FEDERAL COURT OF AUSTRALIA

Fernando v Commonwealth of Australia (No 2) [2015] FCAFC 49

THE COURT ORDERS THAT:

1.    The appellant pay the respondents’ costs of the appeal.

2.    The cross-respondent pay the cross-appellant’s costs of the cross-appeal.

3.    The cross-appellant pay the cross-respondent’s costs of the application to amend the cross-appeal.

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

REASONS FOR JUDGMENT

THE COURT

1        On 22 December 2014, this Court made an order that an appeal by W Lloyd Nirmaleen Fernando (by his tutor John Robert Broderick Ley) be dismissed. In addition, the Court also made an order that the cross-appellant’s application for leave to amend its Notice of Cross-Appeal be refused. Finally, the Court made an order that the cross-appeal by the Commonwealth of Australia (“the Commonwealth”) be allowed, and that the order of the primary judge that the Commonwealth pay Mr Fernando $25,000 by way of exemplary damages be set aside. The Court gave the parties the opportunity to make written submissions on the question of costs (Fernando v Commonwealth of Australia [2014] FCAFC 181).

2        The respondents to Mr Fernando’s appeal, the Commonwealth and the Honourable Gary Hardgrave, formerly Acting Minister for Immigration and Multicultural and Indigenous Affairs (“the Honourable Gary Hardgrave”), seek an order that Mr Fernando pay their costs of the appeal on an indemnity basis. The cross-appellant, the Commonwealth, seeks an order that Mr Fernando pay its costs of the cross-appeal on an indemnity basis. Mr Fernando submits that there should be no order as to the costs of the appeal, and of the cross-appeal.

3        For the reasons which follow, we will order that, with respect to the appeal, the appellant pay the respondents’ costs assessed on a party and party basis. When costs are to be assessed on a party and party basis, there is no need to refer to the basis of assessment in the order (r 40.01 of the Federal Court Rules 2011 (Cth) (“the Rules”)). We will also order that, with respect to the cross-appeal, the cross-respondent pay the cross-appellant’s costs assessed on a party and party basis. Hereafter we refer to the respondents and cross-appellant together as “the respondents”.

4        We should mention that the cross-appellant does not oppose the making of an order that Mr Fernando have his costs of the application to amend the Notice of Cross-Appeal.

5        This proceeding has a long history, and it is necessary to refer to some of the key events in that history.

6        On 31 May 2007, Mr Fernando commenced this proceeding in which he claimed damages for false imprisonment, misfeasance in public office, and negligence. In his application, Mr Fernando claimed that he had a mental condition which had been caused by his detention. On 18 December 2007, the Court appointed Mr John Ley under Order 43 of the Federal Court Rules 1979 (Cth) to act as a tutor for Mr Fernando in the conduct of the proceeding.

7        On 22 May 2009, Mr Ley made an application that he not be exposed to any personal liability in respect of any costs orders made against Mr Fernando in the event that Mr Fernando was unsuccessful in his claims against the respondents. On 5 August 2009, Siopis J made the following orders with respect to that application:

1.    The respondents are precluded from seeking any recourse to Mr John Ley for the payment of any costs order made in their favour in this proceeding, and Mr Ley is not personally liable in respect of any such costs order.

2.    The respondents have liberty to apply within 7 days of the making of any costs order in their favour in this proceeding to vary Order 1, if Mr Ley has in the conduct of this proceeding, acted so unreasonably as to warrant varying Order 1.

Fernando (by his tutor, John Ley) v Minister for Immigration and Citizenship (No 9) [2009] FCA 833.

8        Siopis J’s reasons for making the first of these orders in favour of Mr Ley proceeded on the basis that a costs order could be made against Mr Fernando.

9        After a trial conducted before Siopis J, his Honour made an order on 21 July 2010 that the respondents pay Mr Fernando damages in the sum of $3,000. Those damages were assessed on the basis that Mr Fernando had been unlawfully detained for one day (Fernando v Commonwealth and Another (2010) 188 FCR 188). Siopis J then heard further submissions on Mr Fernando’s claim for aggravated and exemplary damages and, on 24 December 2010, he made an award of exemplary damages of $25,000 in favour of Mr Fernando against the Commonwealth (Fernando (by his tutor Ley) v Commonwealth and Anor (No 4) [2010] FCA 1475; (2010) 276 ALR 586).

10        On 20 April 2011, and in the appeal proceeding by the Commonwealth and the Honourable Gary Hardgrave against the award of damages in favour of Mr Fernando, Gilmour J made the following order:

1.    John Robert Broderick Ley is appointed as tutor to the respondent and is not personally to be liable to any costs orders in respect of the appeal or any cross-appeal.

11        The appeal by the current respondents and a cross-appeal which had been lodged by Mr Fernando came on for hearing before the Full Court of this Court on 16 August 2011. On 8 March 2012, the Full Court made orders allowing both the appeal and cross-appeal in part, and remitting certain matters to Siopis J (Commonwealth and Anor v Fernando [2012] FCAFC 18; (2012) 200 FCR 1). We set out a summary of the orders, and the orders themselves, in our earlier reasons (at [14], [39]).

12        The matters remitted to Siopis J were considered by him and, on 6 September 2013, he made the following orders:

1.    The respondents pay the applicant nominal damages in the sum of $1.00.

2.    The first respondent pay the applicant $25,000 by way of exemplary damages.

3.    Within 14 days of this order, the first respondent file and serve any affidavits and submissions in relation to the question of costs.

4.    Within 7 days thereafter, the applicant file and serve any affidavits and submissions in response.

13        As envisaged by the third and fourth orders set out above, Siopis J considered the question of costs and, on 30 October 2013, he made an order that the respondents pay the applicant’s costs of the remitted hearing (Fernando v Commonwealth of Australia (No 6) [2013] FCA 1121). His Honour rejected a submission that, because of an offer made by the respondents, the applicant should pay their costs from 11 am on 15 November 2012 on an indemnity basis. He did so because he did not think that it was unreasonable for Mr Ley to reject the respondents’ offer at the time that the offer was made. His Honour said (at [15]):

At the time that the respondents’ offer was made, the matter stood as having been remitted to me by the Full Court with the expectation that the damages which I would award would be substantial damages in respect of a very long period of unlawful detention. The respondents had foreshadowed that they would seek to advance the nominal damages argument. Mr Ley, however, was entitled to take the view that the respondents’ approach was, in the circumstances, highly unusual and that there was a good prospect that the Court would not permit the respondents to advance that proposition. Not least of the considerations which would have weighed with Mr Ley, is that, having been successful on appeal, it would be unlikely that the applicant would end up in a worse position than at first instance by reason of subsequent legal developments. As I have said in the reasons for judgment in Fernando (No 5), the question as to whether it was appropriate to permit the respondents, in those circumstances, to advance their nominal damages argument, caused me considerable difficulty and is plainly controversial.

14        Mr Fernando’s appeal from the orders made by Siopis J on 6 September 2013, and the Commonwealth’s cross-appeal, were listed for hearing before this Full Court on 26 May 2014. By notice of offer to compromise dated 12 May 2014, the respondents made an offer to the appellant to settle his claim for damages in the sum of $250,000 inclusive of interest, but in addition to reasonably incurred legal costs. The offer of compromise was said to be open to be accepted until 10 am (WST) on 26 May 2014. By notice of offer to compromise dated 23 May 2014, the respondents made an offer to the appellant to settle his claim for damages in the sum of $265,000 inclusive of interest, but in addition to reasonably incurred legal costs. The offer of compromise was said to be open to be accepted until 10 am (WST) on 26 May 2014. The amount of $265,000 in the notice of offer to compromise dated 23 May 2014 was increased to $300,000 by way of oral advice to the appellant’s solicitors on 26 May 2014. None of these offers were accepted by Mr Fernando.

15        The hearing of the appeal and cross-appeal proceeded before this Court on 26 May 2014 and, on 22 December 2014, this Court made the orders summarised in paragraph 1 above.

16        The first question is whether there should be an order for costs with respect to the appeal and the cross-appeal. As we have said, Mr Fernando claims that there should be no order as to costs. First, he contends that no order should be made against Mr Ley. It is not clear whether in fact an order is sought against Mr Ley, but we agree that no order should be made against him. That is consistent with the way in which this matter has proceeded, and with the order made by Siopis J on 5 August 2009, and the order made by Gilmour J on 20 April 2011. Dr Cameron, who appeared as counsel for the appellant/cross-respondent, then submitted that he represented only Mr Ley and not Mr Fernando. He submitted that Mr Fernando is not represented and that, by reason of r 9.61 and r 9.66 of the Rules, Mr Fernando had no control over the proceeding. He also submitted that the respondents had not cited any authority supporting a claim that the Court should make costs orders against a mentally disable person. Later in his written submissions, Dr Cameron claimed that, even if the Court was minded to award costs against Mr Fernando on a party and party basis, Mr Fernando would be entitled to be heard before the Court exercised the discretion against him. As far as we can see, arguments of this nature have not previously been raised at any stage in the long history of this proceeding and, in particular and by way of example, were not raised before Siopis J when he considered the costs of the remitted proceeding. We reject these submissions. Mr Fernando has been heard through his tutor and his counsel. The whole basis of the respective orders made by Siopis J and by Gilmour J was that there was an ability to make an order for costs against Mr Fernando. In any event, the authorities suggest that a costs order may be made against Mr Fernando (Rhodes v Swithenbank (1889) 22 QBD 577; Masling v Motor Hiring Company (Manchester) Limited [1919] 2 KB 538; O’Brien v The Herald and Weekly Times Ltd [1937] VLR 135).

17        In our opinion, an order for costs should be made against Mr Fernando on the basis that he was unsuccessful on the appeal, and the Commonwealth was successful on the cross-appeal. The second question is whether those costs should be assessed on an indemnity basis.

18        In support of their claim for indemnity costs, the respondents relied on their offers of compromise, and in particular, the offer they made on 12 May 2014 in respect of the appeal and cross-appeal listed for hearing before this Full Court on 26 May 2014. They submitted, correctly in our view, that the result of the appeal and cross-appeal were less favourable to Mr Fernando than the terms of offer made to him. They referred to r 25.14 of the Rules and submitted that, whilst that rule applied to original proceedings, by analogy and as a matter of practice, they were entitled to an order that the appellant pay their costs after 11 am on 14 May 2014 on an indemnity basis.

19        We note the respondents’ acceptance that that rule does not apply directly, and we therefore proceed on the basis that we have a discretion whether to award indemnity costs. We think the issue is whether it was unreasonable for Mr Fernando to reject the respondents’ offer on and following 12 May 2014. That issue is finely balanced. On the one hand, the issue concerning nominal damages and the application of the principles or observations in Regina (Lumba) v Secretary of State for the Home Department [2011] UKSC 12; [2012] 1 AC 245, and Kambadzi v Secretary of State for the Home Department [2011] UKSC 23; [2011] 1 WLR 1299 was a difficult issue which raised important points of principle. There was also an element of public interest in the issue, and there was something to be said for the determination of these issues by an appellate court. On the other hand, Mr Fernando pressed ahead with an appeal after Siopis J had decided the relevant issues against him. By a narrow margin, we think the former matter is entitled to more weight than the latter matter.

20        We also take into account the timing of the respondents’ offers. The 12 May 2014 offer was stated to be open to be accepted until 10 am on 26 May 2014, the day the appeal was listed for hearing at 10.15 am. Further, the respondents did not make clear to this Court when on 12 May 2014 the offer was made. The 23 May 2014 offer was open for 3 days only and was similarly stated to be open to be accepted until 10 am on 26 May 2014, the day the appeal was listed for hearing at 10.15 am. The verbal offer was made on 26 May 2014, the day of the hearing of the appeal, and the respondents did not make clear to this Court the timing and circumstances of that verbal offer.

21        In those circumstances, we do not think it appropriate to award costs on an indemnity basis.

22        We will make the following orders:

1.    The appellant pay the respondents’ costs of the appeal.

2.    The cross-respondent pay the cross-appellant’s costs of the cross-appeal.

3.    The cross-appellant pay the cross-respondent’s costs of the application to amend the cross-appeal.

Associate:    

Dated: 2 April 2015