FEDERAL COURT OF AUSTRALIA

Hamersley Iron Pty Ltd v National Competition Council [1999] FCA 1078

COSTS – whether Court should make order fixing proportion of successful party’s costs to be paid by losing parties.

Trade Practices Act 1974, s 44B, s 44V, s 44W

Federal Court of Australia Act 1976 (Cth), s 43

Federal Court Rules, Order 62 rule 4(2)(a)

Hughes v Western Australian Cricket Association (Inc) (1986) ATPR ¶40-748

Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261

O’Keeffe Nominees Pty Ltd v BP Australia Ltd (1995) 128 ALR 718

Steward v North Metropolitan Tramways Company (1886) 16 QBD 556

Golski v Kirk (1987) 14 FCR 143

Inn Leisure Industries Pty Ltd v D F McCloy Pty Ltd (No. 2) (1991) 28 FCR 172

Nissen v Grunden (1912) 14 CLR 297

Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211

HAMERSLEY IRON PTY LTD (ACN 004 558 276) v THE NATIONAL COMPETITION COUNCIL & ORS

VG 581 of 1998

KENNY J

MELBOURNE

3 AUGUST 1999

THE COURT ORDERS THAT:

1.                  The second, third, fourth, fifth, sixth and seventh respondents pay 73% of the applicant’s costs, including all reserved costs. 

2.                  The second, third, fourth, fifth, sixth and seventh respondents pay the costs of and incidental to the first respondent’s participation in the proceeding.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

EX TEMPORE REASONS FOR JUDGMENT

1                     The parties have made written submissions as to the appropriate orders with respect to costs.  They have today augmented those submissions.

2                     The hearing of the proceeding took place over six days, 19-22, 26 and 28 April 1999.  There were two principal questions raised for determination in the proceeding.  They were (1) whether the service which was the subject of a declaration recommendation application by the second to sixth respondents (collectively, “Robe”) to the National Competition Council (“the Council”) was a “service” within the meaning of s 44B of the Trade Practices Act 1974 (“the Act”); and (2) whether an access determination under s 44V of the Act which required the applicant to provide access to the service to Robe would deprive the applicant of a “protected contractual right” within the meaning of s 44W of the Act. 

3                     On 28 June I delivered judgment on those issues.  In that judgment, I accepted the substance of the applicant’s case that the Council did not have power to entertain the application for a declaration recommendation, upon the ground that the rail track service, which was the subject of Robe’s application to the Council, was not a service within the meaning of s 44B of the Act.  I declined to express a view as to the merits of the applicant’s second ground which was that an access determination in Robe’s favour would necessarily deprive the applicant of a “protected contractual right”.  I adopted that course not only because, having regard to my conclusion on the service issue, it was unnecessary to decide the question of protected contractual rights, but also because the issue of “protected contractual right” was, in my view, hypothetical, theoretical or academic, and unsuitable for declaratory relief in any event. 

4                     Of course, I accept that, although an award of costs is a matter of discretion, the costs of litigation in this Court ordinarily follow the event.  Toohey J set out the relevant principles in Hughes v Western Australian Cricket Association (Inc) (1986) ATPR ¶40-748 at 48,136.  They are:

1.      Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.  Ritter v Godfrey [1920] 2 KB 47.

2.      Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.  Forster v Farquhar [1893] 1 QB 564.

3.      A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them.  In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.  Cretazzo v Lombardi (1975) 13 SASR 4 at p. 12.

5                     After referring to those principles, a Full Court of this Court said, in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271-2:

The propositions enunciated in [Hughes] are subject to the further consideration that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case:  Cretazzo  v Lombardi (1975) 13 SASR 4 at 12.  In Trade Practices Commission v Nicholas Enterprises Pty Ltd (No. 3) (1979) 42 FLR 213; 28 ALR 201, Fisher J regarded the discretion to apportion costs as one to be exercised only in the most exceptional circumstances.  Nevertheless he accepted that where a considerable part of the trial is taken up in determining issues upon which a party fails, it is a proper exercise of the discretion to reduce the costs allowed to that party.  Generally speaking, and notwithstanding the considerations referred to by Toohey J and the other authorities mentioned above, the demands of the community for greater economy and efficiency in the conduct of litigation may properly be reflected in a qualification of the presumption that a successful party is entitled to all its costs.

Subject to one matter, the applicant is, plainly enough, entitled to the costs of and incidental to the proceeding to the extent that those costs relate to the issue of “service”. 

6                     Robe and the seventh respondent successfully submitted that Mr Stern’s affidavit was inadmissible to the extent that it dealt with the ultimate legal issue in the case; and that, in any event, to the extent that the affidavit was admissible, it suffered from other defects.  At the hearing today, they submitted that although only a relatively short time was devoted at trial to the matter, I should bear in mind that the costs of and incidental to the preparation of Mr Stern’s affidavit were likely to be significant.  They submitted that those costs should either be excluded from any costs award in the applicant’s favour, or should be borne in mind in making any apportionment of costs.  I accept the latter submission. 

7                     Robe and the seventh respondent also submitted that if a costs order were to be made in the applicant’s favour, then any such order should be substantially discounted to reflect the applicant’s lack of success on the “protected contractual right” issue.  Robe prepared two schedules, “Approximate time dedicated to arguments” and “Pages in the transcript dedicated to arguments”.  The information in those schedules showed, broadly speaking, that:

As proportions of the total time spent at the trial, the protected contractual right issue occupied approximately one half of the trial, the definition of “service” occupied approximately 40% and the question of the admissibility and weight of Mr Stern’s evidence approximately 10%.  As proportions of total pages of transcript dedicated to these issues, the protected contractual right and the definition of “service” issues increase and decrease respectively by approximately 8%, whilst the proportion devoted to the admissibility of Mr Stern’s evidence remains the same (10%).  (Robe submissions, par 2)

8                     I accept that the “protected contractual right” issue occupied a significant portion of the hearing-time and, presumably, of the parties’ preparation-time.   For the reasons given, I formed the view that it was incapable of forming the basis for a grant of declaratory relief.  The development of the issue did not involve merely the imposition of an alternative legal analysis upon facts already before the Court.  It required consideration of discrete legal issues and additional (although unchallenged) evidence.  I accept, however, that an otherwise successful applicant is not to be regarded as culpable solely because it maintains a ground that ultimately fails; and I reject the seventh respondent’s submission that the ground was so untenable that it was “foredoomed to fail”.  Accordingly, although no order for costs should be made against the applicant in the respondents’ favour, there should, I think, be some discount in the costs to be met by the respondents, to take account of the time spent by them in meeting the protected contractual right issue prior to and at the trial.

9                     I reject the submission made on behalf of the second to sixth respondents (whom I have already collectively called Robe) that they should be treated as a single respondent in the costs orders that I propose to make.  No doubt the fact that those respondents were represented by the same senior and junior counsel and acted as one throughout the trial saved costs in the litigation; but that does not, in my opinion, warrant treating them as one for the purposes of a costs order. 

10                  The seventh respondent, it will be recalled, was joined as a respondent to the proceeding of its own motion, although without opposition.  In almost all respects, the seventh respondent, though separately represented, adopted the same stance as Robe, including virtually all the submissions made by Robe at trial.  The seventh respondent and Robe differed in one significant respect only.  It was solely the seventh respondent’s submission that the protected contractual right issue was hypothetical and, for that reason, would not support the grant of declaratory relief that the applicant sought.  Although it was not strictly necessary to do so, I have indicated that I regarded that submission as being correct.  But I note too that the submission was made in addition to and not instead of submissions that were either the same as, or very similar to, those put by Robe.  Robe relied on related matters to oppose the applicant directly.  In the circumstances of the case, I do not consider an order for costs in the proceeding should differentiate between the burden to be borne by Robe (i.e., the second to sixth respondents) and the burden to be borne by the seventh respondent.  Indeed, neither the seventh respondent nor Robe submitted that any costs order should differentiate between them.

11                  The first respondent’s role in the litigation has been very limited.  It was necessarily named as a respondent by the applicant, which sought declaratory and injunctive relief against it.  In its application initiating the proceeding, the applicant sought an order that the first respondent provide no less than five days’ written notice of its intention to make a declaration recommendation to the designated Minister.  The first respondent subsequently gave an undertaking to that effect.  In consequence of the Court’s ultimate decision, it has since given a further undertaking that made it unnecessary to grant any of the injunctive relief originally sought by the applicant.  The first respondent made no submission on the substantive questions before the Court, other than, in brief compass, on the question of whether an injunction should be granted against it.  The course taken by the first respondent was, it seems to me, akin (although not identical) to that of a submitting party and, in the circumstances, I do not propose to order it to pay the costs of any party.  I do, however, propose to order that the costs of the first respondent occasioned by its participation in the proceeding be paid by the unsuccessful respondents. 

12                  Finally, there is the question of reserved costs.  Costs reserved in this proceeding comprised: 

(a)      the costs of directions hearing on 4 December 1998, 22 January 1999 (other than the costs of the Motion on Notice) and 16 March 1999;

(b)      the costs occasioned by the amendment of the defences of Robe and the seventh respondent; and

(c)      the costs occasioned by Robe’s and the seventh respondent’s request for discovery and inspection of documents relating to the Marandoo rail facilities and associated adjournment of the trial of the proceeding.

13                  Order 62 rule 15 of the Federal Court Rules provides that unless the Court otherwise orders, the reserved costs shall follow the event, i.e., the outcome of the principal litigation:  see O’Keeffe Nominees Pty Ltd v BP Australia Ltd (1995) 128 ALR 718 at 724-5.  There is no occasion in this case to depart from that rule.  Nothing further need be said, I think, of item (a). 

14                  It is plain enough too that Robe and the seventh respondent should bear the applicant’s costs of item (b) and item (c).  Those respondents made application to amend their defences orally in the course of final addresses and after evidence had closed.  There was, as the applicant submitted today, nothing concealed in its submissions, which were filed well before trial.  The amendment concerned the protected contractual right issue, in the context of the Marandoo extension.  Those amendments led to amendments of the applicant’s replies, orders for discovery and inspection against the applicant as well as an adjournment.  The costs of and occasioned by a grant of leave to make an amendment of that kind are ordinarily payable by the party seeking leave (Robe and the seventh respondent):  Steward v North Metropolitan Tramways Company (1886) 16 QBD 556 at 558; and Golski v Kirk (1987) 14 FCR 143 at 157.  I see no reason to depart from the ordinary rule in this case.  Again, in the course of final addresses, on 28 April, Senior Counsel for Robe raised further issues concerning the Hamersley Range State Agreement and sought production of another document.  It was in that context that, on 29 April, the applicant indicated that it abandoned that part of its case which concerned the protected contractual right issue as it applied to the Marandoo extension.  (These matters are more fully addressed in pars 13 to 18 of the applicant’s submissions and par 4 of Robe’s submissions.) 

15                  In this case, the parties concede that the Court may make a single order fixing the proportion of the applicant’s costs that are payable by the relevant respondents:  see Federal Court of Australia Act 1976 (Cth), s 43 and Federal Court Rules, Order 62 rule 4(2)(a); Inn Leisure Industries Pty Ltd v D F McCloy Pty Ltd (No. 2) (1991) 28 FCR 172 at 174; Hughes v Western Australian Cricket Association (Inc) (1986) ATPR ¶40-748 at 48,136; Nissen v Grunden (1912) 14 CLR 297 at 303; and Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211 at 222.  It is, I consider, preferable in this case to adopt such a course.  As I have already indicated, I bear in mind that the applicant has, in a practical sense, succeeded in what it set out to do, although not on all issues.  It is entitled to all reserved costs.  Some discount in the award of costs should, however, be made to take account of the time and effort wasted by the relevant respondents in meeting the protected contractual right issue, and of the position with respect to Mr Stern’s affidavit.  The applicant submitted that it should receive 75% of its costs.  In written submissions, the seventh respondent submitted that it should not be ordered to meet more than 50% of the applicant’s costs and that those costs ought not include the costs of and incidental to Mr Stern’s affidavit.  At the hearing today, counsel for the seventh respondent submitted that, if the Court were to adopt a figure of 75%, then, again, the costs of Mr Stern’s affidavit ought to be excluded.  In written submissions, Robe submitted that there should be a substantial discount on any costs award in the applicant’s favour and, at the hearing today, seemed to accept a figure in the range of 70% to 75%.  After due consideration, I accept that a figure between 70% and 75% would, in the circumstances, reflect the justice of the case.  In my view, taking everything into account, it would be fair, in all the circumstances, to award the applicant 73% of its costs, including reserved costs.

16                  Accordingly, the orders as to costs will be as follows.

1.      The second, third, fourth, fifth, sixth and seventh respondents pay 73% of the applicant’s costs, including all reserved costs. 

2.      The second, third, fourth, fifth, sixth and seventh respondents pay the costs of and incidental to the first respondent’s participation in the proceeding.

Associate:

Dated:              3 August 1999