FEDERAL COURT OF AUSTRALIA

Blow Bar Co Pty Limited v McGann (No 4) [2018] FCA 1072

ORDERS

THE COURT ORDERS THAT:

1.    The applicants pay, on the ordinary basis, the respondents’ costs of and incidental to [3]-[9] of the respondents’ interlocutory application dated 31 May 2018, those costs to be payable forthwith.

2.    On the assessment or agreement of the costs referred to in order 1, $7,000 be released from the amount paid by the applicants as security for costs.

3.    There be no order as to the costs of [1]-[2] of the interlocutory application.

4.    Any application that costs should be assessed on a lump sum basis should be notified to my Associate within seven days of the date of these orders.

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

REASONS FOR JUDGMENT

ROBERTSON J:

1    These reasons concern the appropriate costs orders in respect of the respondents’ interlocutory application dated 31 May 2018 which I determined on 2 July 2018: Blow Bar Co Pty Limited v McGann (No 3) [2018] FCA 980. Those reasons dealt with the balance of that interlocutory application, the issue of an uplift in the security for costs having been the subject of orders made, and short reasons given, on 25 June 2018, the day on which I heard the interlocutory application. By the orders made on 2 July 2018 I gave the parties leave to file short written submissions dealing with the costs orders for which they contended. These reasons should be read with that earlier decision.

2    The respondents’ interlocutory application concerned three matters: an uplift in security for costs; that the claims in certain paragraphs of the Amended Statement of Claim be summarily dismissed or that the corresponding paragraphs be struck out; and an application for a stay of the applicants’ claim to rectify the Shareholders Agreement until Blow Bar Co Barangaroo Pty Ltd (in liquidation), a company said to have joint entitlement to the claimed relief, was joined as a party to the proceedings.

3    The respondents sought an order for their costs of and incidental to the interlocutory application on an indemnity basis, such costs to be payable forthwith. However they wished to reserve their entitlement to indemnity costs until the balance of the proceedings was resolved. The reason for this submission was, it was submitted, to avoid the Court considering without prejudice communications between the parties until the substantive proceedings had concluded.

4    In my view, this approach should not be adopted as it fragments what should be a straightforward issue and one best dealt with at a time as close as possible to the determination of the interlocutory application.

5    I have read on this application an affidavit by Ms Zoe Bojanac, solicitor for the applicants, sworn on 16 July 2018 annexing what was said to be without prejudice correspondence between the solicitors for the parties in relation to the additional security for costs issue and an answering affidavit dated 18 July 2018 sworn by Ms Simone Mitchell, solicitor for the respondents, annexing additional correspondence.

6    The respondents submitted they had been forced to incur significant costs to date, and therefore, as they had been overwhelmingly successful in their application to strike out paragraphs of the applicants’ Amended Statement of Claim, they sought an order for their costs, as agreed or assessed, with such costs to be payable forthwith. The respondents submitted that all of the paragraphs with which they took issue had been struck out by the Court (with the exception of the breach of copyright claim which was withdrawn by the applicants a few days before the interlocutory hearing). Further, the respondents submitted, they were only informed during the course of the hearing that the applicants did not challenge the respondents’ entitlement to an uplift in security and therefore the only remaining question for the Court on that issue was one of quantum.

7    The respondents submitted that the following matters supported an award of costs payable forthwith:

a.    no steps were taken by the Applicants to resolve the proceedings prior to filing the originating process on or about 26 October 2017 and a Genuine Steps Statement has never been filed by the Applicants;

b.    the Applicants were first put on notice of the deficiencies in their Statement of Claim on 4 December 2017;

c.    an interlocutory application to strike out paragraphs of the Statement of Claim was determined primarily in favour of the Respondents in March 2018;

d.    the Amended Statement of Claim did not properly address the deficiencies referred to in Blow Bar Co Pty Ltd v McGann [2018] FCA 293;

e.    the Respondents notified the Applicants of deficiencies in their Amended Statement of Claim prior to filing the interlocutory application. No substantive response was received;

f.    The Respondents filed and served the interlocutory application and supporting affidavit of Simone Mitchell sworn 31 May 2018. The Respondents also filed and served written submissions prior to the hearing of the application; and

g.    following receipt of the written submissions (and two days before the hearing) the Applicants provided the Respondents with further particulars of their claim and notified the Respondents that they intended to now withdraw the copyright claim.

8    The respondents submitted that although the proceedings had not yet concluded, the judgment could fairly be regarded as dealing with a discrete and separate issue. The respondents had incurred substantial costs in conducting the interlocutory applications. The proceedings as a whole would not be concluded for some considerable time and it would be unfair to deny the respondents the opportunity to tax their costs without delay.

9    The applicants submitted in relation to the additional security for costs that the appropriate costs order was that the respondents pay the applicants’ costs on an indemnity basis on and from 7 June 2018 and otherwise on the ordinary basis (or otherwise the respondents pay the applicants’ costs of the interlocutory application on an indemnity basis on and from 22 June 2018 and otherwise on the ordinary basis). Otherwise, the applicants submitted that the appropriate order was that the respondents pay the applicants’ costs of the interlocutory application on this issue on the ordinary basis. The applicants submitted they were wholly successful in defeating the application by the respondents for additional security of $60,000 as opposed to $40,000 and achieved a better result than the without prejudice offer they made.

10    In relation to the summary dismissal and strike out issue, the applicants submitted that the appropriate costs order was that each party pay their own costs or those costs be the respondents’ costs in the cause. The applicants submitted that the respondents were wholly unsuccessful in their application to summarily dismiss certain claims made by the applicants in their Amended Statement of Claim. The applicants submitted that the respondents were only partially successful in striking out certain paragraphs in their Amended Statement of Claim.

11    In relation to the joinder of Blow Bar Co Barangaroo Pty Ltd (in liquidation), the applicants submitted that the appropriate costs order was that the respondents pay the applicants’ costs. Alternatively, the applicants submitted that each party should bear their own costs of that part of the interlocutory application. The applicants submitted that the Court ultimately determined to order the applicants to join the company in liquidation and to let the liquidator decide whether to take an active part in the proceedings upon reading the pleadings. The respondents’ application to stay these proceedings, and thereby delay the preparation of their pleadings pending the hearing and determination of an application by the applicants to join the company, was wholly unsuccessful.

12    On the question of whether the costs should be payable forthwith, the applicants opposed that course, having regard to the policy considerations to which Sackville J referred to in Courtney v Medtel Pty Ltd (No 3) [2004] FCA 347 at [20]. Although the respondents may have incurred substantial costs in conducting the interlocutory application, those costs also pertained to matters in respect of which the respondents were wholly unsuccessful. Further, although some of the paragraphs of the Amended Statement of Claim were found to be defective and struck out, it could not be said that the conduct of the applicants was “so unreasonable that the cost of their folly should be immediately visited upon them as a deterrent to such behaviour in the future”: Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd [2016] FCA 37 at [12] per Perram J. Finally, the fact that the proceedings might not be concluded for some considerable time was not sufficient reason to depart from the usual position: QS Holdings Sarl v Paul’s Retail Pty Ltd (No 2) [2011] FCA 1038 at [35]-[39] per Kenny J.

13    The applicants submitted that if the Court determined to make an order that some portion of the respondents’ costs of the interlocutory application be payable forthwith, then an equivalent amount should be released from the amounts paid into Court by the applicants as security for the respondents’ costs (as those amounts had been paid into Court by reference to estimates given by Ms Mitchell of, amongst other things, the costs of this interlocutory application).

14    I shall consider in turn each of the three elements of the interlocutory application.

15    In my judgment, each party should bear their own costs of that part of the interlocutory application which concerned an increase in the amount of security for costs. In my view, neither the applicants nor the respondents acted unreasonably in relation to the quantum or the terms of the uplift or the offers made in the solicitors’ letters and emails between 8 June 2018 and 25 June 2018. I reject the applicants’ submission that the respondents pay their costs of this part of the interlocutory application on an indemnity basis.

16    In terms of the application for summary judgment or to strike out paragraphs of the Amended Statement of Claim, in my opinion the respondents were substantially successful and there should be a costs order in their favour in this respect. This was against the background of the earlier successful application brought by the respondents to strike out paragraphs of the Statement of Claim: Blow Bar Co Pty Limited v McGann [2018] FCA 293. The applicants’ abandonment of their copyright claim does not affect this conclusion as the abandonment was late.

17    In relation to the question of a stay pending joinder of the company in liquidation, in my assessment there should be a costs order in the respondents’ favour on the ground that the respondents were substantially successful in this respect. Although a stay was not granted, I directed, at [22] of my reasons, that the applicants join that company as a respondent. By order 3 of the orders made on 25 June 2018, I ordered that the parties indicate their agreement or otherwise to a proposed timetable for the joining of that company. After considering the parties’ responses, I made an order in chambers, on 17 July 2018, that the applicants join the company to the proceedings by 18 July 2018.

18    As to whether the costs should be payable forthwith, in my opinion they should. I did not make such an order in dealing with the costs of the respondents’ first interlocutory application to strike out certain paragraphs of the statement of claim: Blow Bar Co Pty Limited v McGann (No 2) [2018] FCA 459. However, in effect the second interlocutory application in respect of the pleading should have been unnecessary. In that sense the present interlocutory application is discrete and is unaffected by the consideration that the unsuccessful party to the interlocutory proceedings, here the applicants, might ultimately succeed in the substantive proceeding.

19    I have considered whether or not I should accede to the respondents’ application that costs be assessed on an indemnity basis but I am not persuaded that there should be a departure from the ordinary, party and party, basis. In my opinion the deficiencies in the applicants’ pleading do not establish unreasonable behaviour on their part or otherwise sound in an order for costs on an indemnity basis.

20    I do not accede to the applicants’ submission that an equivalent amount be released from the amounts paid into Court by the applicants as security for the respondents’ costs. However I accept that some part of the security is referable to the present interlocutory application and, adopting a broad brush approach, I assess that amount as $7,000. In so saying, that amount should not be taken to be what may be assessed or agreed as the amount of the respondents’ costs of [3]-[9] of their interlocutory application.

21    The orders I shall make are that the applicants pay the respondents’ costs of [3]-[9] of the respondents’ interlocutory application dated 31 May 2018, those costs to be payable forthwith. There should be no order as to the costs of [1]-[2] of that interlocutory application. I direct that on the assessment or agreement of the costs of [3]-[9] of the respondents’ interlocutory application dated 31 May 2018, $7,000 be released from the amount paid by the applicants as security for costs.

22    If the parties wish me to do so I will consider making a lump sum costs order in respect of these costs. Any such application should be notified to my Associate within seven days of the date of these orders.

Associate:

Dated:    19 July 2018