FEDERAL COURT OF AUSTRALIA

Summers v Repatriation Commission (No 2) [2015] FCAFC 64

THE COURT ORDERS THAT:

1.    Each party bear its own costs of the proceedings before Mortimer J and of this appeal.

2.    The solicitors for the Appellant have leave to file further submissions on or before 21 May 2015 as to whether or not an order in the terms proposed in paragraph 32 of the reasons for judgment delivered today should be made.

3.    In the event that the solicitors for the Appellant do not file any further submissions in accordance with [2] above, then the Court orders that the solicitors for the Appellant shall not seek or obtain payment of professional fees by Mr Summers (or by any other person or body) for the legal work in the proceeding before Mortimer J or in this appeal, but, subject to any fee and retainer agreement between the solicitors and Mr Summers, may recover the disbursements incurred.

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

REASONS FOR JUDGMENT

1    On 17 March 2015 we handed down judgment in this matter and allowed Mr Summers’ appeal (“the principal judgment”) (Summers v Repatriation Commission [2015] FCAFC 36). We now deal with the question of costs.

The Procedural background

2    The claim to which the appeal relates commenced on 10 December 2007 when Mr Summers sought an increased pension to the special rate of pension under the Veterans’ Entitlements Act 1986 (Cth) (“the Act”) on the basis that he suffered from war-caused PTSD and alcohol dependence.

3    In the various proceedings since the claim was lodged Mr Summers has at all material times been represented by Mr De Marchi of the legal firm De Marchi and Associates.

4    In relation to the proceeding before us, at first instance a single judge of this Court dismissed Mr Summers’ application by way of an appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (Summers v Repatriation Commission [2014] FCA 608) from a decision of the Administrative Appeals Tribunal (“Tribunal”) on 27 June 2013 (Summers v Repatriation Commission [2013] AATA 439). In that proceeding Mr Summers raised ten questions of law directed at two main parts of the Tribunal’s decision - the interpretation and application of the applicable Statement of Principles (“SoP”) under the Act and the proper construction and application of s 24 of the Act. Mr Summers was unsuccessful on all grounds and the Commission was unsuccessful in its cross-appeal. Because both parties were unsuccessful the primary judge held that there should be no order as to costs.

5    Mr Summers then appealed to us by way of an Amended Notice of Appeal dated 11 August 2014. The eight grounds of appeal before us were essentially the same as the grounds before the primary judge.

6    Before us Mr Summers was unsuccessful on grounds of appeal 1, 2, 2A and 3 which related to the proper construction and application of s 24 of the Act. It was unnecessary to trouble counsel for the Commission with oral submissions on those grounds. Mr Summers succeeded in the appeal on two bases.

7    First, he succeeded on appeal ground 4D which concerned whether the Tribunal failed to consider the applicability of cl. 6(a) of the SoP. This ground was not pleaded and was not raised before the primary judge. It was raised as a matter of concern by the Court and at the Court’s invitation Mr Summers sought leave to file a Further Amended Notice of Appeal. Leave was granted after considering the parties’ written submissions on the issue.

8    Second, he succeeded on appeal grounds 4, 4A, 4B and 4C which related to whether the Tribunal misconstrued s 120 of the Act and parts of cl. 3(b) of the applicable SoP. In the hearing Mr Summers’ solicitor, Mr De Marchi, cast the appeal more broadly than it was pleaded and we dealt with the case on that broader basis. Mr Summers succeeded on a basis which was largely not as pleaded and which was only raised in part before the primary judge.

9    We held that the Tribunal erred in its approach to the evidence regarding whether Mr Summers’ alcohol dependence satisfied the requirements in clause 3(b) of the SoP, and that the primary judge erred in failing to correct this error. In relation to this question we observed in the principal judgment (at [120]):

It is here that the deficiencies in Mr Summers’ solicitor’s approach to the evidence to be adduced before the Tribunal are plainly apparent. We say this because there appears to have been no attempt to direct Mr and Mrs Summers’ evidence to the specific requirements of the cl. 3(b) factors, and before us Mr De Marchi’s submissions again failed to focus on those requirements. …

10    We said (at [18]):

… Unfortunately, it must be said that the failure of Mr Summers’ solicitors, De Marchi and Associates to adduce evidence before the Tribunal which was specifically directed at the requirements of the applicable SoP, combined with a lack of clarity in the submissions on Mr Summers’ behalf, made the Tribunal’s factual enquiries unnecessarily difficult. As the primary judge said (at [67]) the written statements by Mr and Mrs Summers were at a level of generality not apt to assist the Tribunal in making the necessary findings. …

11    We summarised the progress of Mr Summers’ claim for a special rate of pension through several decisions of the Tribunal, an earlier appeal to a single judge of this Court and an appeal to a Full Court differently constituted (at [2] and [10]-[14]) and we need not reiterate that. It suffices to note that Mr Summers was successful in the earlier appeal to the Full Court (Summers v Repatriation Commission (2012) 130 ALD 32 (Gilmour, Perram and Jagot JJ)) but, again, not on the basis of the Notice of Appeal filed or the submissions advanced by his solicitors. As we said in the principal judgment (at [18]):

… The Full Court in Summers No 1 pointed to similar deficiencies in the evidence adduced on Mr Summers’ behalf as well as a lack of clarity in submissions (at [38]-[39], [46] and [60]). Although Mr Summers succeeded in that appeal the Full Court said (at [78]) that his success was unrelated to the submissions made on his behalf which were of no assistance to the Court.

12    In the principal judgment we raised our concerns regarding costs with the parties and requested the parties to file written submissions addressing whether costs should be ordered, and if they are to be ordered, where the burden of the order should fall. That is, whether costs should be paid by the respondent, the Repatriation Commission (“Commission”), by Mr Summers personally or by Mr Summers’ solicitors.

Relevant principles

13    The principles governing the award of costs are well understood. It is uncontentious that s 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a largely unfettered discretion in relation to costs. Section 43(3) relevantly provides that without limiting the discretion the Court may award costs in favour of, or against, a party whether or not the party is successful in the proceeding, or order a party’s lawyer to bear costs personally.

14    The discretion must be exercised judicially, not arbitrarily or capriciously, and must relate to the litigation in question: Trade Practices Commission v Nicholas Enterprises Pty Ltd and Others (1979) 28 ALR 201 at 206–207 (Fisher J). In the ordinary course costs will follow the event and if an appeal succeeds then the Court will order the respondent to pay the costs of the appeal and of the proceeding at first instance, unless there are special circumstances justifying some other order: Ritter v Godfrey [1920] 2 KB 47 (“Ritter”) at 52-53 (Lord Sterndale MR) and 54 (Atkin LJ); Gladstone Park Shopping Centre Pty Ltd v Ross Wills and Others (1984) 6 FCR 496 (“Gladstone Park Shopping Centre”) at 505 (Davies J); Ruddock v Vadarlis and Others (No 2) (2001) 115 FCR 229 at [11]-[16] (Black CJ and French J).

Discussion

15    The parties were on fundamentally common ground as to the applicable principles but divided as to their application.

Costs against Mr Summers?

16    Mr De Marchi contended that a costs order against Mr Summers is not appropriate because the Tribunal erred in law and he was successful in the appeal. He contended, in purported reliance on a passage in Ritter at 52-53 (cited with approval by Davies J in Gladstone Park Shopping Centre), that the Court may order that Mr Summers pay the costs of litigation only if it is satisfied that he had brought about the litigation, had done something connected with the institution of the proceeding calculated to occasion unnecessary litigation or had done some wrongful act in the course of the transaction.

17    This reliance on Ritter is misconceived as the cited passage relates to a successful defendant to litigation not, as in the present case, a successful appellant whose conduct in running the case might be said to provide a basis for departure from the ordinary rule that costs follow the event. However, it is unnecessary to consider the question of a costs order against Mr Summers because the Commission does not seek such an order. Further, even if the Commission had sought a costs order against Mr Summers we would be disinclined to make it in circumstances where, as indicated above, we would infer that the matters which might provide a basis for departure from the usual rule as to costs were errors of Mr Summers’ solicitor rather than of Mr Summers.

Costs against De Marchi and Associates?

18    Mr De Marchi submits that a costs order against his firm should not be made because Mr Summers’ case was conducted with due care given the (asserted) difficulty for Mr Summers in providing evidence as a result of his accepted war-caused disabilities, and having regard to what he described as “the extraordinary complexity of the proceedings and the medico-legal facts and issues in dispute.” He contends that “[t]he fact that the successful ground of appeal was not identified by the Applicant’s [sic] solicitors without the assistance of the Full Federal Court should be seen in this light.”

19    The crux of this submission is an attempt to make a virtue of the fact that, rather than the pleadings and submissions by the appellant’s solicitors being of assistance to the Court, a Full Court has for the second time in this matter, found that the grounds of appeal and submissions did not assist and in fact obscured the real issues. In the present appeal the Court identified the Tribunal’s error in ground 4D essentially unaided by the Amended Notice of Appeal or submissions. Nor, in relation to the other successful grounds, were we assisted by the Amended Notice of Appeal and the submissions as to how the evidence before the Tribunal could be said to point to or raise Mr Summers having met at least three of the seven factors in clause 3(b) of the SoP in the same 12 month period.

20    In his submissions on costs Mr De Marchi did not grapple with his failure to adduce evidence before the Tribunal which was specifically directed at the requirements of the applicable SoP and his failure to make clear and focused submissions before the primary judge or us. In our view that failure is likely to have played a part in this matter having required two Tribunal hearings to date, with one further Tribunal hearing pending, as well as two appeals to a single judge of this Court and two Full Court appeals.

21    We do not accept the submission that a costs order against a solicitor is available only in cases of gross negligence. Although the jurisdiction to order costs against a solicitor in a proceeding should be exercised sparingly and with great caution it clearly extends to misconduct or default which does not constitute gross negligence, including to costs incurred without reasonable cause: see Levick v Commissioner of Taxation (2000) 102 FCR 155 at [31]-[50] (Wilcox, Burchett and Tamberlin JJ). It is, however, unnecessary to take this issue further as the Commission does not seek an order that De Marchi and Associates pay costs.

Should Mr Summers receive a costs order?

22    As we have said, in the ordinary course Mr Summers should have his costs of the appeal and the hearing below. The question is whether in the circumstances of this case we should depart from the usual rule.

23    Mr De Marchi’s primary submission is that a costs order should be made in Mr Summers’ favour for the proceedings below and the appeal before us. He submits that, having filed the Further Amended Notice of Appeal, having made further written submissions, and then having enjoyed success on grounds 4, 4A, 4B, 4C and 4D, Mr Summers is entitled to his costs. He notes that it was open to the Commission to concede that the Tribunal had fallen into error but it did not.

24    The Commission’s primary submission is that an order that each party bear its own costs of the proceedings below and of the appeal is appropriate. In the alternative to his primary submission Mr De Marchi submits the same.

25    In our view Mr De Marchi’s primary submission fails to take proper account of the fact, first, that Mr Summers only succeeded in a portion of his appeal, a fact which militates against the usual costs order in favour of a successful party. He was unsuccessful on grounds of appeal 1, 2, 2A and 3.

26    Second, that Mr Summers was successful on ground 4D which was not raised in the proceeding below, in the Notice of Appeal or in the Amended Notice of Appeal. It is settled that the Court may properly depart from the usual order as to costs when the successful party succeeds on a point not argued before a lower court: Armstrong v Boulton [1990] VR 215 at 223 (Kaye, King and Gobbo JJ).

27    Third, grounds 4, 4A, 4B and 4C of the Amended Notice of Appeal were inadequate expressions of the basis of the appellant’s success on the appeal.

28    Fourth, Mr De Marchi’s submissions did not address his own evident failure to direct Mr and Mrs Summers’ evidence to the specific requirements of clause 3(b) of the SoP before the Tribunal, and the effect of that failure on the hearings before the primary judge and us.

29    There are many ways in which a successful party’s conduct of a proceeding can provide a proper basis to deprive that party of its costs. Some of the authorities were usefully collected by McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at [69] where his Honour relevantly noted that some sort of misconduct relating to the litigation (King & Co v Gillard & Co [1905] 2 Ch 7) or in the circumstances leading up to the litigation (Bostock v Ramsey Urban District Council [1900] 2 QB 616), or lax conduct which effectively invites the litigation (Jones v McKie [1964] 1 WLR 960) may ground a departure from the usual rule as to costs.

30    As Dixon J noted in Smith v Gould (No 2) [2012] VSC 541 at [11]:

The successful party may be deprived of costs in myriad ways relating to the manner of conduct of the proceeding (cf Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 30 ACSR 20), including by contesting many issues on which it failed, by requiring the losing party to contest issues abandoned during trial, by taking unnecessarily technical points, by inappropriately prolonging the litigation (Forbes v Samuel [1913] 3KB 706; Lollis v Loulatzis (No. 2) [2008] VSC 35 at [29]), by pressing a substantially exaggerated claim (O’Neill v Williams (Costs) [2007] NSWSC 51), by causing the real issues to be obscured or unnecessary evidence to be led, or by facilitating the loss of the opportunity to expeditiously dispose of the case (Capolingua v Phylym Pty Ltd (1991) 5 WAR 137 at 142; Lollis v Loulatzis (No. 2) [2008] VSC 35 at [35]). In some cases, an examination of the conduct of significant separate issues in the proceeding, by reference to success on the issue event, may inform the proper exercise of the discretion (see the discussion in G.E. Dal Pont, Law of Costs, Lexis Nexis, 2nd Ed, [8.2]–[8.8]).

31    In our view it was plainly not the conduct of the Commission alone that gave rise to the need for Mr Summers to bring the appeal. The circumstances to which we have referred (at [25]-[28]) provide a proper basis for departure from the usual rule that the successful appellant should have a costs order in his favour. In all the circumstances, we would order that the parties pay their own costs of the proceeding before the primary judge and before us.

32    Further, we are also of the provisional view that Mr Summers’ solicitors should not be permitted to seek or obtain payment of professional fees from Mr Summers (or from any other person or body) for the legal work in the proceeding before Mortimer J or in this appeal and that we should order accordingly (although we would permit Mr Summers’ solicitors to recover the disbursements incurred). We propose, however, to afford Mr Summers’ solicitors the opportunity to make further submissions concerning the appropriateness of an order to this effect. If Mr Summers’ solicitors do not file further submissions within seven days of delivery of judgment, we would make an order in the following terms:

“The solicitors for the Appellant shall not seek or obtain payment of professional fees by Mr Summers (or by any other person or body) for the legal work in the proceeding before Mortimer J or in this appeal, but, subject to any fee and retainer agreement between the solicitors and Mr Summers, may recover the disbursements incurred.”

33    Accordingly we would order:

1.    Each party bear its own costs of the proceedings before Mortimer J and of this appeal.

2.    The solicitors for the Appellant have leave to file further submissions on or before 21 May 2015 as to whether or not an order in the terms proposed in paragraph 32 of the reasons for judgment delivered today should be made.

3.    In the event that the solicitors for the Appellant do not file any further submissions in accordance with [2] above, then the Court orders that the solicitors for the Appellant shall not seek or obtain payment of professional fees by Mr Summers (or by any other person     or body) for the legal work in the proceeding before Mortimer J or in this appeal, but, subject to any fee and retainer agreement between the solicitors and Mr Summers, may recover the disbursements incurred.

Associate:

Dated:    14 May 2015