FEDERAL COURT OF AUSTRALIA

Herold v Seally (No 3) [2017] FCA 956

ORDERS

THE COURT ORDERS THAT:

1.    The respondents’ application for a different costs order to that made on 19 May 2017 be dismissed.

2.    Order 3 made on 19 May 2017 that each party bear their own costs be confirmed.

3.    The respondents pay the applicants’ costs of and incidental to this application for costs as assessed or agreed.

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

REASONS FOR JUDGMENT

BROMWICH J:

1    This is a dispute about the costs order that should be made following my orders and reasons in Herold v Seally (No 2) [2017] FCA 543, by which I refused both the applicants’ bid by interlocutory application for an anti-suit injunction of proceedings in the Superior Court of California and the respondents’ bid by interlocutory application for complete or partial setting aside of these proceedings. As outlined in Herold v Seally (No 2), the parties to these proceedings are involved in a highly polarised dispute as to who should take the dominant credit for the development of a particular concept for driverless vehicles, and thereby be able to develop the concept commercially, principally overseas. Each unsuccessfully sought to have the dispute wholly or substantially litigated in only one jurisdiction.

2    On 19 May 2017, I ordered that the two interlocutory applications be dismissed with each party to bear their own costs, but granting liberty to apply for a different costs order within 14 days. The respondents availed themselves of that liberty by seeking alternate costs orders wholly or substantially in their favour.

3    Having considered carefully the competing submissions, agreement as to costs in the cause being unable to be reached, I am not satisfied that the costs order I made on 19 May 2017 should be departed from. For the reasons that follow, that order is confirmed.

4    In a short outline of written submissions, the following alternative costs orders were sought on behalf the respondents:

(1)    that the applicants pay 80% of the respondents’ costs of and incidental to

(a)    paragraph 1 of the applicants’ amended interlocutory application filed 9 January 2017; and

(b)    the respondents’ interlocutory application dated and filed 30 January 2017,

on a party/party basis, as taxed or agreed;

(2)    or alternatively:

(a)    the applicants pay the respondents’ costs of and incidental to paragraph 1 of the applicants’ amended interlocutory application filed 9 January 2017 on a party/party basis as taxed or agreed up to 25 April 2017 and thereafter on an indemnity basis; and

(b)    the respondents pay the applicants’ costs of and incidental to the respondents’ interlocutory application dated and filed 30 January 2017 on a party/party basis as taxed or agreed up to 25 April 2017.

5    The applicants submitted that the existing costs order should stand. They indicated further that they would also not object to an order instead that costs be costs in the cause, an outcome that the respondents conceded was open, but not argued for, and at least implicitly opposed. On careful reflection, I do not consider that ordering instead that the costs of the unsuccessful interlocutory application be costs in the cause would amount to a proper determination of the costs dispute or any proper basis for vacating an order already made. Rather, it would be no more than a deferral of the question, which would not necessarily avoid the need to consider how the two interlocutory applications were advanced, argued and determined. That adjudication is best done now.

The primary costs order sought by the respondents

6    The primary costs order sought on behalf of the respondents was based upon the following propositions:

(1)    the majority of the hearing time, the evidence and the written submissions related to the applicants’ application for an anti-suit injunction, while a significantly less amount of hearing time, evidence and written submissions related to the respondents’ interlocutory application;

(2)    the question of whether this court was a “clearly inappropriate forum” was the main issue in respect of the respondents’ interlocutory application, albeit also an issue that needed to be determined in deciding the applicants’ interlocutory application. Upon determining that question, no significant additional time was required to decide the respondents’ interlocutory application, such that deciding the clearly inappropriate forum question for the anti-suit injunction was also dispositive of the respondents’ interlocutory application;

(3)    in relation to the written submissions:

(a)    the applicants’ submissions dated 13 April 2017 regarding the anti-suit injunction and service on the second respondent were 25 paragraphs in length, of which only three (paragraphs 1, 24 and 25) related to the respondents’ interlocutory application, with all other paragraphs dealing with the applicants’ anti-suit injunction;

(b)    the respondents’ outline of submissions in respect of the anti-suit injunction and the application under r 13.01 of the Federal Court Rules 2011 (Cth) was 15 pages in length with various paragraphs and sub-paragraphs, of which 11 paragraphs and two separate subparagraphs dealt with the issue of clearly inappropriate forum in respect of both interlocutory applications, while the rest of the document dealt with the anti-suit injunction;

(c)    the respondents outline of reply to the applicants’ submissions dated 20 April 2017 was 9 pages in length, but only paragraphs 3(b) and 5(a) dealt with the issue of clearly inappropriate forum in respect of both interlocutory applications, while the remainder dealt with the issue of whether significant procedural advantages could be obtained in the United States proceedings that could not be obtained in the Australian proceedings, as well as some factual issues; and

(d)    the applicants’ submissions in reply dated 20 April 2017 were 13 paragraphs in length (plus an attached copy of the reasons for judgment of the Superior Court of California of 25 January 2017), with only three of those paragraphs relating to the question of clearly inappropriate forum in respect of both interlocutory applications and the balance dealing solely with the applicants’ anti-suit injunction;

(4)    the applicants’ extensive and voluminous evidence upon which it relied at the hearing was originally served in relation to the anti-suit injunction application, whereas only a small part of the respondents’ evidence related specifically to the respondents’ interlocutory application – the applicants therefore effectively forced the respondents to deal with and respond to their voluminous and extensive evidence in respect of the anti-suit injunction;

(5)    a trial judge has the benefit of wide discretionary powers as to costs and may separate a discernible issue at trial in respect of a costs order, with apportionment being a matter of impression and evaluation, which is a question of discretion and not mathematical precision, citing Bostick Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]:

The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this Court in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows:

•    Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).

•    In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal.

•    If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27].

•    Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).

•    A separable issue can relate to “any disputed question of fact or law” before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].

•    Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.

These principles were applied in City of Canada Bay Council v Bonaccorso Pty Ltd (No 3) [2008] NSWCA 57 at [22] and most recently in Turkmani v Visvalingham (No 2) [2009] NSWCA 279.

7    As may be seen from the above passages in Bostick, where there are multiple issues in a proceeding a court will ordinarily not attempt to differentiate between the issues on which a party was successful and those on which it failed. Departure from this general position, however, may be appropriate where the particular issues in respect of which costs are sought were “clearly dominant” or “separable” from the balance. This is the critical gateway by which the respondents assert that apportionment of costs is appropriate in the present case.

8    Centrally, the respondents contended that the issue of the application for an anti-suit injunction and the issue of the application for a striking out of these proceedings, which were both heard together on 26 April 2017, could be “separable” in the Bostik sense for the purposes of apportionment of costs. It was submitted that the respondents had been successful in defeating the former application, and the applicants in defeating the latter. In those circumstances, the basis for a costs order in the respondents’ favour was that there was a substantial difference in the time taken, evidence and submissions for each of the applications. In particular, it was submitted that the largest part of the case went to the question arising under the applicants’ unsuccessful application for an anti-suit injunction, namely, whether the proceedings in this Court offered complete relief to the respondents, in that no advantage by way of procedure or potential relief could be obtained by the respondents in maintaining the United States proceedings. Most of the evidence adduced by Mr Herold was in relation to this application. The dominance of this issue in the written submissions was again emphasised.

9    In response, senior counsel for the applicants submitted that the test restated in Bostick of a dominant or separable issue was not able to be met in this case because the issues overlapped to such an extent that it was necessary and appropriate to address the common issues once and once only, without identifying under which rubric or which interlocutory application they were being addressed. It was submitted that a great deal of the Court’s time was taken with consideration of the question of appropriate forum, which was common to both applications. Each party had to meet a burden of showing oppressiveness of the litigation and appropriateness or inappropriateness of the forum, which was sensibly addressed as an issue common to both applications. It was appropriate for the respondents to bring an interlocutory application so that the whole question of appropriate forum could be determined at the one time, which is what happened.

10    It was submitted on behalf of the applicants in the alternative that even if the only interlocutory application that had been brought was for an anti-suit injunction, and that had still failed, it would have been appropriate to order that costs be costs in the cause because it is unknown what the fate of the arguments advanced will be at the full hearing.

11    In reply, counsel for the respondents asserted that costs in the cause would not have been appropriate if only the anti-suit injunction application had been made and failed. The burden of the reply submission was that, if only the anti-suit injunction had been heard and determined, with the same outcome, the result as to costs would and should have resulted in a costs order in the respondents’ favour.

The alternative costs order sought by the respondents

12    The alternative costs order sought on behalf of the respondents was based upon an email sent by counsel for the respondents at the request of his instructing solicitor (due to that solicitor being on an aeroplane) to the applicants’ senior counsel and solicitors at 7.05 pm on 25 April 2017, on the eve of the scheduled hearing of the two competing interlocutory applications. That email was asserted to be a valid Calderbank offer (made in accordance with Calderbank v Calderbank [1975] 3 All ER 333). An affidavit was read annexing a copy of that email, the operative parts of which were as follows (after the usual “Without Prejudice Save as to Costs”):

We refer to both of the interlocutory applications listed for hearing tomorrow, 26 April 2017 in the Federal Court of Australia (“the Motions”). Without admissions, we are instructed that Mr Seally and Podway Ltd make the following offer of compromise in respect of the Motions:

1.    Mr Herold and Green Light Group Pte Ltd agree to consent to orders in the Federal Court of Australia proceedings that they will provide verified general discovery to Mr Seally and Podway Ltd, including without limitation as to any uses and disclosures made of any information, documents, trade secrets or know how communicated by Mr Seally to Mr Herold between 2014 and 2016 (inclusive) within 40 days of acceptance of this offer;

2.    The documents discovered by Mr Herold and Green Light Group Pte Ltd will be inspected only by the legal representatives for Mr Seally and Podway Ltd in Australia upon them signing and filing with the Federal Court of Australia confidentiality undertakings not to disclose the contents of the discovery documents to any person, including Mr Seally and Podway, unless with the prior written consent of Mr Herold and Green Light Group Pte Ltd or by order of the Federal Court of Australia;

3.    Mr Seally and Podway Ltd will discontinue the Superior Court of California proceedings, without prejudice, as against Mr Herold, with each party to pay its or his own costs of the Superior Court of California proceedings;

4.    Podway agrees to file an unconditional Notice of Appearance in the Federal Court of Australia within 7 days of acceptance of this offer;

5.    The parties consent to Mr Seally and Podway Ltd filing their cross-claims in the Federal Court of Australia 40 days after production of discovery by Mr Herold and Green Light Group Pte Ltd;

6.    Mr Seally and Podway Ltd agree not to commence proceedings in any jurisdiction outside of Australia against Mr Herold, Green Light Group Pte Ltd or any other third party until after completion of discovery in the Federal Court of Australia by Mr Herold and Green Light Group Pte Ltd; and

7.    The parties agree to each of the Motions being discontinued by consent of the parties, with the costs of each of the Motions to be each respective parties’ costs in the cause of the Federal Court of Australia proceedings.

This offer of compromise is open for acceptance until 9.30am on Wednesday, 26 April 2017.

Mr Seally and Podway Ltd reserve their respective rights to rely on this letter on the question of costs of the Motions in accordance with the principles in Calderbank v Calderbank.

13    The written submissions for the respondents asserted that the offer in that email would have been significantly more advantageous to the applicants than the orders made on 19 May 2017 in respect of the interlocutory applications following the 26 April 2017 hearing. The written submissions on behalf of the respondents adverted to, but sought to distinguish, the decision of Griffiths J in Specsavers Pty Ltd v Luxottica Retail Australia Pty Ltd (No 2) [2013] FCA 807, in which his Honour held that the offer made in that case did not constitute a valid Calderbank offer as it was not open for acceptance long enough to be properly considered. The basis for distinction was said to be that Specsavers concerned an expedited hearing and the recipient of the offer was not fully apprised of its position in relation to the other party’s evidence at the time of receiving the offer and was heavily engaged in considering and preparing evidence in reply and generally preparing to present its case the following day. By contrast, it was said that in this matter, all the evidence and detailed written submissions in reply had been served by each party prior to 25 April 2017. Accordingly, it was submitted that it should be found that the applicants unreasonably rejected the offer contained in the respondents’ email.

14    The oral submissions for the respondents largely restated what had been argued in writing.

15    Senior counsel for the applicants asserted that the submissions for the respondents had failed to address whether the outcome ordered by the Court was substantially better for the offering party than the offer that was made. It was submitted that as to the matters that were being adjudicated by the Court, the offers were in identical terms, namely, that both applications would be dismissed. However, the offer attempted to add further terms to the “deal” as to matters that were not then falling for consideration by the Court. The only difference between the parties was as to those ancillary matters, particularly the discovery order and the question of what would happen with the overseas proceedings. The substance of the submission was that the offer made by the email was a conditional offer in respect of issues that were a sideline to the disputed matters to be the subject of adjudication. It was therefore submitted that in order to determine whether or not the respondents did better than the offer they had made, I would have to determine the issue of discovery. In making those submissions, senior counsel for the applicants also emphasised that the respondents’ offer left only a very short period of time on a rushed morning in which to seek to respond to what was being proposed, noting that the applicants asserted that they did their very best to respond to the offer and in a commercial way in order to resolve it before the hearing. It was submitted that an offer made “at the heel of the hunt” should have a much tougher task of persuading a court that a special costs order ought to be made in place of the costs order already made.

Consideration

16    The primary costs order sought by the respondents should not be granted for two interrelated reasons. First and foremost, the question of whether only one forum was or was not clearly inappropriate was at the heart of both of the interlocutory applications. It was a matter of efficient organisation of the consideration of the two sets of litigation that it was dealt with under the umbrella of the application for an anti-suit injunction, rather than under the umbrella of the respondents’ strike out application. It could just as well, if perhaps not as efficiently, have been dealt with under the umbrella of the strike out application, which then would have determined in large measure the anti-suit injunction application. The way in which a judgment is written to address and resolve particular issues in dispute should not artificially suggest that an issue is dominant or separable in the way contemplated by the restatement of principle in Bostick.

17    Secondly, and in any event, the way in which the evidence and submissions were structured simply meant that it made sense to deal with the appropriate forum issue under the heading of the anti-suit injunction application. Again, the submissions could, perhaps less efficiently and less logically, have been written in a way that instead addressed the respondents’ strike out application as the means of considering the issue common to the two applications.

18    For these reasons, the separation contemplated in Bostick was absent in the determination of the two interlocutory applications. Essentially, the applicants were seeking to have the dispute resolved only in Australia, while the respondents were seeking to have the dispute resolved only or substantially in the United States. Both failed and both sets of proceedings remain on foot (subject to any change in relation to the United States proceedings of which I am not aware). In those circumstances the costs order made on 19 May 2017 should stand such that neither party has the benefit or burden of a costs order.

19    In relation to the alternative argument advanced by the respondents, I observe that such a late purported Calderbank offer with so little time for consideration ought not to be regarded as a valid offer other than in more exceptional circumstances than these. However, even if that were not the case, the offer was not confined to the issues to be adjudicated by this Court at the interlocutory hearing. Accordingly, it is impossible to determine, without hypothesis, whether the respondents have obtained a better outcome than what would have been achieved by way of their offer.

Conclusion

20    In all the circumstances, the respondents’ alternative to the costs order made on 19 May 2017 cannot prevail. That order must therefore stand. There is no reason why the costs of this application should not follow the event. Accordingly, the respondents must pay the applicants’ costs of this unsuccessful application.

Associate:

Dated:    18 August 2017