FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v

IMB Group Pty Ltd (ACN 050 411 946) [2002] FCA 886

COSTS – where both parties succeeded in some issues and failed in others – discretion of the Court to apportion costs according to the success or failure of one party or the other – meaning of “issues” in the context of orders for costs – costs recoverable where party is not legally represented

Trade Practices Act 1974 (Cth) ss 47, 51AB, 52

Federal Court of Australia Act 1976 (Cth) s 43

Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 followed

Coogi Australia Pty Ltd v Hysport International Pty Ltd [1998] FCA 1331 followed

Cretazzo v Lombardi (1975) 13 SASR 4 referred to

Cummings v Lewis (1993) 41 FCR 559 distinguished

Cachia v Hanes (1994) 179 CLR 403 applied

Ly v Jenkins (2001) 187 ALR 178 referred to

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v THE IMB GROUP PTY LTD (ACN 050 411 946), LOGAN LIONS LIMITED (ACN 060 338 758) (IN LIQUIDATION), SAMSON NEIL BACKO, DAVID JOHN IVERS, LUKE VINCENT IVERS, JOHN LINDSAY IVERS, LANCE THOMAS STONE, MICHAEL JOHN McLEAN, WILLIAM ANTHONY MUSGRAVE, ROBERT COWLEY AND GLENN JAMES IVERS

QG 175 OF 1993

DRUMMOND J

BRISBANE

16 JULY 2002

THE COURT ORDERS THAT:

1.                  The applicant recover from the fourth to tenth and twelfth respondents its costs of litigating the issues raised by its case as pleaded in respect of which declarations 3, 6 and 7 were made on 5 April 2002.

2.                  The applicant recover from those same respondents its costs of and incidental to the notice of motion filed by the respondents and dismissed by my order of 23 March 1999.

3.                  The fourth to tenth and twelfth respondents recover all their costs of and incidental to the proceedings, other than the costs the subject of orders 1 and 2.

THE COURT DECLARES THAT:

4.                  All costs are to be taxed on a party-and-party basis.

THE COURT FURTHER ORDERS THAT:

5.         The further consideration of the applications by the applicant and the fourth to tenth and twelfth respondents for costs, but only in so far as those applications affect the first and third respondents, be adjourned to 26 July 2002.

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

REASONS FOR JUDGMENT

1                     The Australian Competition and Consumer Commission (“the Commission”) seeks an order that the respondents pay its costs of the proceedings.  It did not seek to pursue the eleventh respondent, who has not been served with the originating application.  I therefore take its application to be for a costs order against all the other respondents.  The twelfth respondent, purporting to act not only on behalf of the fourth to tenth respondents as well as himself, but also on behalf of the first and third respondents, submits that the Commission is not entitled to any of its costs, even with respect to the issues in which it was successful in obtaining declaratory relief and that, instead, the Court should give those respondents all their costs of the proceedings and moreover, order taxation of those costs on an indemnity basis.

2                     The third respondent has been in liquidation for some time.  I assume that administration remains on foot.  There is uncertainty as to the status of the first respondent.  It is not clear whether it is in voluntarily liquidation, compulsory liquidation or under some other form of administration.  This uncertainty was noticed at a number of points during the trial, but has not been cleared up.  There is nothing to indicate that, if leave be necessary to permit the Commission to pursue the first or third respondents for costs, that leave has been obtained.  Nor is there anything to suggest that the twelfth respondent has authority to seek costs against the Commission on behalf of the third respondent.  Because of the uncertainty as to the status of the first respondent, it is also unclear as to whether he has similar authority in respect of it.  I will therefore deal with the Commission’s costs application as limited to an application against the fourth to tenth and twelfth respondents and the twelfth respondent’s application as limited to one made on behalf of those same respondents.

3                     The Commission chose to bring a case based not only on s 47 the Trade Practices Act 1974 (Cth), but also on many different representations for which the respondents are said to be responsible and each of which was said to involve conduct that infringed s 52 of that Act.  The Commission also raised other issues, including a claim that the respondents engaged in unconscionable conduct in contravention of s 51AB of the Act.  There were no cross-claims by the respondents.

4                     Neither the Commission nor the respondents can properly be described as the successful party, ie, the party who, at the end of the case, has been wholly or at least substantially successful.  The declarations I have made reflect that each achieved success with respect to some of the discrete issues litigated in the course of the proceedings, but that each failed with respect to others of those issues.

5                     In claiming an order that it have all its costs of the proceedings, the Commission submits that there was a substantial degree of evidentiary overlap between the matters on which it succeeded and those on which it failed.  Accordingly, it is the Commission’s contention that there is no ground for apportioning costs between those issues.  This submission, I think, obscures the true position.  For example, the Commission illustrates its submission by contending that most, if not all, the Category J witnesses called by the respondents gave evidence about the representations as to the future value of shares (which were found to contravene s 52) and the performance of the insurance policies (which were found not to contravene s 52) and about the representations as to Council approval (also found not to contravene s 52).  In running its case on these representations, as well as its case on other issues which it raised by its pleading, the Commission relied not only on written material produced by the respondents containing such representations, but also on oral statements made on behalf of the respondents, particularly in the course of sales seminars.

6                     A great deal of effort was expended by the respondents in assembling evidence from the large number of Category J witnesses on issues on which the respondents succeeded.  This effort would have been unnecessary if the Commission had not chosen to run those issues.  The litigation of the issues about which this group of witnesses testified, and on which the Commission failed, occupied a substantial part of the hearing.  Moreover, a not insignificant number of witnesses additional to the Category J witnesses were called by the respondents, acting reasonably; these additional witnesses would not have been called if the Commission had not run issues on which it failed.  I mention, by way of one example, the issues concerning representations about Council approval and the range of witnesses additional to the Category J witnesses called by the respondents on those issues.

7                     Though the Commission succeeded in establishing its allegations with respect to the issues on which I made declarations 3, 6 and 7 on 5 April 2002, the respondents, in par 5 of their written submissions, set out a broadly accurate summary of the outcome of the litigation in so far as that is relevant to costs.  Some qualifications to what the respondents here submit are, however, necessary.  I will set out par 5 of the respondents’ submissions, together with these qualifications.

8                     Paragraph 5

“The following submissions are made with respect to the ‘issues’ decided in this matter;

A.        The Applicant has failed to obtain any order for penalties against the respondents.

B.         The Applicant has not obtained any of the injunctions or orders which it sought in these proceedings.”

Comment:  The Commission only amended late in the trial, over the respondents’ objections, to seek declaratory relief, some of which alone of all the relief sought by it it succeeded in obtaining.

“C.      The Applicant has failed to prove its case of ‘Third Line Forcing’.  [The respondents submitted] that this aspect of the case was significant and that it could be argued that perhaps 50% of the case related to this question, while the other 50% related to the issue of alleged breaches of sections 52, 53 and 55A.”

Comment:  I do not accept that the third line forcing issue took up as much as 50 percent of the case as the respondents here suggest.  However, it was a more significant issue to litigate than the Commission suggests at par 9 of its own written submissions.

“D.      The Applicant has failed to obtain a judgment (and in fact has failed to call a witness) to substantiate serious allegations of unconscionable conduct against the Fourth and Twelfth Respondents.

E.        The Applicant has failed to obtain a judgment (and in fact has failed to call a witness or provide any evidence) to substantiate serious allegations that the IMB development proposal was in effect a scam, and that the Respondents specific purpose in the scheme was to sell investment policies and to ‘garner’ the commissions from the sale of those policies.”

Comment:  The Commission commenced the hearing on this basis, at one stage abandoned the contention that IMB’s scheme was a scam, but in closing submissions returned, in a qualified way, to its original position.  The issue was not fully litigated.  The only conclusion I reached is set out in my reasons for judgment at [24] and [25].  It was only at the start of the trial that the respondents acknowledged that the eleventh respondent, Mr Cowley, whom they relied on heavily to advance their scheme from early 1992 to September 1993, was a fraudster.  See judgment at [303].  Cowley’s involvement in IMB’s activities coloured the Commission’s views of the respondents’ conduct.

“F.      The Applicant has failed to obtain a judgment (and in fact has failed to call a witness or provide any evidence) to substantiate serious allegations that no application had ever been made for the entry of a Logan City team into the Australian Rugby League competition.  Despite withdrawing this allegation late in the trial of the matter, it was maintained for many years in circumstances where the respondents had put clear evidence before the court to the effect that a bid had been lodged, and that such bid ‘appeared to conform with the guidelines for entry’ and was ‘receiving serious consideration’ by the Australian Rugby League.  This allegation significantly adds to the characterisation of the respondents scheme as a ‘scam’, and received significant publicity throughout the Logan region in the period subsequent to the institution of these proceedings.”

Comment:  The Commission abandoned this issue late in the trial only after much evidence had been called.  See also J.

“G.      The Applicant has failed to obtain a judgment to substantiate serious allegations relating the alleged inadequacy of approaches made by the Respondents to the Logan City Council and that the project did not have the support of the Logan City Council.  This allegation was also maintained until the end of trial in circumstances where the respondents had put clear evidence before the court to the effect that a the Logan City Council did support the development of the proposed facilities.  Again, this allegation significantly adds to the characterisation of the respondents scheme as a ‘scam’, and received significant publicity throughout the Logan region in the period subsequent to the institution of these proceedings.”

Comment:  See also K.

“H.      The Applicant has failed to obtain a judgment to substantiate allegations that the Respondents used ‘Hard Sell Tactics’.  Despite having been provided with details of all of IMB’s Legal and General policy holders, the Applicant has failed to call a single IMB policy holder to substantiate this allegation, relying instead upon the evidence of Kay Dibben.

Comment:  This can be regarded as an “issue” in the context of the present argument over costs.  Goldberg J, in Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 (“Dr Martens”), accepted at [53] that, in the context of costs, the term “issue” does not mean a precise issue in the technical pleading sense, but any disputed question of fact or law.  This issue took up a not insignificant part of the trial:  see judgment at [27] to [34].  In my reasons for judgment at [34], I concluded:

“I do not accept what Dibben, Graham and Matijasevic say about IMB using ‘hard sell’ tactics.  There is an abundance of evidence from people who bought policies about the complete absence of any ‘hard sell’ approach and of the immediate willingness of all the IMB people they dealt with to respect their wishes to go home and think about things before deciding whether to commit themselves to buying a policy.  All the IMB witnesses, including Gustafson from the ASC who attended an IMB sales seminar on 23 August 1993 without revealing his identity as an ASC officer, expressed the view that no ‘hard sell’ tactics were used.  Some gave convincing explanations of the opportunities they were given to think about whether they would buy a policy, which further shows that whatever else the IMB operation may have been, it was not one which employed ‘hard sell’ tactics to sign up people to the insurance policies.  See, eg, Messrs Stokes, Taylor and Brooks and Mr and Mrs Worrall (who decided not to purchase a policy).  Though those of the respondents and some of the people employed by IMB who were involved in dealing with potential purchasers of policies, described the scheme in a highly optimistic light to encourage people to buy policies, there was no attempt to pressure people into doing that.”

“I.       Based upon the evidence of the growth and success of the Greenbank RSL, the Applicant has failed to obtain a judgment to substantiate allegations that the proposal to develop a major sports and entertainment centre in Logan City in the early 1990’s was not viable.  At the time of instituting these proceedings the Applicant had no evidence and had conducted no investigation to substantiate this claim and did not file expert witness statements until late in 1996.  This allegation, as with its’ allegations that no bid had been lodged with the Australian Rugby League and that no support existed within the Logan City Council, was based upon the (false) assumption that the IMB scheme was nothing more that a scam designed to enrich the Respondents through the high pressure selling of investment policies.”

Comment:  I said in my reasons for judgment, at [146]:

“There can be little doubt that the considerations which the Ivers identified when they first formulated their proposal – the demographic profile of Logan City, the imminent development of a national rugby league competition and the imminent introduction into Queensland of poker machines – show that it was reasonable in 1991 to believe (as the respondents say they did believe) that an opportunity then existed for the development of a major rugby league club in Logan City.”

But this point does not much assist the respondents.  I went on to say, at [148]:

“But such evidence does not go beyond showing that it was reasonable, when the Ivers first formulated their ideas for a rugby league club development in Logan City in early 1991, for them to think that a properly designed and implemented development might be established.  The question whether the respondents infringed s 52 the TPA by making the various predictive representations relied on by the Commission has to be resolved taking into account the way the respondents’ proposals for the development of their scheme changed between early 1991 and late 1993 and, in particular, how their plans for funding the scheme changed in mid 1992.”

And at [165], I concluded:

“This goes a long way to establishing that the respondents, during the period from early 1991 to mid 1992, had no reasonable grounds to believe they would be able to fund construction of the project they were marketing.”

As to the period from mid 1992 to September 1993, when IMB ceased its operations, I concluded at [182]:

“Whether the respondents might have been able to raise $20,000,000 in debt finance in July 1993 (one of the issues to which McDougall’s report was directed) is also largely beside the point.  Their conduct between adopting that funding plan in mid 1992 and late 1993, when IMB had to shut its business down, shows they made no attempt to locate such a source of funding other than the very belated reliance they placed entirely on Cowley.  There is no evidence that they attempted to identify an Australian lender.  So far as the evidence reveals, Cowley confined such attempts as he made to identify a lender to seeking one off–shore about mid 1993.  The undoubted difficulties that the respondents would have faced if they had actively sought debt finance for the project, described by, eg, McDougall, coupled with their inaction in seeking such finance, demonstrates the absence of any reasonable ground for making the predictive representations they did about a range of matters referred to by the Commission from mid 1992 to late 1993 concerning the development of the project.  It is irrelevant, in my opinion, to that issue that, if the respondents had tried, they may have been able to overcome the difficulties inherent in the assets they had to offer a financier by way of security and obtain $20,000,000 of loan funding:  they did not make any serious effort to do that.”

“J.       The Applicant has failed to obtain a judgment to substantiate allegations that representations made by the Respondents in relation to the Australian Rugby League and the status of its dealings with the Australian Rugby League were in contravention of s 52 of the Trade Practices Act 1974 (Cth).  These allegations were only withdrawn at a very late stage in the trial of this matter.”

Comment:  See F.

“K.      The Applicant has failed to obtain a judgment to substantiate allegations that representations made by the Respondents in relation to the Logan City Council and the status of its attempts to obtain a lease over land owned by the Council were in contravention of s 52.”

Comment:  See G.

“L.      The Applicant has failed to obtain a judgment to substantiate allegations that representations made by the Respondents in relation to the projected cash values of National Mutual and Legal and General savings plan policies were in contravention of s 52.

M.        The declarations relating to contraventions of s 52 in respect of approval of finance, relate to only two occasions over the course of nearly three years of marketing the syndicate proposal.”

Comment:  This submission misstates the position.  A significant issue at the trial, quite apart from whether the respondents made specific representations as to funding being arranged, was whether there was any prospect at any time of the development being funded.  I dealt with this issue at [141] to [183] of my reasons.  I determined this issue in favour of the Commission, concluding at [181]:

“If the case was to depend upon whether the scheme, as initially devised in early 1991, was practicable, having regard to how development finance was then intended to be raised, the respondents would face a difficult task in showing that they had reasonable grounds for making the predictive representations about development of the project that they did from early in the piece and through most of 1991.  …  But their poor performance through 1991 in failing to achieve policy sales at the level necessary to generate the loan moneys required to realise the project throws serious doubt on whether the respondents had any reasonable basis for thinking they would be able to fund the kind of project the subject of the respondents’ representations in most of the period through 1991 to mid 1992.  That question ceases, however, to be of significance from, at the latest, mid 1992 when that form of financing the scheme was abandoned.”

And, at [182], I said:

“Whether the respondents might have been able to raise $20,000,000 in debt finance in July 1993 (one of the issues to which McDougall’s report was directed) is also largely beside the point.  Their conduct between adopting that funding plan in mid 1992 and late 1993, when IMB had to shut its business down, shows they made no attempt to locate such a source of funding other than the very belated reliance they placed entirely on Cowley.  There is no evidence that they attempted to identify an Australian lender.  So far as the evidence reveals, Cowley confined such attempts as he made to identify a lender to seeking one off–shore about mid 1993.  The undoubted difficulties that the respondents would have faced if they had actively sought debt finance for the project, described by, eg, McDougall, coupled with their inaction in seeking such finance, demonstrates the absence of any reasonable ground for making the predictive representations they did about a range of matters referred to by the Commission from mid 1992 to late 1993 concerning the development of the project.  It is irrelevant, in my opinion, to that issue that, if the respondents had tried, they may have been able to overcome the difficulties inherent in the assets they had to offer a financier by way of security and obtain $20,000,000 of loan funding:  they did not make any serious effort to do that.”

“N.      The declarations relating to contraventions of s 52 in respect of representations as to future matters which were not adequately qualified, relate only to the period between July 1992 and September 1993.

O.        The Applicant has failed to obtain any form of relief with respect to the National Mutual period.  The National Mutual allegations, when consolidated with the Legal and General allegations, significantly increased the volume and complexity of the Applicants statement of claim.”

Comment:  Pars N and O can be dealt with together.  There is substance in these submissions.

“P.      The witness statements obtained by the Respondents were found to have been procured by proper means, and provided a large body of evidence which was relied upon by his Honour in determining a number of issues in favour of the Respondents.”

Comment:  This was a significant “issue” litigated at the trial.

9                     At various points in their written submissions, the respondents set out the basis upon which they claim all their costs of the entire proceedings and, moreover, on a full indemnity basis.  It is sufficient to refer to the respondents’ summary at pars 102 and 103 of their submissions:

“In summary, it has been said that the issue of indemnity costs should be considered having regard to ‘the particular facts and circumstances of the case’.  The particular ‘facts’ of the case are that the Applicant has failed on the majority of its case and upon the most scandalous aspects of its case.  If indeed the Respondents’ whole proposal was merely a scam designed to garner commissions from the sale of investment policies, a scam where no bid had ever been made to the Australian Rugby League and which had no support from the Logan City Council then, while not specifically pleaded, it could well have been said that the Respondents’ conduct was seriously fraudulent.

The particular ‘circumstances’ of the case are that the Applicant orchestrated a situation whereby the Respondents were destroyed before these proceedings were launched.  It orchestrated a situation whereby all IMB policy holders were offered a full refund of their policies, without any order having been made against the Respondents by a court of law.  It then refused to consider an offer of compromise which gave it every opportunity to achieve the object of protecting the public interest without having to have instituted the matter currently before this Honourable Court in circumstances where its real objective was to force the establishment of a national trade practices compliance program throughout the insurance industry.”

10                  In their written submissions in response to the Commission’s submissions on costs, the respondents also say:  “The manner in which our offer of undertakings was rejected is in our submission critical to the determination of the issue of costs in this matter.”  One of the significant considerations the respondents rely on is that the Commission had an ulterior purpose in pursuing the respondents.  The burden of this submission, put in various ways in the course of the respondents’ written submissions, is that the present proceedings were pursued against the respondents who had settled with National Mutual Life Association of Australasia Limited (“National Mutual”) and Legal and General Life of Australia Ltd (“Legal & General”) so that the Commission could use this litigation as a lever to force the establishment of a national compliance program on the entire insurance industry.  One of the points put in support of this submission is that, if the Commission had accepted the respondents’ offer of 4 October 1993, its ability to continue to pressure particularly Legal & General to design and promote a compliance program applicable to the entire industry would have been extinguished.

11                  As the respondents’ acknowledge in par 18 of their submissions:  “the issue of how the IMB Group was closed down has not been a fact in issue in these proceedings”, though they go on to submit that the justice of the case requires this matter to be considered in the determination of costs.  Resolution of the factual situation would involve the Court in a major piece of litigation.  The Court would have to give the Commission natural justice before it could arrive at any conclusion on this issue.  It would have to require the respondents to formulate their contentions, including those outlined in their written submissions at pars 21 to 56 and at pars 72 to 86, where the allegation is made, among others, that the Commission instituted action against IMB for a purpose collateral to enforcing the Trade Practices Act against IMB because of its contraventions of that Act.  A lot of evidence would be adduced.

12                  In my opinion, it is not appropriate for this Court, in the context of a costs argument, to embark upon an investigation that would constitute a major piece of new litigation between the respondents and the Commission into whether the Commission is guilty of misconduct in connection with the action it took against IMB, which the respondents say resulted in that organisation’s unlawful closure.

13                  It was on the basis that it was too late to permit them to do so that, on 13 September 1999, I refused the respondents leave to commence what would have been a cross-action raising this and other issues by filing their notice of motion presented on 31 August 1999.  By that notice of motion, the respondents sought declarations in the form of answers to a number of questions, including the following:

“Was the Applicant’s conduct relating to the closure of the IMB Group and the destruction of the Logan Lions syndicate and development proposal, a valid exercise of the powers conferred upon it by the Trade Practices Act?”

14                  In refusing to allow the respondents to file this motion, I said:

“… Mr Ivers, under the rubric of the notice of motion, wishes to expand in a significant way the issues for determination in this case. It’s obvious that the point he wishes to ventilate and obtain Court rulings upon concern the questions: what caused IMB to go out of business? Was the Commission responsible for that? And in producing that result did the Commission act in abuse of power or in some way which might be actionable at the suit of IMB and those associated with it.

It seems to me that what the respondents wish to do is raise a cross action, in effect, very close to the end of the respondents case in very long running litigation. There are a number of reasons why it is, in my opinion, inappropriate to allow these new issues to be raised at this very late stage. The action has been on foot since 1993; directions for the preparation for trial including the exchange of witness statements were given as long ago as December 1994; the trial proper started on 7 September 1998; the Commission closed its case late last year; the respondents have called a large number of witnesses and are moving towards closing their case.

The issues that Mr Ivers wishes now to raise in a formal way with a view to seeking a Court determination on them, are matters that have long been of concern to the respondents. Mr Ivers has on several occasions through the conduct of the litigation, both before the trial started in September last year and during the trial, raised this very issue. His belief is that the Commission has acted wrongly and in a way which gives rise to a claim for damages in the course it followed in what can be described simply as the demise of IMB.

Senior Counsel for the Commission, understandably, opposes Mr Ivers’ application and I accept that, if it is to be raised as an issue for determination now, the Commission would be entitled to consider its position and probably call fairly extensive additional evidence to answer the claim that it conducted itself in some way leading up to the demise of IMB which may give a right of action to those associated with IMB.

…

I accept that the issues sought to be raised by Mr Ivers now are such that the Commission would, in all probability , be entitled to call significant additional evidence. In my view, when one takes into account the long history of the litigation, the fact that Mr Ivers has long been alert to the issue he now wishes, practically at the end or close to the end of the trial, to raise, all demonstrate the inappropriateness of allowing the proceedings to be significantly expanded in the way which will be inevitable if the application succeeds.”

15                  Moreover, the respondents have an action on foot in the Supreme Court against the Commission based on the latter’s alleged misconduct in moving against IMB with the result that it was soon after forced to shut down its business.

16                  I am not prepared to mount the investigation necessary to resolve whether the Commission misconducted itself in moving against the respondents in the context of an argument over costs.

17                  The respondents also rely heavily, in support of their costs claim, on what they say was the Commission’s unreasonable rejection of their compromise offer and, in particular, the offer to give the undertakings contained in the letter of 4 October 1993 sent by the respondents’ then solicitors to the Commission.  This detailed letter concluded at pp 6 - 9 with an offer by the respondents to give undertakings designed to meet the Commission’s concerns that the respondents were engaging in third line forcing by linking the entitlement to acquire an interest in Logan Lions Limited, or in any club facility that the respondents intended to develop, to ownership of policies.  The letter also contained an offer to give undertakings not to make any of a very large number of representations in connection with IMB’s activities.  Many of these representations became the subject of allegations by the Commission in the action it soon after instituted against the respondents.

18                  I am not, however, prepared to accept that the Commission’s rejection of these undertakings should tell against it in deciding upon the proper costs orders to be made now.

19                  The respondents’ proposal of 4 October 1993 was, as they made clear on 6 October 1993, “put forward as an alternative to a prosecution and is, therefore, conditional upon no prosecution proceedings being commenced”.  During the course of the trial, the respondents made an open offer to give various undertakings not dissimilar to those the subject of their letter of 4 October 1993 and, in reliance on that open offer, sought the striking out or the permanent stay of the Commission’s then part-heard action against them.  In rejecting this application, I said:

“It may be, depending on the view of the case ultimately formed by the Court, that the Commission will be denied relief by way of injunctions, corrective advertising orders and orders for compliance programs, even though it may be able to establish that the respondents in various respects did contravene either or both s 47(6) and s 52.  But even if the Court comes to that view, it would still be open to the Court, given the public interest nature of the proceedings brought by the Commission, to make declarations that conduct in which the respondents were involved in the past did contravene one or other of the provisions of the Trade Practices Act relied on:  the respondents’ activities were directed to a large number of members of the public and were carried on over a significant period of time.  They attracted (and still appear to attract) widespread public support.  If those activities do involve contraventions of the Trade Practices Act, there is in my opinion a legitimate public interest to be vindicated by the Commission pursuing the case to judgment with a view to obtaining a judicial pronouncement that the respondents’ activities did infringe the Act, whether or not the circumstances are such as to require anything more than the making of declarations to that effect.  Cf Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 100.

For these reasons, the making by the respondents of their offer, against a background of the cessation of relevant business activities, does not, in my opinion, provide any basis for concluding that the further prosecution of the action by the Commission is futile in the sense referred to in the decisions relied on by the respondents.”

20                  This same public interest consideration goes a long way to answering the respondents’ present contention that the Commission acted unreasonably in rejecting the compromise offer of 4 October 1993, an offer expressed to be conditional upon the Commission not taking proceedings against the respondents.

21                  There is a further consideration which, when added to that, in my opinion, shows that the respondents do not get support for their costs application from the Commission’s rejection of that early compromise offer.  In the letter the respondents’ then solicitors sent on 6 October 1993 to the Commission, the respondents made it clear that IMB was still “anxious to move forward to start its development and build a facility for the community of Logan”.  Yet they were prepared to give undertakings which, if they had been accepted, would appear to have prevented the applicants from pressing ahead with those development plans on a basis that was in any way similar to that which they had pursued through 1991 to September 1993.  The undertakings, if accepted, may not have prevented the respondents continuing to sell insurance policies.  But just how IMB might have pressed on with its plans for a large sporting club development while constrained by the offered undertakings was not explained to the Commission in October 1993.  Nor is it explained by the respondents now, despite their reliance on this offer of compromise as support for their claim to recover all their costs on an indemnity basis from the Commission.  Further, I have found that, apart perhaps from the first few months of operations, the respondents never at any time thereafter had any prospect at all of funding a development, in any of the forms they had under consideration from time to time, in the period 1991 to September 1993.  As I noted in my reasons at [303], by mid September 1993 various of the respondents, including Glenn Ivers, had become suspicious of Cowley’s bona fides and, in particular, about whether they could have any confidence in Cowley’s claims that funding had been arranged.  I do not consider it unreasonable of the Commission to reject the 4 October 1993 offer when the respondents made it clear they intended to proceed with their scheme in circumstances revealed at the trial to be such that, at that late stage, they had not been able to identify, through three years of operation, any source of funding that development and when they had already then begun to doubt the bona fides of the person on whom they had for so long relied to find the necessary funding.

22                  Moreover, the Commission succeeded in obtaining, over the respondents’ opposition, declarations 3, 6 and 7.  The Commission, in my opinion, did not act unreasonably or imprudently, in the light of what emerged at trial and the success it there achieved, in rejecting the respondents’ offer of 4 October 1993.

23                  The respondents also rely, in seeking costs against the Commission, on the manner in which the Commission conducted the litigation, particularly in so far as it initially served the respondents with seventy-nine witness statements and then, late in the piece, after the respondents had expended enormous effort in gathering over 1,300 witness statements of their own, the Commission informed them that it proposed to confine its case to a significantly smaller number of witnesses.  I have dealt with one aspect of the Commission’s change in the direction of its evidentiary case in the judgment at [36] and [37].  The Commission maintained through the trial much of the case it originally formulated in its first statement of claim, including allegations that the respondents contravened s 52 by making a wide range of representations.  What it did, at quite a late stage of the litigation, was confine the range of evidence it decided to rely on in support of that case.  I doubt that, if the Commission had at the outset confined its witnesses to the eighteen it ultimately relied on, the respondents themselves would not have embarked on something like the task they did to enlist a huge number of witnesses to support their defence.  (This is, of course, a different point from that arising from the fact that the Commission ran to judgment a much more extensive s 52 case than it succeeded upon and that, in consequence, the respondents’ evidence gathering exercise was made more complicated than it would have been if the Commission had pruned, at an early stage, the range of representations to be relied on by it.)

24                  For these reasons, I do not think the respondents are entitled to have such costs as they do recover, taxed on other than the usual party-and-party basis.

25                  It is apparent from the declarations I made on 5 April 2002 that each side of the record has been successful on some discrete issues and unsuccessful on others.  But the declarations do not fully reflect the extent of each side’s success.

26                  The respondents have succeeded not only in defending the Commission’s pleaded claims in respect of which I made declarations 1, 2, 4, 5 and 8, but they succeeded also on a number of what can fairly be regarded as “issues” for the purposes of the exercise of the costs discretion.  These issues include the “hard sell” issue and the propriety of the way the respondents went about assembling their Category J witness evidence.  These subsidiary issues occupied a significant part of the case.  Moreover, as I have already noted, the Commission long persisted in, but abandoned late in the day, its s 52 case based on representations with respect to the entry of a Logan team in the Australian Rugby League competition.  That, too, took up a significant part of the preparations for and hearing time at the trial.  Further, the Commission failed to obtain any of the relief it sought, other than the limited declaratory relief claimed by a late made amendment to its application.

27                  So far as the Commission is concerned, in addition to the issues the subject of the declarations made in its favour, it succeeded on some subsidiary issues, the most important of which was that described in my reasons at [140(1)], viz, whether the respondents ever had any prospect of funding their proposed development.

28                  In my opinion, this is a case in which the competing claims of the parties in respect of costs should be resolved by giving each of the Commission and the respondents the costs of those issues upon which they succeeded.

29                  I respectfully agree with Goldberg J’s examination in Dr Martens at [52] to [54] of the principles to be applied in exercising the discretion with respect to costs conferred by s 43 the Federal Court of Australia Act 1976 (Cth), subject only to what I said in Coogi Australia Pty Ltd v Hysport International Pty Ltd [1998] FCA 1331 (“Coogi”).  I there noted that courts are now more ready to apportion costs according to the success or failure of one party or the other on the various issues which arise in the course of a trial than they were in 1975, when Jacobs J, in Cretazzo v Lombardi (1975) 13 SASR 4, referred at 16 to his “note of cautious disapproval” of that approach. 

30                  In Coogi, I also referred to recent cases in which a party entitled to be described as “the successful party” has nevertheless been deprived of part of its costs where nothing more has occurred than the failure of that otherwise successful party on a discrete issue whose litigation occupied a significant part of the hearing.  I do not understand there to be any rule that the broad discretion under s 43 can be exercised so as to give a party the costs of an issue on which it has defeated the other party, who itself is successful on other issues, only if the party losing the particular issue can be seen, by raising that issue, to have unreasonably prolonged the proceedings.  The statements in Cummings v Lewis (1993) 41 FCR 559 referred to in Dr Martens, I think, are directed to a different situation, viz, where one party can fairly be said to have succeeded on all the issues litigated.  In such a situation, though that party would prima facie have a justifiable expectation of recovering all its party-and-party costs, it may nevertheless be a proper exercise of the discretion under s 43 to deprive it of a part of those costs if, though successful overall, it has so conducted the litigation as to unnecessarily prolong it.

31                  I will therefore make the following order that:

(1)        the Commission recover from the fourth to tenth and twelfth respondents its costs of litigating the issues raised by its case as pleaded in respect of which declarations 3, 6 and 7 were made on 5 April 2002. 

32                  I do not think I should make any order in favour of the Commission in respect of the issue identified at [140(1)] of my reasons, though, as I observed at [142], this was an issue of fundamental importance.  It was not identified as an issue in the pleadings and was only raised in closing submissions.  Further, as appears from my treatment of this matter at [140] to [183], evidence relevant to its resolution was assembled and adduced in relation to a range of issues actually pleaded, on some of which the Commission has succeeded and on others of which it has failed.  In these circumstances, I think it would be unjust to the respondents to give the Commission the costs of the issue in [140(1)], even if it were possible for the taxing officer, without undue expense and effort, to identify such costs.

33                  There have also been a number of interlocutory hearings and orders made.  The only one of these disputes in respect of which I think it is appropriate for me to deal now with costs is that raised by the respondents’ notice of motion seeking to stay the further prosecution of the Commission’s action, which I dismissed on 23 March 1999 after the hearing on 22 March 1999.  I will order that:

(2)               the Commission recover from those same respondents its costs of and incidental to this notice of motion filed by the respondents.

34                  I will further order that:

(3)               the fourth to tenth and twelfth respondents recover all their costs of and incidental to the proceedings, other than the costs the subject of orders 1 and 2.

35                  And I will declare that:

(4)               all costs are to be taxed on a party-and-party basis.

36                  I will adjourn further consideration of the applications by the Commission and the fourth to tenth and twelfth respondents for costs, but only in so far as those applications affect the first and third respondents to 26 July 2002.

37                  The costs the respondents will recover under order 3 will be limited by the fact that, for parts of the proceedings both pre-trial and during trial, they were not legally represented.  Cachia v Hanes (1994) 179 CLR 403 (“Cachia”) establishes that the Court’s power under s 43 to award costs to a litigant is confined to money reasonably paid or liabilities reasonably incurred for professional legal services in conducting the litigation.  A limited range of actual outlays or liabilities reasonably made or incurred in order to conduct the litigation such as court filing fees and expenses paid to witnesses may also be recoverable:  see Ly v Jenkins (2001) 187 ALR 178.  But compensation for time spent by a litigant who is not a lawyer in preparing and conducting the case cannot be recovered under a costs order made in favour of the litigant whether it be for party-and-party costs or indemnity costs.  As Mason CJ and Brennan, Deane, Dawson and McHugh JJ said in Cachia at 414:

“[Costs] are intended to reimburse a litigant for costs actually incurred; they are not intended to compensate for some other disadvantage or inconvenience suffered by the litigant.”

38                  I am not empowered by s 43 the Federal Court of Australia Act to take any action which would ameliorate the consequences for the respondents of the ruling in Cachia, even though, if the respondents had been legally represented throughout, the result of the costs orders I have made would almost certainly be that the respondents would have recovered a substantial sum from the Commission for the balance of all costs.

Associate:

Dated:              17 July 2002