 2012. The Respondents to that proceeding when first commenced were the Commonwealth of Australia (as First Respondent) and Mr Slipper (as Second Respondent). Mr Slipper was a member of the Commonwealth House of Representatives and a former Speaker of that House. Mr Ashby was a political adviser to the Speaker.

2    Mr Ashby’s Originating Application essentially made two claims for relief, namely:

    a claim under the Fair Work Act 2009 (Cth) (“Fair Work Act”) that he had suffered adverse action by both the Commonwealth and Mr Slipper in the form of sexual harassment; and

    a claim for damages for breach by the Commonwealth of Mr Ashby’s contract of employment “by involving [him] in questionable conduct in relation to travel”, namely conduct in relation to cabcharges.

The claims as against the Commonwealth were ultimately resolved and the proceeding against the Commonwealth was discontinued by consent in October 2012.

3    Mr Slipper for his part maintained (inter alia) that the proceeding was an abuse of the Court’s process. A Judge of this Court (Rares J) at first instance agreed and dismissed the proceeding: Ashby v Commonwealth (No 4) [2012] FCA 1411, (2012) 209 FCR 65. There was an appeal. In February 2014 the appeal was allowed: Ashby v Slipper [2014] FCAFC 15, (2014) 219 FCR 322. Mr Slipper was ordered to pay the costs of the application for leave to appeal and the costs of the appeal. That order as to costs was subsequently set aside by the Full Court: Ashby v Slipper (No 2) [2014] FCAFC 67. The Full Court agreed with Mr Slipper’s contention that it had no jurisdiction to award costs given the terms of s 570 of the Fair Work Act.

4    On 12 March 2014, the proceeding came back before the Court, as presently constituted, to hear the proceeding instituted by Mr Ashby. A Directions Hearing was held on that date and an order was made requiring the parties to approach the Registry to have the matter listed for mediation. A further order was made on that day setting the matter down for hearing for 10 days commencing on 30 June 2014. That hearing did not take place.

5    On 23 June 2014 two relevant events occurred, namely:

    Mr Slipper filed an Interlocutory Application seeking “[a]n order vacating the indemnity costs order made by his Honour Justice Rares in these proceedings on 17 August 2012”; and

    leave was granted to Mr Ashby to discontinue the proceeding.

The orders granting leave to discontinue included an order that preserved the ability of Mr Slipper to pursue his Interlocutory Application. When agreeing to the terms upon which leave was granted to discontinue, it was thus the case that both Mr Ashby and Mr Slipper “took their chances” as to whether the indemnity costs order would be vacated.

6    Now before the Court is the resolution of the question as to whether Mr Ashby should retain the benefit of the indemnity costs order made by Rares J in August 2012 in circumstances where he sought – and was granted – leave to discontinue. Senior Counsel for Mr Slipper adhered to the position that the only relief sought was that claimed in the Interlocutory Application filed on 23 June 2014. No application was made to seek, for example, a further order varying the terms upon which leave had been granted to discontinue the proceeding.

7    For the purposes of advancing his application, Senior Counsel for Mr Slipper conceded that Justice Rares had power to make the indemnity costs order and that the order had been correctly made. Indeed, that concession most probably had to be made if Mr Slipper was to avoid the conclusion that any challenge to the indemnity costs order was capable of being resolved – and, indeed, should have been resolved – on appeal or cross-appeal to the Full Court (cf. Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589). To contend otherwise and to contend that there was either no power to make an order for costs or to make an order that costs be paid on an indemnity basis would need to confront the fact that no such contention was sought to be canvassed before the Full Court.

8    The relief sought in the Interlocutory Application filed on 23 June 2014 is to be granted. The indemnity costs order made on 17 August 2012 should be vacated.

9    Yesterday, and after the parties were advised as to the date upon which this judgment was to be published, there was filed on behalf of Mr Slipper a further Interlocutory Application. He thereby sought to re-open the hearing in respect to the Interlocutory Application filed on 23 June 2014. Reliance was placed upon what were said to be inconsistencies between an account previously given by Mr Ashby in an affidavit he had filed in 2012 and an account he provided on 7 September 2014 during the course of a television program known as “60 Minutes”.

10    The more recent Interlocutory Application, namely that filed yesterday, is to be dismissed. Leave to re-open the evidence adduced during the course of the hearing on 2 September 2014 – and to advance further submissions – is refused. The account apparently provided by Mr Ashby in the “60 Minutes” program, obviously enough, occurred subsequent to the September 2014 hearing. And “fresh evidence”, it may be accepted is one of the recognised circumstances in which leave may be granted to re-open: Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 at [24] per Kenny J. But the fundamental principle which determines whether leave to re-open should be granted or refused is the interests of justice: Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 478 per Clarke JA (Mahoney and Meagher JJA agreeing). See also: Walsh v Greater Metropolitan Cemeteries Trust (No 2) [2014] FCA 456 at [48] per Bromberg J. In the circumstances of the present case, the interests of justice do not require Mr Slipper being granted leave to re-open. Even if leave were to be granted and further submissions entertained, it would lead to no greater success on the part of Mr Slipper and would only expose Mr Ashby to prejudice in the form of further costs being incurred.

The indemnity costs order

11    The 17 August 2012 indemnity costs order had as its origins the filing on 8 June 2012 of an Interlocutory Application by Mr Slipper seeking an order that the proceeding brought against him by Mr Ashby be dismissed upon the basis that:

    it was an abuse of the process of the Court; and/or

    it was vexatious.

Later in June 2012 Mr Slipper filed Points of Claim in support of his Interlocutory Application, including an allegation that Mr Ashby had acted “unlawfully”. It was contended on behalf of Mr Slipper that Mr Ashby had acted “unlawfully” in providing an employee of News Ltd and a member of the Liberal National Party copies of his diary entries for periods in 2009 and 2010.

12    The unlawfulness allegation led to orders being made by Rares J that Mr Ashby was not required to file any defence or evidence until after Mr Slipper had closed his case. The Interlocutory Application came on for hearing on 23 July 2012. On that date Mr Slipper opened and closed his case. Mr Ashby then elected to go into evidence and filed:

    “Points of Defence”; and

    two affidavits.

Orders were made at the conclusion of the hearing on 23 July 2012 requiring (inter alia) the filing of further evidence and the service of a notice under s 78B of the Judiciary Act 1903 (Cth). The notices under s 78B were necessary because it was said on behalf of Mr Ashby (inter alia) that the supplying of copies of Mr Slipper’s diary was protected under the implied constitutional freedom of communication on government and political matters.

13    The further hearing of the Interlocutory Application was stood over to 2 October 2012. On 17 August 2012 Mr Slipper applied for leave to amend his Amended Points of Claim by deleting the term “unlawfully”. The reasons provided by Mr Slipper for doing so included the delay occasioned by the necessity to serve the s 78B notices and that the withdrawal of the allegation of “unlawfulness” would reduce the complexity of the evidence.

14    Leave was then granted to Mr Slipper to amend his Amended Points of Claim. It was on that occasion that the indemnity costs order was made. Such reasons as were provided by Rares J for making that order can only be distilled from the transcript. But the exchange between his Honour and Senior Counsel for Mr Slipper exposes a consideration on the part of his Honour of the terms of s 570 of the Fair Work Act and whether or not the facts were such as to fall within s 570(2). That exchange, it is now accepted on behalf of Mr Slipper, is sufficient to warrant the order then made by his Honour. Mr Slipper thereafter applied by way of an Interlocutory Application dated 30 August 2012 to have that indemnity costs order vacated. On 5 October 2012 that application was dismissed by Rares J. The order as to costs made on 17 August 2014 has not been entered.

Rule 39.04

15    Notwithstanding initial reservation as to whether the Court as presently constituted had power to now make an order vacating the costs order made in August 2012, it is concluded that that power may be found in r 39.04 of the Federal Court Rules 2011 (Cth) (“Federal Court Rules”). That Rule provides as follows:

The Court may vary or set aside a judgment or order before it has been entered.

Notwithstanding the absence of any express constraint upon the manner in which this discretionary power is expressed, it is recognised that it is a power which has to recognise both the need for finality in litigation and the need to exercise the power with “great caution”: Austin Nichols & Co Inc v Lodestar Anstalt (No 2) [2012] FCAFC 72 at [6], (2012) 202 FCR 506 at 508 per Jacobson, Yates and Katzmann JJ. And in this very course of this litigation the Full Court has again endorsed these constraints upon the exercise of the power: Ashby v Slipper (No 2) [2014] FCAFC 67. It was r 39.04 which was there invoked by Mr Slipper when seeking to set aside the order for costs previously made by the Full Court. In allowing that application, and in rejecting the discretionary reasons relied upon by Mr Ashby, the Full Court there summarised the principles to be applied as follows:

[13]    The exercise of the discretion to vary or set aside orders, including under r 39.04 FCR, is a power to be used only sparingly, with great caution and rarely, having regard to the public interest in the finality of litigation:…

[14]    The discretion is exercised to cure injustice, particularly where it would otherwise be irremediable …They include error, oversight, a misapprehension of the law, or a decision given in ignorance or forgetfulness of a statutory provision.

[15]    As Kenny J stated in Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 at [24]: “[i]n every case the overriding principle to be applied is whether the interests of justice are better served by allowing or rejecting the application for leave to re-open”: ….

See also: Oswal v Apache Corporation (No 2) [2014] FCA 778 at [3] per Gilmour J.

16    In the circumstances of the present case, the intervening decision of the Full Court places no impediment in the way of Mr Slipper again seeking to invoke s 39.04 to vacate the indemnity costs order. Had the lawfulness of the 17 August 2012 indemnity costs order been in question, the decision of the Full Court may well have created an insurmountable difficulty. But the consequence of the decision of the Full Court of present relevance is simply that the interlocutory decision of Rares J dismissing the proceeding was set aside. The proceeding was simply thereafter remitted back to a single Judge of this Court to hear and determine both Mr Ashby’s claims as against Mr Slipper and to resolve on a final basis the allegations being advanced by Mr Slipper as to an abuse of process. Subject to the Court being reconstituted, all of the powers of a judge at first instance remained to be exercised.

17    All orders previously made which had not been entered remained within the purview of r 39.04. Had the proceeding continued before Rares J, a further application could possibly have been made – for example – to vary the order his Honour made on 17 August 2012. Subject to the express provisions of any Rule to the contrary and to discretionary considerations, r 39.04 remained available to be exercised during the course of the hearing of Mr Ashby’s application. In a proceeding, for example in which security for costs had been ordered, r  39.04 would provide for either the vacation of that order or for an increase in the quantum of security previously ordered. The indemnity costs order in the present proceeding stood in no different position.

Discontinuance

18    The question nevertheless remains whether the power conferred by r 39.04 should be exercised in the circumstances of the present case and after the orders made on 23 June 2014 granting leave to Mr Ashby to discontinue his proceeding.

19    The grant of leave to discontinue on 23 June 2014 was given pursuant to r 26.12(2)(c) of the Federal Court Rules. That rule, in its entirety, provides as follows:

Discontinuance

(1)    A party claiming relief may discontinue a proceeding in whole or in part by filing a notice of discontinuance, in accordance with Form 48.

(2)    The party may file the notice of discontinuance:

(a)    without the leave of the Court or the other party's consent:

(i)    at any time before the return date fixed in the originating application; or

(ii)    if the proceeding is continuing on pleadings - at any time before the pleadings have closed; or

(b)    with the opposing party's consent - before judgment has been entered in the proceeding; or

(c)    with the leave of the Court - at any time.

(3)    The notice of discontinuance must:

(a)    state the extent of the discontinuance; and

(b)    if the discontinuance is by consent - be signed by each consenting party.

(4)    However, a litigation representative or a representative party must not discontinue a party's claim without first obtaining the leave of the Court.

(5)    An application for a winding up order under section 459P or 461(1)(a) of the Corporations Act 2001 may be discontinued only with the leave of the Court.

(6)    A notice of discontinuance filed by one party does not affect any other party to the proceeding.

(7)    Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued.

Rule 26.12 had as its counterpart, Order 22 r 2 of the now-repealed Federal Court Rules 1979 (Cth) (“Federal Court Rules 1979”).

20    The right to discontinue a proceeding is a recognition of the fact that a party should not be forced to litigate a case: Trade Practices Commission v APM Investments Pty Ltd (1983) 74 FLR 276 at 280 per Woodward J. But where a party seeks to discontinue a proceeding, be it with consent or with leave, that party usually is required to pay the costs of the discontinuance: El-Debel v Secretary, Department of Immigration and Border Protection [2014] FCA 474 at [17] per Foster J; Travaglini v Raccuia [2012] FCA 620 at [36] per McKerracher J.

21    There may be circumstances in which a party who seeks to discontinue a proceeding should not be permitted to do so whilst at the same time retaining the benefit of an interlocutory costs order previously made: O’Neill v Mann [2000] FCA 1680. In that case Mr O’Neill had commenced a defamation action against Dr Mann. The Full Court had made a costs order in favour of Mr O’Neill on the hearing of a preliminary question of law: O’Neill v Mann (1994) 54 FCR 212. Mr O’Neill thereafter sought to discontinue. Mr O’Neill conceded that he should pay the costs thrown away by reason of the discontinuance but sought to retain the benefit of the costs order made by the Full Court. Dr Mann wished for the proceeding to be discontinued, but contended that the price of discontinuance should be that each party should pay its own costs, including the costs of the hearing of the preliminary question. Whilst addressing the predecessor provision to the current r 26.12, namely Order  22 r 2 of the now-repealed Federal Court Rules 1979, Finn J relevantly observed:

[12]    … The costs consequences to a discontinuing party where leave is required and granted is somewhat more complex. Unlike with the previous two categories, the Rules do not provide expressly for the incidence of costs on discontinuance with leave, the Court's power to award costs being that general one provided by s43(1) of the Federal Court of Australia Act 1976 (Cth) and O62 r3(1) of the Rules. It is a discretionary power to be exercised judicially: …

[13]    …It properly can be said that there is an "underlying policy" in the Rules that the discontinuing party should be liable for the other party's costs unless the court orders otherwise:…But so various can be the reasons for, and circumstances of, discontinuance that that policy cannot safely be said to have hardened into a "usual rule" where leave is granted such as exists where there has been a determination of a claim on its merits:…The conduct of the parties in the matter and the reasons for the discontinuance can bear heavily on the exercise of the discretion as to costs. As McHugh J observed in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Qin (1997) 186 CLR 622 at 625 of one common category of case:

“[i]f it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases."

In applying this approach it is not the function of a court to make a prediction as to the outcome of a hypothetical case…

And, when applying the general principles to be applied when exercising the discretion, Finn J reasoned as follows:

[18]    When one turns to the reasons for discontinuing the proceeding I have not, as I have indicated, been provided with evidence by Mr O'Neill of his reasons for pursuing this course. What is significant is Mr O'Neill's apparent acceptance that he should pay Dr Mann's costs in respect of the discontinued claim. Given that there is nothing to suggest that the proceeding was futile, one simply is left wondering at the reasons for the discontinuance. The case is clearly one that does not fall within the principle stated by McHugh J in Qin's case, above.

[19]    I earlier indicated that, when an applicant seeks leave to discontinue, a consideration of which account is taken is whether the grant of leave would deprive a respondent of an advantage already obtained. The present case is the converse of that. Mr O'Neill wants the advantage of discontinuance and the shelter it incidentally provides from a significant adverse costs award in the event that the defamation action would have been unsuccessful in the event. But he seeks to retain the benefit of the Full Court's cost order. In my view, he seeks too much. He fought and won a preliminary skirmish which resulted in a costs order but which did not cast light on his prospects of success in the proceeding. He now seeks to leave those prospects forever unresolved. Dr Mann did not act unreasonably in defending the claim by having the separate question determined. And he may ultimately have been successful in his defence of the claim at trial. It is not my function to make a prediction about that. What I consider to be unfair is for Mr O'Neill to seek the benefit of his interlocutory “spoils” while seeking to terminate prematurely the contest he initiated and which already has occasioned cost to Dr Mann and has exposed him to a costs liability. What may have been appropriate for him to have had at the end of the day and as an element in a larger reckoning as to costs is, in my view, quite inappropriate when he seeks to walk away from litigation he initiated.

In granting leave to discontinue – but on terms that Mr O’Neill undertake not to take steps to have taxed the costs awarded by the Full Court – Finn J concluded:

[20]    In the circumstances I consider the proper orders to be made in giving leave to discontinue would be ones that confer no greater benefit on either party than that of having the proceeding discontinued. I cannot, of course, set aside the order of the Full Court. Nonetheless I do not consider it should be able to be enforced notwithstanding discontinuance on the defamation proceeding - even if leave to have the costs taxed could be granted after discontinuance (a question I do not decide). Accordingly I will grant leave to discontinue the proceeding on condition that Mr O'Neill undertake not to take steps to have taxed the costs awarded by the Full Court of this Court in this proceeding. In light of that leave I do not consider that it would be appropriate as well to make an order as to costs. I note that Dr Mann does not contend otherwise. I will make orders accordingly.

But that decision, it has subsequently been said, “is intelligible only by reference to a contrary proposition, namely, that, in the absence of some special order, a party who discontinues by leave would in the normal course be entitled to proceed to taxation with respect to any interlocutory costs orders which had been made in his favour”: Fastlane Australia Pty Ltd v Nolmont Pty Ltd [2007] FCA 492 at [15]. Jessup J there went on to observe that it “was because Finn J did not consider it just or appropriate that the applicant in O’Neill v Mann should have the benefit of such orders, while at the same time avoiding the scrutiny of the merits of his substantive claims, that his Honour extracted an undertaking from him. Absent that undertaking, the applicant would have been entitled to proceed to taxation with respect to the interlocutory costs orders in his favour”.

22    In the circumstances of the present case, the fact seized upon by Senior Counsel for Mr Slipper – and the fact which warrants the indemnity costs order being set aside – is the very fact of discontinuance. That was self-evidently a fact which could not have been taken into account when the order was made some two years in advance of the decision to discontinue. Although the indemnity costs order was conceded to have been properly made and may well have remained in place had the proceeding continued to final hearing and judgment, the fact that changed the position between the parties was Mr Ashby’s decision to discontinue. Given that decision, it was then said on behalf of Mr Slipper that it would be unfair to permit Mr Ashby to walk away from the proceeding he had instituted whilst at the same time retaining the benefit of the indemnity costs order.

23    That submission is accepted.

24    Whereas there was no power to vary the costs order in O’Neill v Mann, r 39.04 in the present case does permit such an order to be made. There is no necessity to seek to vary the terms of the orders made on 23 June 2014 to include, for example, an order granting leave subject to an undertaking that Mr Ashby not seek to enforce the indemnity costs order.

25    The indemnity costs order made on 17 August 2012 should be vacated. Had Mr Slipper’s Interlocutory Application filed on 23 June 2014 been resolved at the same time as the grant of leave to discontinue, that indemnity costs order would then have been vacated. It matters not that the Interlocutory Application is resolved thereafter.

26    Although O’Neil v Mann is but an instance of an exercise of discretion relevant to the facts of that case and does not purport to espouse any generally applicable principle, there is considerable merit in a proposition that a party who seeks to discontinue a proceeding should not normally be permitted to retain the benefit of prior interlocutory costs orders.

27    The conclusion is also consistent with basic notions of fairness. The discontinuance of the proceeding left unresolved the various and many allegations that had been made by Mr Ashby. In advance of the order granting leave to discontinue, evidence had been filed on behalf of both Mr Ashby and Mr Slipper. Mr Slipper, in that evidence, sought to address the allegations levelled against him. The allegations being made, it may be accepted, attracted considerable media attention. Had the matter proceeded to hearing, it would inevitably have been the case that the competing factual accounts would have been vigorously contested. And that debate itself would most probably have attracted even further media attention. The discontinuance of the proceeding by Mr Ashby left Mr Slipper in the position where his rebuttal of the allegations remained unresolved and the allegations made by Mr Ashby left untested by cross-examination. It is unnecessary for present purposes to even attempt to make an assessment as to how those competing allegations may have been resolved. Indeed, it would be wrong to do so. It also left Mr Slipper in the position that his contention that the proceedings instituted by Mr Ashby were an abuse of the process of the Court had not been resolved on a final basis. Had he been ultimately successful in respect of that contention, he may possibly have secured an order in his favour that Mr Ashby pay the costs of the proceeding, notwithstanding s 570 of the Fair Work Act.

CONCLUSIONS

28    The indemnity costs order made on 17 August 2012 should be vacated.

29    Given the terms of s 570 of the Fair Work Act, there should be no order as to costs.

30    The Interlocutory Application filed on 10 September 2014 is to be dismissed.

THE ORDERS OF THE COURT ARE:

1.    The indemnity costs order made on 17 August 2012 is vacated.

 2.    There is no order as to costs in relation to the Interlocutory Application filed on 23 June 2014.

 3.    The Interlocutory Application filed on 10 September 2014 is dismissed.

 4.    There is no order as to costs in relation to the Interlocutory Application filed on 10 September 2014

Associate:

Dated:    11 September 2014