FEDERAL COURT OF AUSTRALIA

Vasram v AMP Life Limited [2002] FCA 1286

COSTS – indemnity costs – factors to be taken into account in the award of indemnity costs – whether history of matter disclosed special or unusual features so as to warrant award of indemnity costs for whole or part of proceedings – applicant previously given leave to file fifth amended statement of claim – statement of claim sought to reagitate issues previously decided – statement of claim struck out and proceedings dismissed – whether respondent should have had to incur costs of responding to fifth statement of claim – whether applicant’s solicitor should bear part of award of indemnity costs – circumstances in which appropriate to make costs order against applicant’s solicitor

Federal Court of Australia Act 1976 (Cth)  s 43

Federal Court Rules  O 62

Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225  referred to 

Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685  referred to

NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77  referred to

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

Knight v FP Special Assets Limited (1992) 174 CLR 178  referred to

De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544  referred to

Cook v Pasminco Ltd (No 2) (2000) 107 FCR 44  applied

Levick v Commissioner of Taxation (2000) 102 FCR 155  applied

Re Bendeich (No 2) (1994) 53 FCR 422  applied

Assaf v Skalkos [2000] NSWSC 935  distinguished

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397  referred to

Waiviata Pty Ltd v New Millenium Publications Pty Ltd [2002] FCA 481  referred to

Hamod v State of New South Wales [2002] FCAFC 97  referred to

Calderbank v Calderbank [1975] 3 All ER 333  referred to

Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425  referred to 

Australian Competition & Consumer Commission v Universal Music Australia Pty Limited (No 2) [2002] FCA 192  applied

McKerlie v State of New South Wales (No 2) [2000] NSWSC 1159  referred to

Australian Competition & Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 163  referred to

John S Hayes & Associates Pty Limited v Kimberly-Clark Australia Pty Limited (1994) 52 FCR 201  referred to

CHIMAN LAL VASRAM v AMP LIFE LIMITED

NG 667 OF 1998

STONE J

21 OCTOBER 2002

SYDNEY

THE COURT ORDERS THAT:

1.                  Subject to previous costs orders, the applicant pay the respondent’s costs in this proceeding assessed on a party and party basis;

2.                  The applicant’s solicitor pay the difference between the respondent’s costs from 8 October 2001 assessed on a party and party basis and the amount of those costs assessed on an indemnity basis. 

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

REASONS FOR JUDGMENT

1                     On 15 November 2001, I ordered that the proceedings in this matter be dismissed.  I also ordered that the question of costs be reserved and that the parties provide written submissions on that question; Vasram v AMP Life Limited [2001] FCA 1625.  I also invited the parties to contact my associate if either party wished to have oral argument on the written submissions on the question of costs.  Written submissions on the question of costs were received from both parties.  Neither party took up the invitation regarding oral argument.

2                     The facts in this matter were discussed in my previous judgment; Vasram v AMP Life Limited (supra). I do not intend to repeat the substantial facts of the case.  It is sufficient to note the following:

·        on 21 November 2000, I made orders that certain questions raised in the applicant’s amended statement of claim be determined separately from any question in the proceeding; see Vasram v AMP Life Limited [2000] FCA 1676 (“first judgment”);

·        on 22 December 2000, I gave my decision on those questions raised by the applicant’s amended statement of claim, filed on 25 February 2000 and referred to in the [2001] FCA 1625 judgment as the applicant’s “fourth statement of claim”.  I also ordered that the proceeding no longer continue under Pt IVA of the Federal Court of Australia Act 1976 (Cth)(“the Act”); see Vasram v AMP Life Limited [2000] FCA 1916 (“second judgment”);

·        as a result of the second judgment it was clear that the applicant’s statement of claim needed to be amended further to clarify certain claims and to take into account that the matter was no longer a representative proceedings;

·        on 24 September 2001, the applicant was given leave to amend his pleadings further;

·        on 8 October 2001, the applicant filed a further amended statement of claim (the “fifth statement of claim”) which differed significantly from its predecessors and sought to reagitate issues determined adversely to the applicant in the first and second judgments;

·        on 12 November 2001, the respondent was given leave to file an amended notice of motion dated 12 November 2001 which sought inter alia that the proceedings be dismissed pursuant to O 20 r 2 of the Federal Court Rules and the costs of the motion on an indemnity basis.  Oral argument on the notice of motion was heard on that date;

·        on 15 November 2001, I made the orders dismissing the proceedings and reserving the question of costs (see [1] above).

3                     The only question that now remains is that of costs.  The power of the Court to award costs is found in s 43 of the Act, the relevant parts of which provide:

“(1) … the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded;

(1A) …

(2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.”

4                     Reference should also be made to O 62 of the Federal Court Rules, which also deals with the power of the Court to award costs.  Order 62 rule 4 provides as follows:

“(1) Subject to this Order, where by or under these Rules or any order of the Court costs are to be paid to any person, that person shall be entitled to his taxed costs.

(2) Where the Court orders that costs be paid to any person, the Court may further order that as to the whole or any part of the costs specified in the order, instead of taxed costs, that person shall be entitled to –

(a)   a proportion specified in the order of the taxed costs; or

(b)   the taxed costs from or up to a stage of the proceeding specified in the order; or

(c)    a gross sum specified in the order; or

(d)   a sum in respect of costs to be ascertained in such manner as the Court may direct.”

The “taxed costs” for which O 62 r 4 provides are costs taxed on a party and party basis; Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 (“Colgate-Palmolive”); Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685. 

5                     As is reflected in O 62, the discretion of the Court to award costs is wide.  This includes the power of the Court to order that costs be paid on an indemnity basis, rather than on a party and party basis; Colgate-Palmolive; NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77.  However, the general rule is that costs will be awarded on a party and party basis, unless there are some special or unusual features, or the justice of the particular case so requires; Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151.  The Court also has the power to award costs against a non-party, such as solicitors; Knight v FP Special Assets Limited (1992) 174 CLR 178; De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544, which extends to the power to make indemnity cost orders against a non-party; Cook v Pasminco Ltd (No 2) (2000) 107 FCR 44.  It is recognised, however, that the jurisdiction of the Court to award costs against solicitors must be exercised with caution; Levick v Commissioner of Taxation (2000) 102 FCR 155; Re Bendeich (No 2) (1994) 53 FCR 422.

6                     The respondent has already had the benefit of a number of costs orders made against the applicant in the proceedings.  At the hearing of the notice of motion, counsel for the respondent, Ms Rees, indicated that, if the proceedings were dismissed, the respondent would seek an award of costs on an indemnity basis.  This is confirmed in the respondent’s written submissions.  As an alternative to an indemnity costs order, the respondent seeks an order for costs on a party and party basis from the commencement of the proceedings until 8 December 1998, and on an indemnity basis thereafter.  The respondent submits that:

‘[t]he effect of an indemnity costs order would be to retrospectively increase the recoverable level of costs under the various costs orders made in the respondent’s favour thus far in the proceedings.”

At the hearing of the notice of motion, and by a facsimile sent to my associate shortly after the hearing, Ms Rees indicated that authority for this proposition could be found in the decision of Assaf v Skalkos [2000] NSWSC 935 at [120] – [122].  This was confirmed in the written submissions.  That part of the case referred to by Ms Rees, however, concerns the award of costs for interlocutory appearances where no order for costs appeared to have been previously made.  In his judgment Carruthers AJ noted that the order for indemnity costs which had been made in the matter should embrace the interlocutory appearances.  Those interlocutory appearances, however, do not appear to have involved the making of costs orders.  I am not persuaded by the respondent’s submission on this point.

7                     As a further alternative to the cost orders described in [6] above, the respondent seeks an order that:

“(a)     the applicant and/or the applicant’s solicitor pay the costs of the amended motion of 12 November 2001 on an indemnity basis …; and

(b)       the applicant pay the respondent’s costs of the proceedings on a party and party basis.”

8                     In its written submissions the respondent identifies three bases on which it is said that an award for indemnity costs should be made in this case.  Firstly, it was submitted that the applicant’s action was commenced and continued in circumstances where the applicant, if properly advised, should have known that he had no chance of success.  In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Woodward J accepted this ground as a basis for the award of indemnity costs.  In that case his Honour stated, at 401:

“I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.  In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare.”

Woodward J’s comments have been referred to with approval in a number of authorities, including, more recently, Waiviata Pty Ltd v New Millenium Publications Pty Ltd [2002] FCA 481 and Hamod v State of New South Wales [2002] FCAFC 97.

9                     The respondent drew my attention to certain pre-litigation correspondence in which the applicant is said to have recognised, to some extent, the absence of any legal claim in this matter.  The respondent also submitted that the absence of the applicant’s entitlement to the relief sought, being damages under s 82 of the Trade Practices Act 1974 (Cth), should have been apparent to the applicant’s legal representatives early in the litigation, especially in light of the unfavourable comments which both myself, and the previous docket judge in this matter, Madgwick J, made regarding the flawed nature of the applicant’s claim.  The respondent’s solicitors also sent certain letters to the applicant’s solicitors setting out comprehensively the defects in the applicant’s claim and inviting him to discontinue the proceedings.  The respondent concludes:

“Given the applicant’s persistence in a hopeless case, in the face of repeated warnings from the bench and the respondent’s solicitors, the justice of the case requires that the applicant pay the costs of the proceedings on an indemnity basis.”

10                  The second basis given by the respondent for the award of indemnity costs is the applicant’s conduct of the proceedings.  The respondent notes the tortuous history of the proceedings and the failure of the applicant to articulate a viable cause of action.  The proceedings, it was submitted, were also prolonged by the applicant’s conduct.  It was submitted that an indemnity costs order was justified where costs had been largely expended in dealing with the applicant’s manner of conducting the litigation. 

11                  The third basis given by the respondent was said to be the applicant’s imprudent refusal of an offer of settlement.  The respondent refers to a letter of 8 December 1998 in which its solicitors invited the applicant to discontinue, in which event the respondent agreed to waive its entitlement to costs.  This submission implies that it is necessary to view the letter of 8 December 1998 as a type of Calderbank offer; see Calderbank v Calderbank [1975] 3 All ER 333.  This should be compared to the offer of compromise and payment into Court mechanism provided in O 23 of the Federal Court Rules.  The respondent referred to the approach of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 at 446, where his Honour stated,

“in my opinion, the evidence of a Calderbank letter, the rejection of the offer contained therein and the failure to obtain a result better than the offer, places the offeror in the position that a court should approach an application by the party for indemnity costs with a predisposition to holding that it is entitled to indemnity costs.”

12                  However, I do not agree that the kind of offer made on behalf of the respondent can be regarded as a Calderbank offer.  The offer made here was merely an invitation to the applicant to discontinue with no costs order being made.  It was not an attempt to resolve the matter by way of compromise.  An offer similar to that made by the respondent was discussed by Hill J in Australian Competition & Consumer Commission v Universal Music Australia Pty Limited (No 2) [2002] FCA 192.  In that case the applicant had not accepted an offer that the proceedings be dismissed with no order as to costs.  Hill J noted, at [59] – [60], that:

“the weight of authority is against an offer of the kind here made … being regarded as a Calderbank offer.

In Calderbank itself … the offer to settle divorce proceedings was one whereby the wife in divorce proceedings offered to transfer a house to the husband.  It was an offer of a real compromise for a consideration of real value.  By contrast the offer here made was to terminate the litigation with no cost orders being made.”

His Honour also noted that the Supreme Court of New South Wales in McKerlie v State of New South Wales (No 2) [2000] NSWSC 1159 had expressly held that an offer to settle a case by dismissing it with no order as to costs did not carry with it the consequences of a Calderbank letter. 

13                  Even if the view was taken that the respondent’s offer in this matter was of the nature of a Calderbank offer, the rejection of this offer would be but one factor to be taken into account in the exercise of the Court’s jurisdiction as to costs; see Australian Competition & Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 163; John S Hayes & Associates Pty Limited v Kimberly-Clark Australia Pty Limited (1994) 52 FCR 201. 

14                  In his written submissions the applicant submits that the orders as to costs previously made in the proceeding should stand and should not be revisited.  The applicant also submits that, “there is nothing unusual or peculiar in relation to this matter which would warrant payment of costs on an indemnity basis.”  With respect to the respondent’s amended notice of motion, the applicant submits that any costs order made against the applicant ought to be made on a party and party basis.  The applicant goes so far as to say that he consents to paying the respondent’s costs of the motion on this basis.  In his written submissions it is further submitted that no costs should be ordered against the applicant’s solicitor. 

DECISION

15                  As previously noted, the respondent already has the benefit of a number of costs orders in this matter.  Pursuant to O 62, such costs are party and party costs.  I am not minded to grant the respondent an order for indemnity costs for the entirety of these proceedings.  I am not persuaded that the history of this matter, woeful though it may be, discloses such special or unusual features as to warrant such an order for the whole of the proceedings.  If that had been the case one might have expected the respondent to seek indemnity costs in relation to the interlocutory issues at the relevant time.  No such requests were made.

16                  However, in my opinion, there are special or unusual features that warrant an indemnity costs order for at least part of the proceedings.  One might have thought that from 22 December 2000, the date of the second judgment (see [2] above), the applicant properly advised, should have known that he had no chance of success in the proceedings.  Nevertheless he persisted with his claim and was given the benefit of the doubt and allowed to replead.  In my reasons for dismissing the proceeding I made the following comment (at [5]):

“On 24 September 2001, in giving leave to the applicant to amend his pleadings I said that it was my impression that much of the delay in this matter stemmed from the applicant’s lack of clear vision of what he was trying to achieve.  Because of those delays and because there had already been four attempts to finalise the pleadings, I put the applicant on notice that I would give sympathetic consideration to any motion by the respondent to strike out the statement of claim if it was not properly pleaded.”

17                  Despite the warning, the fifth statement of claim prompted me to make these comments:

“The fifth statement of claim indicates that my lack of confidence as to the utility of further amendments to the statement of claim … was well-founded.  A brief comparison between the fourth and fifth statements of claim should assist in understanding the scope of the difficulty.  The fourth statement of claim consisted of twenty nine paragraphs of which seventeen were rendered obsolete as a result of my orders of 22 December 2000.  In addition a number of the remaining twelve paragraphs required amendment for the same reason.  Quite apart from these consequences, the statement was noticeably lacking in particulars and suffered from the defects to which I earlier referred; ….

The fifth statement of claim was considerably expanded.  It consists of forty-six paragraphs of which twenty deal solely with issues that have already been decided.  For example, paragraphs 30 – 46 seek to reinstate the proceeding as a representative proceeding despite my express order of 22 December 2000 ….  Paragraphs 15 – 17 raise issues relating to the terms of the applicant’s insurance policy with the respondent that have already been decided.  Paragraphs 2 – 10 consist of entirely new material.  Most of the remaining paragraphs also contain some new material and/or claims that have already been decided.

It is totally unacceptable for the applicant to seek to reagitate issues determined adversely to him in my judgments of 21 November and 22 December 2000.  If the applicant wished to challenge decisions already made the appropriate course would have been to seek to appeal from my orders.  Such appeal would, of course, have required leave and, at this late stage, would also require an extension of time.

…

The fifth statement of claim does nothing to clarify the issues between the parties.  It goes well beyond the scope and purpose of the leave to amend that I gave on 24 September 2001.  It contains much irrelevant material.  It does not identify the causes of action on which the applicant relies and it completely fails to particularise the applicant’s claims.  It would be virtually impossible for the respondent to put on a comprehensible defence to this pleading.  It is embarrassing in the extreme and, in my opinion, it is an abuse of the process of the Court.  It should be struck out in its entirety.”

18                  The respondent should never have had to incur any costs responding to such a seriously flawed document and should therefore be indemnified in respect of the costs incurred since 8 October 2001, the date on which the fifth statement of claim was filed.  This gives rise to the question whether the applicant should bear the whole of those indemnity costs, or whether they should in whole or in part be the responsibility of his solicitor. 

19                  In my opinion both the applicant and his solicitor are responsible for the debacle. There is no suggestion that the applicant has not been fully involved in this proceeding at all relevant times.  His affidavit, sworn on 5 October 2001, is attached to the fifth statement of claim.  The applicant swears that he has personal knowledge of the facts set out in the statement of claim and that they are true and correct.  The applicant must take some responsibility for the way in which this proceeding has been conducted.

20                  However, the most remarkable aspect of the fifth statement of claim, namely the way in which it seeks to reagitate issues that had previously been decided in considered decisions of this Court, must be the responsibility of the applicant’s solicitor.

21                  In Levick v Commissioner of Taxation (supra) the Full Court reviewed the authorities concerning the circumstances in which it is appropriate to make an order against a party’s legal adviser rather than against that party.  It is fair to say that in all of those authorities the courts were conscious that such an order should not be made without careful consideration and with extreme caution.  These concerns were endorsed by the Full Court which continued (at [44]):

“Having said that, it is equally important to uphold the right of a court to order a solicitor to pay costs wasted by the solicitor’s unreasonable conduct of a case.  What constitutes unreasonable conduct must depend upon the circumstances of the case; no comprehensive definition is possible.  In the context of instituting or maintaining a proceeding or defence, we agree with Goldberg J [in White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169] that unreasonable conduct must be more than acting on behalf of a client who has little or no prospect of success.  There must be something akin to abuse of process; that is, using the proceeding for an ulterior purpose or without any, or any proper, consideration of the prospects of success.”

22                  In Cook v Pasminco Ltd (No 2) (supra), Lindgren J said (at [65]) that the solicitors in question:

“were not entitled to commence the proceeding in this Court irresponsibly, recklessly as to whether the federal claims had any prospect of success.  Yet it seems to me that this is precisely what they did.  If they had responsibly considered the matter, they would have appreciated that the federal claims had no prospect of success at all.”

23                  These comments (substituting “previously decided claims” for “federal claims”) are applicable here.  The applicant’s solicitor could not seriously have considered that the claims that had been previously decided had any prospects of success.  In the circumstances it is fair and just that, subject to previous orders, the applicant bear the party and party costs of the whole proceeding and that the applicant’s solicitor be personally liable to pay to the respondent the difference between this amount and the amount of costs, assessed on an indemnity incurred .  A similar approach was adopted by Drummond J in Re Bendeich (No 2) (supra).  His Honour (at 427) held that before he could order that the solicitor pay any of the costs he had to be satisfied that the solicitor:

“has committed a breach of his duty to the Court to conduct the litigation on behalf of his client … with due propriety; secondly, that that breach involves conduct more than mere negligence and amounts at the very least, to gross negligence;  and, finally, I must also be satisfied that the result of any such dereliction of duty … has been to occasion useless costs [to the other party]”. 

24                  It is clear from my account of this proceeding that these conditions have been met.  Accordingly, subject to previous costs orders that have been made, the applicant must pay the costs in this proceeding on a party and party basis and the applicant’s solicitor must pay the difference between the respondent’s costs from 8 October 2001 assessed on a party and party basis and the amount of those costs assessed on an indemnity basis. By “indemnity basis” I mean all of the costs actually incurred by the respondent except those costs unreasonably incurred or unreasonable in amount. 

Associate:

Dated:              21 October 2002