Federal Court of Australia
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 2)  FCAFC 120
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Permanent Stay)  FCA 802
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Form of Orders)  FCA 1772
NSD 1974 of 2019
KATZMANN, BEACH AND MARKOVIC JJ
Date of judgment:
COSTS – whether in relation to the appeal there is any reason to apportion costs taking account of the parties’ success or failure on certain issues – costs of interlocutory application at first instance – orders made
Federal Court of Australia Act 1976 (Cth) s 43
Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61
New South Wales
National Practice Area:
Number of paragraphs:
Date of last submissions:
18 June 2021
Determined on the papers
Mr D Shavin QC and Ms C Cochrane
Solicitor for the Appellants:
Quinn Emanuel Urquhart & Sullivan
Counsel for the Respondent:
Mr M Darke SC and Mr D Larish
Solicitor for the Respondent:
King & Wood Mallesons
FEDERAL PUBLIC UNITARY ENTERPRISE EXTERNAL ECONOMIC UNION SOJUZPLODOIMPORT (FGUP VO)
DATE OF ORDER:
THE COURT ORDERS THAT:
1. The proceeding be remitted to the primary judge for the determination of the respondent’s interlocutory application dated 7 December 2018 in accordance with the Court’s reasons of 21 May 2021.
2. The appellants’ interlocutory application dated 27 April 2020 be dismissed with the appellants to pay the respondent’s costs of that application.
3. The respondent pay the appellants’ costs of and incidental to the appeal and on the notice of contention, save and except for the costs in order 2.
4. In relation to the costs of the proceeding before the primary judge in respect of the respondent’s interlocutory application referred to in order 1, the issue of such costs is to be remitted to the primary judge for his consideration.
1 On 21 May 2021, the Full Court published reasons for judgment and made certain orders in this appeal (Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V.  FCAFC 77).
2 At that time the Court made orders that the appeal be allowed and that orders 1 and 3 of the orders made by the primary judge on 31 October 2019 be set aside. The Court also made orders for the parties to file and serve minutes of proposed orders and submissions on the question of any consequential orders and on costs. The parties have now filed such minutes and submissions.
3 Essentially there are various matters to address, including:
(a) first, the form of the remittal to the primary judge;
(b) second, the costs of the appeal; and
(c) third, costs questions concerning the proceedings before the primary judge.
4 These reasons should be read together with the Court’s reasons for judgment on 21 May 2021. We have adopted here the abbreviations used in those reasons.
The form of the remittal
5 FKP seek the following orders:
1. FKP have leave to apply for judgment on the Third Further Amended Cross-Claim (3FACC) on the grounds that Spirits is precluded from relying on its pleaded Defences by issue estoppels or res judicata arising from the Dutch Decisions, subject to the reservation that Spirits may seek to demonstrate at the final hearing of that application that:
a. it was entitled to argue one or more of the Discretionary Defences; and
b. in relation to any Discretionary Defence still open to Sprits, that:
i. Spirits suffered prejudice by reason of any discovery not provided by FKP; and
ii. FKP should not be entitled to succeed on its application.
2. The following matters be remitted to the primary judge:
a. the application in order 1, and its further management;
b. the framing of a modified form of permanent stay order in accordance with the Full Court’s reasons for judgment  FCAFC 77, including to allow for the application in order 1.
6 FKP say that the proceeding on their cross-claim is no longer stayed. By our order 2 made on 21 May 2021, we set aside the primary judge’s order 1 made on 31 October 2019 that any further proceeding on the cross-claim be permanently stayed. The primary judge had ordered a temporary stay of the cross-claim by order 1 made on 20 November 2017, however that order was expressed in terms of being “until further order”, with the result that it was superseded by the 31 October 2019 order, which we have now set aside.
7 FKP submit that their proposed order 1 is necessary to give effect to our reasons where we made various rulings as to the nature of the application FKP should be permitted to bring before the primary judge and the nature of the defences Spirits should be permitted to raise.
8 We held that the primary judge ought to have permitted the cross-claim to be litigated to the extent of permitting a consideration of the issues estoppel allegedly raised by the Dutch decisions and their operative effect and to allow a consideration of the viability of Spirits’ discretionary defences.
9 We also held that the primary judge ought to have considered permitting the consequences referred to in appeal grounds 7(a) and 7(b)(i) and (ii).
10 Further, we held that, to the extent that the primary judge intended to apply the principle in Arnold v National Westminster Bank plc  2 AC 93, there is no such principle under Australian law.
11 FKP submit that, given these rulings, there is no residual discretionary matter on these issues to be determined by the primary judge for effect to be given to our rulings.
12 Accordingly, FKP submit that we should remit the proceeding to the primary judge to give effect to our rulings by way of their proposed order 1. Further, FKP contend that their proposed order 2 makes clear which of those matters should be remitted to the primary judge, being the application in proposed order 1 and the framing of a modified form of permanent stay order of the type said to have been envisaged by us.
13 By contrast, Spirits seeks an order that the proceeding be remitted to the primary judge for the determination of its interlocutory application of 7 December 2018 in accordance with our reasons.
14 Spirits says that such an order will give effect to our reasons.
15 We indicated that the primary judge should reconsider the matter in light of our reasons. Accordingly, Spirits says that its form of remittal will provide the necessary flexibility for his Honour to properly consider how best to deal with the issues estoppel and the discretionary defences in light of the material which would be before him on a rehearing. It will also enable him to re-exercise the discretion, which we held had miscarried. Further, his Honour will be able to engage in a “reconsideration of a modified form of permanent stay order in accordance with our reasons” ().
16 Spirits says that FKP’s approach of seeking to circumscribe the primary judge’s re-exercise of the discretion is not appropriate. Spirits says that the advantage of its proposed form of remitter allows the primary judge to make appropriate case management orders in respect of procedural steps leading up to a hearing involving the primary judge’s re-exercise of his discretion.
17 Further and in any event, Spirits says that even if we consider that the remitter ought not simply provide for the primary judge to re-exercise the discretion by reference to our reasons, the remitter should at least leave within the primary judge’s control the procedure to be adopted in order to address FKP’s asserted issues estoppel and Spirits’ discretionary defences.
18 Spirits says that such questions involve matters of case management and discretionary aspects of practice and procedure. It says that such matters are most appropriately dealt with by the docket judge, who is responsible for the further conduct of the proceeding.
19 Further, Spirits says that FKP’s proposed orders 1 and 2 are contrary to parts of our reasons. It is said that those proposed orders do not involve the primary judge re-exercising any discretion. Further, it is said that we did not determine that the primary judge ought to have permitted the precise consequences referred in appeal grounds 7(a) and 7(b)(i) and (ii).
20 We largely agree with Spirits’ proposal concerning the form of the remitter.
21 It is more appropriate that the docket judge be given sufficient flexibility to deal with the precise form of permanent stay order taking into account our reasons.
22 There will need to be argument concerning the evidence to be adduced and the procedure to be followed on the re-hearing. His Honour is best placed to deal with such questions.
23 Further, as Spirits correctly points out, we were not definitive concerning the acceptance of the option reflected in appeal grounds 7(a) and 7(b)(i) and (ii). That will be a matter for his Honour to consider on a re-hearing on the evidence then led before him.
24 In all the circumstances, the more general form of order for remittal is appropriate.
Costs of the appeal
25 The parties are at odds on the question of the costs of the appeal. FKP say that they should have all of their costs. Spirits says that there should be an apportionment of the costs.
26 Spirits accepts that it should pay the appeal costs concerning grounds 4 to 7 of the appeal and also the notice of contention. But it says that it should have its costs of grounds 1 to 3.
27 Spirits says that its orders are appropriate for various reasons.
28 First, it is said that Spirits had a substantial level of success on appeal. By grounds 1 to 3, FKP sought to impugn the primary judge’s conclusions that there had been an abuse of process and that a permanent stay of at least part of the proceeding was appropriate. FKP’s position was that no part of the proceeding should be permanently stayed. It is said that FKP failed in these respects.
29 Second, the issue of whether Spirits was entitled to a permanent stay of any aspect of the proceeding was a contested and important issue, and accounted for a substantial proportion of the written and oral submissions on the appeal.
30 Third, it is said that the Court should take into account the nature of the grounds on which Spirits succeeded and the conduct of the Russian Federation in that respect. In particular, it is said that FKP failed to overturn the primary judge’s conclusion that the Federation had engaged in an ongoing abuse of process.
31 Indeed, it is said that we ought to give those matters substantial weight, given that it is well accepted that:
(a) the failure to give proper discovery may be relevant to any costs award;
(b) the fact that a proceeding constitutes an abuse of process may be relevant to a costs award; and
(c) where a successful party engages in improper conduct during litigation, that may justify a departure from the usual order for costs.
32 In the circumstances, Spirits says that it would be incongruous for FKP to recover any part of its costs relating to its unsuccessful grounds of appeal.
33 Fourth, it is said that although ground 3 revealed, as we described it, “some inaccuracies and infelicities in [the permanent stay reasons] concerning the searches for documents of some of the Federation entities”, this did not materially alter or affect his Honour’s ultimate conclusions.
34 It is said that our findings as to ground 3 do not provide any basis to deprive Spirits of the costs of that ground or indeed grounds 1 and 2.
35 In the alternative, Spirits says that where both parties have partially succeeded in the appeal, there should be no order as to the costs of the appeal. In the further alternative, Spirits says that we should order Spirits to pay a percentage, say around 20%, of FKP’s costs of the appeal, excluding the costs of their interlocutory application to adduce new evidence which we will discuss in a moment.
36 It is true that we did not disturb the primary judge’s findings that the Federation had engaged in conduct that was unfair, intolerable and an abuse of process. Nevertheless, we do not accept Spirits’ submissions. FKP should have their costs of the appeal, including the notice of contention, without any discount or apportionment on an issues basis, but excluding the costs referable to their interlocutory application to adduce new evidence.
37 The relevant principles are not in doubt.
38 We are exercising our broad discretionary power under s 43 of the Federal Court of Australia Act 1976 (Cth). And in that context, and as was pointed out in Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at  and  by Bennett, Besanko and Beach JJ:
There are two general approaches to the award of costs that have general application and have been the subject of numerous decisions:
(1) The successful party is generally entitled to its costs. That is, costs usually follow the event.
(2) It is also the case that a successful party may be awarded less than its costs, or there may be an order apportioning costs, on the basis of success on the issues.
This has been recently reiterated by the High Court (per French CJ, Kiefel, Nettle and Gordon JJ) in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 90 ALJR 270 at , where their Honours observed that if the event of success cannot be seen as contestable, having regard to how separate issues have been determined, then:
There are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like.
39 But the Court then noted (at ):
On the other hand, Courts have been increasingly concerned, generally, to use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. This has led to decisions whereby the successful party does not recover all of its costs where it has been unsuccessful on a discrete issue or in what is decided to be an unmeritorious objection. While it is acknowledged that, ordinarily, costs follow the event, the wide discretion in awarding costs has led to circumstances where a successful party who has failed on certain issues may be ordered to pay the other party’s costs of them (as discussed in Hughes v Western Australian Cricket Association (Inc)  ATPR 40-748 per Toohey J), although warnings have been stated that care should be taken in such a course and consideration be given to whether the issues on which the successful party failed are clearly dominant or separable (Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330-331 per Mahoney JA) and to whether the issues involved different factual enquiries in the one proceeding or multiple causes of action, even if based on a common substratum of fact.
40 The Court then said (at  and ):
Without amounting to an absolute rule, the principle remains that, subject to certain limited exceptions generally linked to the disentitling conduct of the successful party, a successful party in litigation is entitled to an award of costs (Oshlack per McHugh J at -, in dissent but not in this aspect of the principle and with whom Brennan CJ agreed). That is not to punish the unsuccessful party but to compensate the successful party. There is no absolute rule that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party, nor is there a rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party (Oshlack at  per Gaudron and Gummow JJ). However, the Courts have been slow to order a successful party to pay the costs where it has been unsuccessful on some issues. In Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1993) 47 FCR 81, Keely J was of the view (at 84) that, without attempting to fetter the discretion, this power ought to be exercised only where the Court, on a consideration of all of the circumstances, has concluded that the raising of an issue by the applicant on which it has failed was so unreasonable that it is fair and just to make the order.
However, there is no limitation on the power granted in s 43 that is not found in the words used (Probiotec at ). The discretion is unconfined, except insofar as the subject matter, scope and purpose of the legislation indicate otherwise, yet it falls to be exercised judicially (Probiotec at , ).
41 FKP substantially succeeded in their appeal. They succeeded in overturning the permanent stay order made by the primary judge. Further, Spirits was unsuccessful on its notice of contention.
42 Further, we agree with FKP that in substance they succeeded in relation to aspects of appeal ground 3 and all aspects of appeal grounds 4 to 7.
43 Moreover, although FKP were unsuccessful on appeal grounds 1 and 2, the relevant factual matters challenged by grounds 1 and 2 in part formed the foundation for FKP’s success in relation to grounds 4 to 7 as to the appropriate scope of any permanent stay order. In particular, we noted that:
(a) in some respects, the primary judge overstated the deficiencies in the discovery that had been given;
(b) it was not unreasonable to have FKP carry out the necessary steps in relation to discovery by the Federation , such that everything done by FKP could also be seen as having been done for the Federation;
(c) the primary judge’s description of the discovery process as being not close to finalised did not give an accurate impression; and
(d) it was apparent that FKP had made and were making reasonable efforts, albeit that their searches were not complete.
44 Further, we found that the primary judge erred in permanently staying the whole of the cross-claim based in part upon our earlier findings in relation to appeal grounds 1 and 2.
45 For these reasons, and subject to a carve-out to which we will come in a moment, we do not consider that any discount or apportionment is warranted. FKP has had substantial success. Moreover, there were no truly discrete issues. The facts and evidence underpinning appeal grounds 1 and 2 also underpinned the other grounds. In essence we had to address a common substratum of facts.
46 FKP should have all its costs subject to one carve-out to which we now turn.
47 Spirits seeks its costs of FKP’s interlocutory application to adduce fresh evidence on appeal.
48 We refused to grant leave in respect of the contested aspects of FKP’s interlocutory application concerning the tender of the second and third Brodsky orders. We agree with Spirits that that application was discrete from the rest of the appeal. In the circumstances, those costs should follow the event, and should be carved out from the costs order in favour of FKP.
The costs below
49 By order 2 of our 21 May 2021 orders, we set aside the primary judge’s order 3 made on 31 October 2019 that FKP pay Spirits’ costs of prayer 1 of its interlocutory application of 7 December 2018.
50 FKP say that Spirits should pay FKP’s costs below in respect of the matters addressed in the permanent stay reasons and in the form of orders reasons. They say that such an order is appropriate in circumstances where:
(a) FKP have succeeded in overturning the orders of the primary judge that gave effect to both sets of reasons;
(b) FKP’s appeal ground 4 reflects the position advanced by FKP before the primary judge that was addressed in the form of orders reasons; and
(c) we have ruled in favour of FKP’s appeal ground 4, excluding the reservation in relation to the Arnold principle.
51 In contrast, Spirits seeks an order that in relation to the costs of the proceeding before the primary judge in respect of its interlocutory application of 7 December 2018 FKP should pay Spirits’ costs up to 30 May 2019, but the issue of the costs from 31 May 2019 onwards should be remitted to the primary judge.
52 Spirits says that FKP should pay its costs up to the permanent stay reasons because:
(a) FKP did not succeed in overturning the permanent stay order over at least part of the proceeding;
(b) the basis for the permanent stay was the abuse of process arising from the Federation’s continued failure to provide proper discovery; and
(c) FKP did not raise the point on which they succeeded on appeal, namely, the potential for a ‘carve-out’ of the permanent stay order, before delivery of the permanent stay reasons.
53 In elaboration of the last point, Spirits says that during the permanent stay hearing on 14 March 2019, FKP did not seek an order that any part of the proceedings could remain on foot if some form of permanent stay was justified.
54 Spirits further says that it is appropriate to remit the question of the costs of the remainder of Spirits’ interlocutory application because the primary judge is yet to rule on the scope of orders at first instance and there was a mixed outcome on appeal.
55 In our view, all questions of costs at first instance should be left to the primary judge to determine. He is best placed to deal with the arguments raised, and perhaps at a time after he has ruled on the matters remitted to him.
56 We will make orders to accord with these reasons.