FEDERAL COURT OF AUSTRALIA

LFDB v SM (No 2) [2017] FCAFC 207

ORDERS

THE COURT ORDERS THAT:

1.    Order 2 made by Jagot J on 23 June 2017 be varied so as to delete the words “as agreed or taxed”.

2.    The appellants are to pay on a party/party basis the respondent’s costs of the appeal save that the appellants are to pay on an indemnity basis the costs of the respondent of and incidental to:

(a)    that part of the interlocutory application filed by the appellants on 17 July 2017 which sought leave to adduce evidence in relation to the appeal; and

(b)    the interlocutory application filed by the appellants on 17 August 2017.

3.    The respondent be awarded a lump sum for her costs in a sum to be determined by a Registrar of the Court.

4.    Within 14 days, the respondent is to file and serve any evidence upon which she proposes to rely on the issue of quantification of the lump sum for costs.

5.    Within a further 14 days, the appellants are to file and serve any evidence upon which they propose to rely on the issue of quantification of the lump sum for costs.

6.    The Registrar be directed pursuant to FCR 1.37 to determine the quantum of the lump sum for costs payable pursuant to Order 3 above (including the quantification of the costs payable pursuant to Order 2 made by Jagot J on 23 June 2017 as varied by Order 1 above) in such manner as he or she deems fit including, if thought appropriate, on the papers.

7.    The Registrar be directed pursuant to FCR 1.37, at the conclusion of the quantification process, to order that the appellants are to pay whatever sum has been quantified pursuant to Order 6 above to be paid within 28 days from the date of the order.

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

REASONS FOR JUDGMENT

THE COURT:

1    On 15 November 2017, the Full Court dismissed an appeal against orders made by a judge of the Court dismissing an application under s 72(1) of the Trans-Tasman Proceedings Act 2010 (Cth) to set aside the registration of judgments of the High Court of New Zealand: LFDB v SM [2017] FCAFC 178 (Principal Judgment).

2    The parties had foreshadowed application being made for a special costs order and when dismissing the appeal, the Court ordered the parties to file written submissions as to the appropriate order as to costs. The approach of ‘flagging’ such an application prior to judgment was consistent with the obligations of a party seeking such an order: see Westpac Banking Corporation v Wittenberg (No 3) [2016] FCAFC 51 at [9] per Buchanan, McKerracher and White JJ; Thomas v Commissioner of Taxation (No 2) [2017] FCAFC 144 at [5] per Dowsett, Perram and Pagone JJ.

3    There is no need to recount the details of the appeal, nor of the history of the broader litigious saga in which the parties have been involved. These reasons assume familiarity with the background referred to in the Principal Judgment at [10]-[26].

4    The submission of the appellants is that no order as to costs should be made. This is because the controversy, at heart, is a de facto property dispute and, by analogy to s 117 of the Family Law Act 1975 (Cth) (FLA), the default position should be that each party bear their own costs.

5    The respondent submits that not only should an order for costs be made, but that it should be made on an indemnity basis. The respondent contends that the appellants’ conduct of the appeal “amounted to an abuse of the Court’s processes” and was characterised by delay, change of position and meritless arguments. Additionally, a lump sum costs order is sought.

6    It is convenient at the outset to reject the appellants’ contention that costs “do not… follow the event in such a matter as this”. For reasons explained in the Principal Judgment at [55]-[63], this was not a de facto financial cause as that expression is used in Division 2 of Part V of the FLA. The default costs position under the FLA is not an apposite analogy to this different character of litigation. The presently relevant approach is as was explained by Gleeson CJ, Gummow, Hayne and Crennan JJ in Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 at 62-63 [25] that although there is “no absolute rule”, one of the “general propositions” regarding an award of costs is that “the award is discretionary but generally that discretion is exercised in favour of the successful party”: see also Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 88-89 [40]-[41] per Gaudron and Gummow JJ.

7    When it comes to the respondent’s submission, the principles guiding the exercise of the discretion to make a special costs order can be shortly stated. It is trite that the Court has a broad power to award costs, including indemnity costs, under s 43 of the Federal Court of Australia Act 1976 (Cth) (Act). It has often been remarked that the discretion as to costs is unfettered, but in exercising the discretion to award costs, s 37N(4) of the Act requires the Court to take account of any failure by a party to comply with the overarching purpose of the civil procedure provisions, namely to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see s 37M(1). An award of indemnity costs is not a punitive measure, but is designed for “compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at 665 [20] (Gray J, Carr and Goldberg JJ agreeing). Consistently with facilitating the overarching purpose, such circumstances may include where a proceeding is unduly prolonged by groundless contentions: see Ragata Developments Pty Limited v Westpac Banking Corporation at 7, 8 (unreported, Davies J, 5 March 1993), and more generally Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 at [3]-[5] per Jagot, Yates and Murphy JJ. 

8    Turning to the application of these principles, there is an insufficient basis for reaching the conclusion that the appellants’ conduct of the appeal amounted to an abuse of process. Other than pointing to delay and want of merit in the appellants’ arguments, the respondent’s contention that the proceeding amounted to an abuse of process was undeveloped. Given the caution that should be borne in mind when dealing with allegations of abuse of process, we do not consider there is a sufficient basis for us to stigmatise the appellants’ conduct of the litigation in that way.

9    Moreover, we are not convinced that this is an appropriate case for indemnity costs to be awarded generally. Although the grounds of appeal changed and the ambit of the argument ultimately pressed narrowed significantly, the core public policy contention (arising from an alleged serious denial of procedural fairness caused by the ‘unless’ order) was maintained throughout. Although this argument was not vindicated, it could not be accurately described as being hopeless. Additionally, the late abandonment (or virtual abandonment) of many of the arguments specified in the initial and amended notice of appeal served the purpose of reducing the time needed for the oral hearing.

10    In the alternative, the respondent submits that she should receive her costs on an indemnity basis up to and including the date upon which the amended notice of appeal was filed or, in the further alternative, that she should receive her costs on an indemnity basis of three interlocutory applications, being:

(a)    an application for a stay of the enforcement of the registered judgments dismissed by Jagot J: see LFDB v SM (No 4) [2017] FCA 753 at [16] per Griffiths J (Stay Application);

(b)    an additional evidence application being prayer 1(b) of an interlocutory application filed on 17 July 2017, in which leave was sought for evidence to be adduced on appeal (Further Evidence Application); and

(c)    the belated interlocutory application filed on 17 August 2017, which sought a “declaration” that the Court did not have jurisdiction to register the judgments (Want of Jurisdiction Application).

11    Again we do not consider that it would be appropriate that the respondent receive her costs on an indemnity basis up until and including the time when the amended notice of appeal was filed, for the same reasons we have rejected a general order of indemnity costs: see [9] above.

12    We do, however, consider that it is appropriate that the appellants pay the respondent’s costs of the Further Evidence Application and the Want of Jurisdiction Application on an indemnity basis. Both applications involved the appellants unreasonably subjecting the respondent to wholly unnecessary costs, and the Want of Jurisdiction Application in particular was also inimical to the overarching purpose by prolonging the resolution of the appeal. In relation to the Further Evidence Application, this was because the additional evidence the subject of the application was already before the primary judge (see Principal Judgment at [51]). As to the Want of Jurisdiction Application, the argument as to jurisdiction was wholly misconceived both as a matter of form (seeking a declaration, being a form of final relief, by way of interlocutory application filed in the appellate jurisdiction of the Court) and also as a matter of substance (see Principal Judgment at [63]).

13    As to the Stay Application, we do not consider it appropriate that there be an award of indemnity costs, notwithstanding that Jagot J did describe the application as “hopeless”. In any event, an order for costs was already made on 23 June 2017, namely that the interlocutory applications dated 17 May 2017 and 8 June 2017 be dismissed and that the appellants pay the respondent’s costs of those applications as agreed or taxed on the ordinary basis.

14    As noted above, the respondent also seeks a lump sum costs order as contemplated by FCR 40.02(b). The purpose of this rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120 per von Doussa J.

15    As the Full Court (Allsop CJ, Besanko and Middleton JJ) explained in Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146 at [16]-[17]:

16.    On 25 October 2016 the Chief Justice issued the Central Practice Note: National Court Framework and Case Management (CPN-1) (‘Central Practice Note’) and the Costs Practice Note (GPN COSTS) (‘Costs Practice Note’).  The Central Practice Note states that the determination of the quantum of costs of a successful party (in a proceeding) should not be delayed and, to this end, the Court will, where appropriate, facilitate the making of lump sum costs orders.  The Costs Practice Note provides that the Court’s preference, wherever it is practicable and appropriate to do so, is to make a lump sum costs order so as to finalise costs and avoid potentially expensive and lengthy taxation hearings.  It makes clear that the Court should now proceed on the basis that taxation “should be the exception” and confined to matters which are unable to be determined otherwise: Costs Practice Note at [3.3].  The guiding principles are to reduce delay and cost when quantifying costs: Costs Practice Note at [3.1].

17.    The Costs Practice Note provides for the Court to make use of sophisticated costs orders and procedures, and to take such steps as it considers necessary to ensure that it has the requisite level of detail to make a costs determination that is fair, logical and reasonable and to avoid orders that lead to potentially expensive and lengthy taxation hearings: Costs Practice Note at [3.3].

(Bolding in original)

16    Although there are no particular characteristics that a case must possess for it to be suitable for the making of a lump sum costs order, the protracted, trench warfare like nature of the underlying dispute makes this a good example of the sort of case where arguments on a lengthy and expensive taxation should be avoided.

17    Consistently with the approach taken by Perram J in Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd (No 4) [2017] FCA 436, the Court proposes to direct that the process of assessing the lump sum costs be carried out by a Registrar of the Court. As his Honour pointed out, the power in FCR 40.02 is one which may be exercised by a Registrar: see s 35A(1)(h) of the Act; FCR 3.01(1)(b) and Schedule 2, Item 221. This will not become a ‘mini taxation’ as there are important differences between the protracted process involved in the conduct of a taxation of costs under Division 40.2, and the more general assessment under FCR 40.02(b).

18    Given that there is going to be a lump sum quantification process, it is appropriate that Order 2 made by Jagot J on 23 June 2017 be varied to provide that the costs of the interlocutory applications dated 17 May 2017 and 8 June 2017 form part of the lump sum order which (with the exception of the two interlocutory applications identified at [12] above) are to be quantified on the ordinary party/party basis.

Associate:

Dated:    12 December 2017

SCHEDULE OF PARTIES