FEDERAL COURT OF AUSTRALIA

Gersten v Minister for Immigration & Multicultural Affairs [2001] FCA 260

PRACTICE AND PROCEDURE – costs – whether primary Judge’s discretion miscarried in awarding indemnity costs.

Administrative Appeals Tribunal Act 1975 (Cth), ss 44, 46.

Freedom of Information Act 1982 (Cth), s 46(6)

Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225, applied.

White Industries (Qld) Pty Ltd v Flower & Hart (A Firm) (1998) 156 ALR 169, applied.

JOSEPH MORRIS GERSTEN AND ALEX LEE v MINISTER FOR IMMIGRATION AND MULTICULTURAL AFFAIRS

N 996 OF 2000

JOSEPH MORRIS GERSTEN AND ALEX LEE v AUSTRALIAN FEDERAL POLICE

N 168 OF 2001

LEE, CARR AND SACKVILLE JJ

19 MARCH 2001

SYDNEY

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.         The appeal be dismissed.

2.         The appellants pay the respondent’s costs.

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

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.         The appeal be dismissed.

2.         The appellants pay the respondent’s costs.

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

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

THE COURT:

1                     These are appeals, made with leave, from judgments of a judge of this Court, Whitlam J, in which the appellants were ordered to pay costs “on an indemnity basis” on motions brought by the respective respondents (“the Minister” and “the AFP”) in separate proceedings commenced against them by the first appellant. The appeals were heard together.

2                     The matters in which the motions were brought were “appeals” instituted by the first appellant from decisions of the Administrative Appeals Tribunal (“the Tribunal”) pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”). The first appellant is a legal practitioner. He instructed the second appellant to act on his behalf in the foregoing matters. Upon commencement of the “appeals” the Tribunal was required by s 46 of the AAT Act to forward to the Court all relevant documents. These included certain documents (“the exempt documents”)  that had been produced to the Tribunal by the Minister and the AFP subject to claims that the documents were exempt from production to the first appellant under the Freedom of Information Act 1982 (Cth) (“the FOI Act”). The Tribunal upheld those claims and it was from those decisions that the “appeals” were made.

3                     Section 64(6) of the FOI Act provides as follows:

“Subsection (1) or (2) does not operate so as to prevent the Tribunal from causing a document produced in accordance with that subsection to be sent to the Federal Court of Australia in accordance with section 46 of the Administrative Appeals Tribunal Act 1975, but, where such a document is so sent to the Court, the Court shall do all things necessary to ensure that the contents of the document are not disclosed (otherwise than in accordance with this Act) to any person other than a member of the Court as constituted for the purpose of the proceeding before the Court or a member of the staff of the Court in the course of the performance of his or her duties as a member of that staff.”

4                     In April 2000, in the course of preparation of application books for the hearing of the “appeals”, the contents of the exempt documents were disclosed to the second appellant as solicitor for the first appellant. The disclosure occurred when an agent of the second appellant was given access to the Court file for the purpose of copying documents to be included in the application books. The second appellant provided copies of the exempt documents to the first appellant, and to counsel briefed on behalf of the first appellant. The first appellant forwarded copies of the exempt documents to a legal practitioner in the United States of America who provided them to a committee of the United States House of Representatives.

5                     The exempt documents having been perused, the first appellant gave consideration to discontinuing the “appeals” and sought the advice of counsel thereon. Counsel was asked whether the “appeals” could be discontinued without disclosing that the first appellant had possession of copies of the exempt documents and without returning the documents. On 18 April 2000, counsel advised in writing that the first appellant could discontinue the proceedings without disclosing that he had possession of the exempt documents but did not, however, address directly whether the first appellant was obliged to return the documents.  There was nothing in counsel’s advice to indicate that he was aware that the exempt documents had been inadvertently disclosed by the Federal Court.

6                     On 25 May 2000, the second appellant disclosed that he had possession of the exempt documents in an affidavit filed in another proceeding in which the first appellant was the applicant and the Minister was the respondent. The affidavit exhibited copies of the exempt documents. That proceeding was listed for hearing on 31 May 2000 at 2.15 pm.

7                     As at 30 May 2000, the “appeals” had not been discontinued. Late on that day solicitors for the Minister and the AFP forwarded a letter to the second appellant by facsimile transmission requesting that the exempt documents be returned immediately. Shortly thereafter a solicitor for the Minister spoke to the second appellant on the telephone and advised the second appellant that an urgent application to the Court would be made if the documents were not returned.

8                     On 31 May 2000, at about 10.22 am, solicitors for the Minister, by a facsimile-transmitted letter, advised the second appellant that instructions had been received to make an application to the Court that morning for an order that the exempt documents be returned. The letter did not attach a copy of the proposed motion.

9                     By letter dated 31 May 2000, the second appellant replied to the facsimile by suggesting that any request for return of the documents be dealt with in the directions hearing in the “appeals” listed for resumption in July 2000.

10                  At 11.12 am on 31 May 2000, solicitors for the Minister, by facsimile-transmitted letter, advised that the “matter” was listed before a Duty Judge at 11.30 am at which time orders would be sought for the return of the documents. A draft, or incomplete notice of motion, was forwarded by facsimile which indicated that at 11.00 am orders for return of the documents would be sought including an order that the first and second appellants pay the costs of the Minister and of the AFP “on an indemnity basis”.

11                  It was not in issue that the second appellant did not see the facsimile letter or the copy of notice of motion until at least 11.45 am and it was accepted that the motions were dealt with by his Honour on 31 May 2000 as ex parte applications. At no time was the first appellant given notice of the motions filed by the Minister and the AFP. On the morning of 31 May 2000, his Honour made orders that all copies of the exempt documents, including copies thereof provided to counsel, and “all notes memoranda, letters and other communications (whether in electronic or written form) containing reference to the contents of the [exempt] documents” be delivered to the District Registar of the Court forthwith and that otherwise the motions be stood over until 2 June 2000.

12                  When the motions came before his Honour on 2 June 2000, the first and second appellants were separately represented by counsel, albeit on limited instructions. Counsel informed the Court that orders would be sought that the orders made ex parte be stayed “until early next week” and requested that the motions be adjourned until 2.00 pm that day when counsel duly instructed by the first appellant would be available. An adjournment was refused by his Honour and counsel who had appeared for the second appellant to make the application for adjournment was given leave to withdraw. Thereafter the second appellant was not separately represented. Counsel for the first appellant proceeded with an application for a stay of the orders. The second appellant was called to give evidence and was cross-examined. Upon resumption of the hearing of the matter after the luncheon adjournment, counsel for the first appellant advised that the appellants would deliver the exempt documents to the Court that day and comply with the orders as far as practicable, and further advised that the appellants had taken steps to have counsel return all relevant documents to enable the appellants to comply with the remainder of the orders as soon as possible.

13                  Thereafter, the question whether the first and second appellants were to pay the costs of the motions on an indemnity basis was stood over for hearing on 14 June 2000.

14                  When the motions were called on for further hearing on 14 June 2000, counsel appeared for the first appellant but the second appellant was not represented and took no part in the proceeding. Further evidence was adduced and submissions were made to his Honour.

15                  In a reserved decision his Honour determined that the first and second appellants were to pay the costs of the motion on an indemnity basis. The relevant part of his Honour’s reasons read as follows:

“A moment’s reflection should have caused [the second appellant] and the [first appellant] to realize that access had been given in error. The proper course was not to make copies and, if Ms Sim had already done so, the copies should have been promptly returned. Mr Grey does not appear to have been told how the documents were obtained. The object of the FOI Act is spelt out in s 3(1) of that Act. Support for that object is undermined by the underhand and disreputable behaviour of the [first appellant] and [the second appellant] in these proceedings. The applicable principles governing the award of costs on an indemnity basis are explained by Sheppard J in Colgate Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225. His Honour emphasized that such an order always depends on the particular facts and circumstances. This is, in my view, the clearest possible case, and it is appropriate to exercise my discretion to make such an order.

So far as the power to order costs against a solicitor, who is not a party to the proceedings, is concerned, it has been most usefully explained very recently by a Full Court of this Court in Levick v Deputy Commissioner of Taxation [2000] FCA 674. I am conscious that such power must be exercised sparingly and with great caution. In particular, it should be noted that this is not a case where such an order is necessary to protect the solicitor’s client. Indeed, although the [first appellant] has not given evidence, [the second appellant] appears to have been content to act as a mere cipher and not to exercise his own professional judgment in the conduct of this litigation. That is a serious dereliction of his duty to the Court. Accordingly, in both matters, I shall make the orders sought against both the [first appellant] and his solicitor.”

16                  The essence of his Honour’s reasoning was that both appellants, as legal practitioners, should have been aware, without further advice, that documents put in the possession of the Court under s 46 of the AAT Act being documents claimed to be exempt documents, could not be retained by them if possession of the documents was obtained pursuant to an apparent breach of s 64(6) of the FOI Act. In effect, his Honour took the view that failure to perform a duty to return the documents made application to the Court by the Minister and the AFP for an appropriate order both inevitable and incontestable and as the Minister and the AFP had been put to the expense of unnecessary litigation they should be recompensed in full.

17                  In submissions to his Honour, counsel for the first appellant conceded that it was appropriate for the motions to be brought by the Minister and the AFP. Nothing was put before his Honour to show that the first or second appellant had any argument to put as to why orders directing the return of the documents should not be made against them on those motions.

18                  As his Honour noted, the relevant principles were clearly stated by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 232-234.

19                  If an action is commenced when proper advice would indicate that the proceeding has no prospect of success, a discretion to award indemnity costs is ordinarily enlivened. Similarly, if a party who has no defence to a claim of right, refuses to acknowledge that right and either obstinately, or for an ulterior purpose, obliges the claimant to commence proceedings to enforce that right, that circumstance may attract the exercise of a discretion to award indemnity costs against that party. Such an order may also be made against the legal representative of that party if that practitioner subordinates his or her professional duties to promote the interests of the client in that litigation. (See White Industries (Qld) Pty Ltd v Flower & Hart (A Firm) (1998) 156 ALR 169 at 252-253.)

20                  The thrust of the argument on appeal was that his Honour erred in law in failing to have regard to the fact that the appellants had obtained the advice of counsel and had acted consistently with that advice. His Honour did not overlook that evidence. He determined that the scope of that advice was limited by the instructions provided to counsel and that, in any event, the appellants, as legal practitioners, must have been well aware of the obligations imposed on them when they obtained the exempt documents contrary to the prohibition against disclosure of those documents imposed by s 64(6) of the FOI Act. No advice from counsel was necessary to obtain that understanding.

21                  Counsel for the appellants further submitted that the discretion exercised by his Honour miscarried when his Honour grounded his decision on a conclusion that the appellants had engaged in “underhand and disreputable behaviour”.  Counsel invited us, should we accept that submission, to exercise the discretion afresh.  He contended that the appropriate costs order was one limited to costs on a party and party basis and that no order should be made in respect of the costs hearing before the primary Judge.

22                  Whilst the material before his Honour involved conduct by legal practitioners upon which his Honour was entitled to comment, nonetheless, in our view, the primary Judge’s description of the conduct of the appellants jointly as “underhand and disreputable” was not appropriate.  The proceeding before his Honour was not an inquiry into the probity of the conduct of either appellant and accordingly the appellants did not have matters relevant to such a conclusion put to them and were not given the opportunity to make responses thereto.

23                  But this conclusion does not mean that the primary Judge’s discretion miscarried.  Judicial exercise of the discretion to award indemnity costs did not require a finding that the acts of the appellants were “underhand and disreputable” and a fair reading of his Honour’s reasons for judgment indicates that the order for indemnity costs against both appellants was not predicated on that conclusion.  It is plain that his Honour was well aware of the principles to be applied in deciding whether it was appropriate that an order be made that indemnity costs be paid and that the decision made by his Honour was, in fact, based upon those principles.  It was open to his Honour to make the orders he did.

24                  The appeals must be dismissed, with costs.

Associate:

Dated:             

Matters N 996 of 2000, N 168 of 2001