FEDERAL COURT OF AUSTRALIA

Graham Barclay Oysters Pty Ltd v Ryan (No 2)[2000] FCA 1220

PRACTICE AND PROCEDURE – Costs – indemnity costs – whether costs ordered in favour of successful representative party in group proceeding under Part IVA of Federal Court of Australia Act 1976 (Cth) should be on indemnity basis – considerations of inadequacy of party and party costs to cover costs incurred by representative party – suggested inadequacy of an order under s 33ZJ of Act as a remedy – saving to respondents to the application in having all claims against them dealt with in one proceeding – no suggestion of unreasonable conduct by those respondents in their conduct of the litigation.

Federal Court of Australia Act 1976 (Cth) s 33ZJ

Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 followed

Qantas Airways Ltd v Cameron (1996) 148 ALR 378 distinguished

GRAHAM BARCLAY OYSTERS PTY LIMITED & ORS v GRANT RYAN & ORS

N 219 OF 1999

N 234 OF 1999

N 298 OF 1999

LEE, LINDGREN, KIEFEL JJ

31 AUGUST 2000

SYDNEY

ON APPEAL FROM A SINGLE JUDGE OF THE

FEDERAL COURT OF AUSTRALIA

ON APPEAL FROM A SINGLE JUDGE OF THE

FEDERAL COURT OF AUSTRALIA

ON APPEAL FROM A SINGLE JUDGE OF THE

FEDERAL COURT OF AUSTRALIA

IN EACH APPEAL THE COURT ORDERS THAT:

1.         The orders for costs made on 9 August 2000 take effect forthwith.

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

ON APPEAL FROM A SINGLE JUDGE OF THE

FEDERAL COURT OF AUSTRALIA

ON APPEAL FROM A SINGLE JUDGE OF THE

FEDERAL COURT OF AUSTRALIA

ON APPEAL FROM A SINGLE JUDGE OF THE

FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT (No 2)

1                     On 9 August 2000 we made final orders disposing of these three appeals.  The orders included orders for costs of the appeal and at first instance.  We directed that the orders for costs were not to take effect if any party lodged submissions on costs within 14 days, that is, by 23 August.  Mr Ryan filed such a submission on 23 August seeking an order that his costs, which we ordered the State and the Barclay companies to pay, both in relation to his personal and representative claims in the proceeding at first instance and on the appeals, be “on an indemnity or solicitor and client basis”.

2                     In his submission, Mr Ryan emphasises the breadth of the Court’s discretion under s 43 of the Federal Court of Australia Act 1976 (Cth) (“the Act”).  We accept that it is broad but are not persuaded by Mr Ryan’s submission to think that costs should be other than on the usual party and party basis.

3                     We will summarise the submissions made by Mr Ryan and our responses to them.

1.         There is likely to be a substantial discrepancy between the amount of Mr Ryan’s costs and the amount that he will be entitled to recover on a party and party basis. 

4                     We understand that this is true in relation to most costs orders.  Under the régime of costs that prevails, the discrepancy is not itself regarded as a sufficient reason why indemnity costs should be ordered.  The contrary view would be inconsistent with authority which establishes that costs are awarded on a party and party basis unless special circumstances exist in a particular case calling for a departure from that practice: cf Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 (FC) and the cases referred to in the judgments in that case.

2.         While Mr Ryan might seek and obtain an order under s 33ZJ of the Act, the effect of such an order would be to reduce significantly the amount of damages available to group members.

5                     The amounts of damages to which the respective 185 group members will be entitled is not known at present.  It may be that most will be entitled to only a modest sum.  It is difficult to know on average the proportion of the awards that would be needed to satisfy an order under s 33ZJ.  It may be that in a representative proceeding in which the respective amounts of damages payable to group members are large, the effect of an order under s 33ZJ would be less significant than one would be in the present case.

6                     It is generally accepted that an advantage of the representative proceeding for which Part IVA of the Act provides is to enable the bringing of actions which would not be brought individually because of the smallness of the amounts likely to be recovered.  To the extent that this is so, the effect of this submission of Mr Ryan’s is that generally an order under s 33ZJ does not justly compensate for the discrepancy between full costs and party and party costs and that indemnity costs should be awarded to the representative instead.

7                     We do not accept that the special features of representative proceedings identified in Mr Ryan’s submission provide an appropriate basis on which to order indemnity costs.

8                     In substance the present submission is no more than that an order under s 33ZJ should not be regarded as providing a solution to the problem of the inadequacy of a party and party costs order to cover Mr Ryan’s actual costs, referred to in submission (1) above.

3.         There would be no injustice to the State or the Barclay companies in the making of an order for indemnity costs because the costs incurred by them in the representative proceeding are less than they would have been if they had been called upon to defend separate proceedings, and the costs payable by them pursuant to the costs orders made against them here are less than the costs they would have had to pay under costs orders made against them in separate proceedings instituted by the respective group members.  Accordingly, the objective of protecting an unsuccessful litigant from exposure to an unduly burdensome costs order is not infringed.

9                     It is true that there is an advantage to the State and the Barclay companies in being called upon to defend only one action rather than numerous actions brought by the group members.  But there is also an advantage to the group members in the Part IVA procedure in that they, similarly, do not have to incur liability for costs in numerous individual proceedings.  We are not persuaded that the advantage to the State and the Barclay companies signifies that an order for indemnity costs is warranted. 

10                  There are advantages and disadvantages in the Part IVA procedure from the perspectives of the various parties involved – the representative party, the group members and the respondents.  It is inappropriate to isolate a particular disadvantage suffered by one party that is part of the total procedure provided by the legislature and seek to overcome it by an indemnity costs order.  To express the present point differently, we do not think it a basis for ordering indemnity costs that the respondents would have been worse off if faced with numerous individual proceedings – proceedings in which the group members would also have been worse off in relation to costs than they have been in the Part IVA proceeding in fact brought.

4.         The liability in damages to the group members carries with it a liability to some of Mr Ryan’s costs: Qantas Airways Ltd v Cameron (1996) 148 ALR 378 (FCA/FC) at 381. 

11                  This submission is in substance a repetition of submission (3) above.  Qantas Airways Ltd v Cameron is distinguishable because the representative party did not succeed, one group member did, and one discretionary factor taken into account in reducing from 100% to 75% the respondent’s costs she was ordered to pay was the fact that the respondent’s liability in damages to the one group member carried with it a liability to pay at least some of the representative party’s costs.  In this case, in the ordinary course no doubt further costs orders will be made against the State and the Barclay companies as the respective group members prove the loss and damage suffered by them.  The circumstances of Qantas Airways Ltd v Cameron were very different from those of the present case.

5.         It will facilitate the use of the Part IVA procedure in the future to award Mr Ryan indemnity costs and discourage the use of it in the future to limit his recovery to party and party costs.

12                  The general nature of this submission emphasises the essential nature of all Mr Ryan’s submissions: they are directed not to special features of the present proceeding other than those it shares with Part IVA proceedings generally.

13                  While the special circumstances in which indemnity costs may be ordered are not to be circumscribed, in all the cases in which they have been ordered of which we are aware, the party ordered to pay them has been guilty of conduct having a relevant connection with the litigation which has been unreasonable or has otherwise attracted criticism.  Mr Ryan makes no relevant criticism of the manner in which the State and Barclay companies have conducted themselves in connection with the present litigation.

14                  While representative proceedings under Part IVA undoubtedly present special features, we would not exercise our discretion by ordering indemnity costs because of those features, and so subvert the well established approach to the awarding of costs that prevails in litigation where there is no criticism to be made of the way in which the litigation has been conducted by the unsuccessful party.

15                  For the above reasons we do not accept Mr Ryan’s submissions and will order that our orders for costs made on 9 August take effect forthwith.

Associate:

Dated:              31 August 2000

N 219 of 1999