FEDERAL COURT OF AUSTRALIA

Vata-Meyer v Commonwealth of Australia (No 2) [2015] FCAFC 167

THE COURT ORDERS THAT:

1.    The application by the first and second respondents to vary the order made on 22 September 2015 that they pay the appellant’s costs of the appeal be dismissed with costs.

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

REASONS FOR JUDGMENT

THE COURT

1    Edna Vata-Meyer claims to have been subject to racial discrimination contrary to the Racial Discrimination Act 1975 (Cth) while an employee of the Commonwealth. On 22 September 2015 this Court allowed an appeal from an order of the Federal Circuit Court dismissing Ms Vata-Meyer’s application for relief with respect to the alleged discrimination, remitted the matter to that court for rehearing on a limited basis, and ordered the first and second respondents — the Commonwealth and Angus Lee (“the respondents”) — to pay Ms Vata-Meyer’s costs of the appeal: Vata-Meyer v Commonwealth of Australia [2015] FCAFC 139.

2    The Court granted leave to the parties to apply in writing within seven days of the publication of the judgment to vary the order for costs. The respondents availed themselves of that opportunity, asking that the order be varied such that the costs of the appeal be reserved “to be determined by the Federal Circuit Court on re-trial”. That application was opposed and, for the following reasons, it should be refused.

3    The respondents’ application was supported by an affidavit sworn by Peter McNulty, solicitor, on 29 September 2015, although no application was made to adduce any evidence. It is based on the facts revealed by the affidavit that on 20 January 2015 the respondents made an offer in writing to Ms Vata-Meyer to settle the entire claim, including the appeal, which, by letter dated 22 January 2015 Ms Vata-Meyer rejected. Ms Vata-Meyer made a counter-offer, which the respondents rejected. Both offers were made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. The offers included the payment of a sum of money in damages. One of the conditions the respondents placed on the acceptance of its offer was that Ms Vata-Meyer take a voluntary redundancy. In the circumstances, it is unsurprising that she rejected it. Copies of the letters in which the offers were made were annexed to the affidavit. In our opinion, that was inappropriate, as the issue of damages is yet to be determined: see Maricic v Dalma Formwork (Australia) Pty Ltd (No 2) (2006) 67 NSWLR 712 (“Maricic”) at [12] (Basten JA).

4    The respondents submitted that the Court’s discretion as to costs is very wide. That is undoubtedly true. Section 43(2) of the Federal Court of Australia Act 1976 (Cth) (“FCA Act” or “Act”) states that “[e]xcept as provided by any other Act, the award of costs is in the discretion of the Court or Judge”. The respondents also submitted that as a matter of policy courts should encourage genuine efforts to resolve disputes without recourse to the courts, including by “according beneficial treatment to a party which has made a reasonable or realistic offer of settlement before trial”: Owen v Musladin (No 2) [2010] ACTCA 24 (“Owen”) at [41] (Penfold J). This submission may also be accepted, but it does not take the respondents very far.

5    The respondents’ short point is that, had Ms Vata-Meyer accepted their offer, the appeal would not have been necessary. The short answer to this point is that Ms Vata-Meyer could say the same. If they had accepted her offer, they would have avoided any appeal and the prospect of any adverse costs order. This is not, however, the respondents’ only difficulty.

6    Depending on the outcome of the retrial, it would be open to the Federal Circuit Court, in its discretion, to order Ms Vata-Meyer to pay the respondents’ costs from the date of the offer, but, contrary to the respondents’ submission, we are not persuaded that that could or should encompass the costs of the appeal. The respondents relied for this submission on an observation by Penfold J in Owen at [43]. That observation, however, provides no support for the respondents’ submission.

7    Owen was concerned with the costs of an appeal where the court had allowed the appeal and ordered a new trial limited to the assessment of past and future economic loss. The respondent had made a number of Calderbank offers. In Owen the respondent was taken to be submitting that if at retrial the verdict exceeded the offer that was made he should have a special costs order from the date of his offer, which, as Refshauge J put it at [17], “would include, in some way, the costs of the appeal”. But Penfold J’s proposal was that the costs of the appeal be reserved for determination until after the outcome of the re-hearing was known. She did not propose that the costs be determined by the trial judge. In any event, her Honour was in the minority. The majority (consisting of Refshauge and Buchanan JJ in separate judgments) ordered the respondent to pay the costs of the appeal. As Buchanan J pointed out at [48], the circumstance that offers were made after the judgment in the trial and before the appeal was heard “could not operate to render irrelevant the circumstance that the appellant was obliged to prosecute the appeal, which was resisted by the respondent”.

8    The respondents acknowledged the majority’s decision but sought to distinguish it on the basis that the appeal in that case succeeded because the respondent failed to adduce sufficient evidence on damages at the trial. But that is not what the majority judges said. It is at least an exaggeration. Buchanan J said at [49] that “the difficulties which confronted the Master at the trial arose in large measure from the inadequacy of the respondent’s (the plaintiff’s) case for damages”. At [29] Refshauge J said:

In this case, the Court has found that the approach of the Master was wrong, but to an extent as a result of the inadequacy of the evidence adduced by the respondent. The appellant is entitled to have a fair trial where the proper approach to the assessment of damages is determined according to law. That she had to take the appeal to achieve that over the respondent’s opposition means, so far as I am concerned, that she is entitled to her costs of taking that step.

9    Although we did not find that the respondents’ conduct in the Federal Circuit Court contributed to the errors of the primary judge, the parallels between this case and Owen are obvious.

10    In any case, as Campbell JA observed in Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [59]–[60] (Young and Meagher JJA agreeing), there are numerous vicissitudes in litigation which can affect its costs without the fault of any party. The fact that such a vicissitude has arisen is not a reason for departing from the usual order that costs follow the event. His Honour added at [61]–[62]:

61    It is an inevitable part of our legal system that on occasions a judge will act in error. If the error of the judge is not one that has been brought about by one of the parties … the costs of rectifying that error should, prima facie, be treated as one of the vicissitudes of litigation. Therefore, the costs of rectifying the error should prima facie follow the event.

62    This principle is well established in the basis upon which appellate courts make costs orders. Allegations that a judge has made an error make up the daily diet of the Court of Appeal. However, if such an allegation turns out to be correct, the fact that it was a judge who made the error provides no reason for the Court of Appeal to make no order for the costs involved in remedying that error. …

11    Earlier, in Suresh v Jacon Industries Pty Ltd (No 2) [2005] NSWCA 270 (“Suresh”), a case in which, after a successful appeal, the proceedings were remitted to the District Court for an assessment of damages, the Court of Appeal ordered that the respondent pay the appellant’s costs. The respondent applied for a variation of the order based on an offer of compromise made in the proceedings below. That application was dismissed with costs. Basten JA, with whom Mason P and Santow JA agreed, observed at [17]:

The possibility that the Respondent would ultimately be successful, once the offer of compromise is taken into account, is a possibility which may arise in any case where a retrial is ordered. There is no authority for the proposition that, in such circumstances, the proper course is for this Court to make its order conditional on such an outcome not eventuating. It is usual for this Court, and indeed the High Court, to award costs of an appeal to follow the outcome of the appeal.

12    Maricic was a similar case, save that in that case offers of compromise had been made both during the trial and on appeal. The respondents applied for an order that the costs of appeal be reserved, to be determined after the further hearing in the District Court. Once again, the Court of Appeal considered that the possible impact of the offers of compromise in the hearing on damages in the District Court was no reason not to make the usual order. Ipp JA, with whom Beazley JA agreed, cited with approval the above passage from the judgment of the court in Suresh.

13    Moreover, we doubt that the Court has power to make the order the respondents seek. Section 43(1) of the FCA Act gives the Court jurisdiction to award costs in all proceedings before the Court subject to the exceptions referred to in the subsections, none of which apply here. It does not give the Court the power to remit the question of costs in a proceeding decided in this Court for determination by another court. True it is, s 28(1)(c) of the FCA Act authorises the Court in the exercise of its appellate jurisdiction to “remit the proceeding to the court from which the appeal was brought for further hearing and determination”, subject to appropriate directions. In our opinion, however, properly construed “the proceeding” is a reference to the proceeding the subject of the appeal; it does not include any part of the appeal. We think it unlikely that the power to make directions was intended to include a power to determine the costs of the appeal. Nor do we consider that it was intended to confer jurisdiction on the lower court where otherwise it would have none. Section 79 of the Federal Circuit Court Act 1999 (Cth) gives that court power to order costs “in all proceedings before the Federal Circuit Court”. Self-evidently, that does not extend to an appeal heard in another court.

14    In the present case, in lieu of the order proposed by the respondents, it would of course be open to us to revoke our earlier order and to substitute an order reserving the question of costs until after the retrial. Yet, in substance this was the order sought in Maricic. In our opinion it should not be made here either. Given the heavy workload of the Federal Circuit Court, its effect would be to leave the question of the costs of the appeal pending for a long time. In these circumstances, making such an order would not be the best way to promote the overarching purpose of s 43 of the Act and the rules — to facilitate the just resolution of disputes as quickly, inexpensively and efficiently as possible: see FCA Act, s 37M(1). The Court is bound to exercise its powers in the way that best promotes that purpose: FCA Act, s 37M(3). Basten JA came to the same conclusion in Maricic. We respectfully agree with what his Honour said about this course at [21]-[23]. At [21] his Honour observed:

It is, of course, inevitable, although no doubt inconvenient to the parties, that the resolution of claims for costs in respect of a trial may have to await the outcome of a retrial, following a successful appeal. That effect would be significantly exacerbated by requiring the parties to return to this Court, long after the proceedings in this Court had been completed, in order to deal with the costs of the appeal

15    While his Honour took into account the policy considerations referred to above at [4] he regarded as decisive “the undesirability of leaving proceedings, otherwise completed, pending in [the] Court for a significant period, to allow the completion of proceedings in another Court”. We take the same view.

16    In any event, Ms Vata-Meyer was entitled to a trial free from the errors this Court found to have occurred. The respondents could have accepted that the trial miscarried and consented to the orders sought. Not only did they not take this course, they vigorously fought her on every issue. This was their forensic choice. They should bear the consequences.

17    We therefore decline to vary the order made on 22 September 2015 that the respondents pay Ms Vata-Meyer’s costs on the appeal. The application for the Court to do so should be dismissed with costs.

Associate:    

Dated:    26 November 2015