FEDERAL COURT OF AUSTRALIA

Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 282

PRACTICE AND PROCEDURE – costs – losing party not paying all costs of winning party.

Federal Court of Australia Act 1976 (Cth)   subs 43(2)

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

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

Commissioner of Australian Federal Police v Razzi (No 2)  (1991) 30 FCR 64

R v Secretary of State for Transport; ex parte Factortame Ltd [1998] EWCA 2999

Hayle Holdings Pty Limited v Australian Technology Group Ltd [2000] FCA 1699

ACCC v Australian Safeway Stores Pty Limited (No 3) [2002] FCA 1294

ACCC v Boral Limited (No 2) (2000) ATPR 41-738

EVANS DEAKIN PTY LTD v SEBEL FURNITURE LTD

N 768 of 1999

ALLSOP J

3 APRIL 2003

SYDNEY

THE COURT ORDERS THAT:

1.         The applicant pay the costs of the respondent on the following basis:

(a)      the applicant pay the costs of the respondent on issues of liability,

(b)      subject to order (c) below, the applicant pay 70% of the costs of the respondent on issues of quantum, and

(c)      the costs of the respondent on the issues of quantum are not to include the costs of the preparation of the report of Andrew Murray Ross attached to his affidavit sworn 24 April 2002.

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

REASONS FOR JUDGMENT

1                     On 12 March 2003 I made orders dismissing the application in this matter.  I have heard the parties on costs.

2                     The primary question for consideration now is whether the respondent, having been successful in having the application dismissed, should have all its costs.

3                     In short, the applicant submits that the respondent should only have its costs on liability and there should be no order as to costs on questions of quantum or damages.

4                     The basis for this submission is the claim that the respondent behaved unjustifiably in the conduct of the damages issues.  Whilst it is accepted by the applicant that the respondent legitimately incurred a body of costs on the question of quantum or damages, it says that the costs which the respondent unjustifiably caused the applicant to expend should be taken into account and there should be, it is said, a denial of all costs to the respondent for quantum or damages.

5                     The discretion which I have under subs 43(2) of the Federal Court of Australia Act 1976 (Cth) is a wide one.  It includes the power to look at issues run in a case differentially and make an order otherwise than that the loser pays all costs.  I do not propose to set out exhaustively the relevant authorities on this question. I have had particular regard to Hughes v Western Australian Cricket (Inc) (1986) ATPR 40-748 at 48,136, Dodds Family Investments Pty Limited v Lane Industries Pty Limited (1993) 26 IPR 261, 272, Commissioner of Australian Federal Police v Razzi (No 2)  (1991) 30 FCR 64, 68-69 and the cases referred to below.  In R v Secretary of State for Transport; ex parte Factortame Ltd [1998] EWCA 2999 Lord Woolf (with whom Schiemann LJ and Robert Walker LJ agreed) said the following:

…The practice of the courts does evolve, and in recent times there has been a greater emphasis on recognising that the raising of issues in the course of complex litigation, of which this case can be considered as an example, can increase the costs of that litigation.  It is therefore important that the parties should pay careful attention to the merits, not only of the whole case but to the issues which arise in the course of a case.  In complex litigation, where issues are raised on which a party is unsuccessful, the court should, when appropriate, make orders for costs which reflect the fact that, whereas a party may generally be successful, in regard to some of those issues that party has been unsuccessful.  Furthermore, if the way in which an issue is conducted or argued has the result of increasing the costs of the litigation, and the court finds that it was unnecessary for the party to develop the issue in that way, that again can be reflected in a special order for costs.

The passage in Nourse LJ’s judgment quite properly focuses on the word “unreasonably”.  It also mentions the word “improperly”. It seems to me, in exercising the general discretion which Ord 62 gives the court with regard to costs, the court will always be concerned as to whether an issue has been conducted reasonably before the courts.  However there can be situations where, although a party has not behaved improperly, the way the litigation has been conducted has increased the costs.  If the court, without concluding that the party has been improper in any way, comes to the conclusion that the costs have been increased because the approach has not been reasonable, that is certainly a matter which should be reflected in an order for costs.

            [emphasis added]

6                     These views of the English Court of Appeal have been specifically approved by Hely J in Hayle Holdings Pty Limited v Australian Technology Group Ltd [2000] FCA 1699 at [7].

7                     I think it is also relevant to take into account the fact that I am here dealing with a respondent brought to court rather than an applicant.  It seems to me that this is a consideration to be taken into account not by way of an arbitrary rule altering the discretion, but to assist in recognising that the position and behaviour of the person brought to court unwillingly may need to be judged in that light.  Goldberg J dealt with this subject matter in ACCC v Australian Safeway Stores Pty Limited (No 3) [2002] FCA 1294 at [55], as did Heerey J in ACCC v Boral Limited (No 2) (2000) ATPR 41-738 at 40,560.  I am not intending to disagree with anything said by their Honours in those cases.  Each case is, of course, different.  I do not see any inflexible principle expressed by their Honours in the exercise of the discretion.  It is enough to say, I think, that being brought to court is a relevant consideration in assessing the behaviour of a litigating party, as would no doubt be (as was the case in Boral) the seriousness of the issues about which the party has been brought to Court.

8                     I do not propose to analyse exhaustively the evidence on quantum in this case; nor do I propose to seek to trace the history of interlocutory procedures. 

9                     The broad outline of the debate on quantum was as follows.  The applicant filed a significant body of primary material carefully and painstakingly prepared.  Together with that material was an affidavit of Mr McClintock.  Mr Ross, the expert retained by the respondent, undertook a task which might be referred to as “critiquing” Mr McClintock’s report.  Mr McClintock accepted a number of those criticisms and prepared a second report in which he assessed the damage at $6,558,113.  This represented a reduction in the order of $570,000.  Various criticisms of his erstwhile approach and the evidence led to this reduction. 

10                  The evidence of the respondent however did not rest with these matters.  A significant number of matters were otherwise raised by Mr Payne, Mr Wright and Mr Ross.  The issues were, it is fair to say, wide ranging.  They required the applicant to respond in detail which was done in a detailed round of further affidavits by the quantum witnesses for the applicant.

11                  None of the applicant’s quantum witnesses was cross-examined other than Mr McClintock and, to a small degree, Mr Graham.  I will not repeat what I said in my first reasons for judgment about quantum or about Mr Ross’ second report.

12                  It is fair to say that by some close attention by Mr Ross and others there was a withdrawal by the applicant of its position for a not inconsiderable amount of money.  However, a significant body of material was required to deal with the issues of quantum raised by the respondent on which it failed, and on which it did not cross-examine the primary witnesses for the applicant.  Many of the points raised by the respondent, whilst perhaps arguable, were weak and evaporated on close analysis or questioning.

13                  It may be overly harsh to describe the carriage of the defence in relation to quantum as in part unjustifiable.  I do not wish to repeat what I said about Mr Payne’s evidence in my first judgment.  The parties were engaged in strongly conducted commercial litigation.  No point was left untouched by the respondent.  I am not prepared to describe the conduct of the quantum case as unjustifiable (or to use the words of Lord Woolf in Factortame, “improper”).  I do not make a criticism of those involved in the case.  However, in large scale commercial litigation, if parties see fit, in their own interests, to struggle exhaustively on every point, raising perhaps arguable but weak matters upon which they ultimately fail, it should be recognised that, where appropriate, there may be a price to be paid for the conduct of litigation in that fashion.  In these circumstances commercial parties, whether applicant or respondent, should not expect, I think, that courts will simply make the loser pay all.

14                  Here, the respondent lost virtually all the quantum points raised by it past the point where Mr McClintock accepted some of the criticisms of Mr Ross.

15                  Doing my best to make a fair, and not overly precise, attempt to relieve the applicant of some of the costs caused by the approach of the respondent in the areas where the respondent was unsuccessful, I propose to order that the applicant pay the costs of the respondent on the following basis:

(a)        the applicant is to pay the costs of the respondent on issues of liability,

(b)        subject to (c) below, the applicant is to pay 70% of the costs of the respondent on quantum, and

(c)        the costs of the respondent in quantum are not to include the costs of the preparation of the report of Andrew Murray Ross attached to his affidavit sworn 24 April 2002.

Associate:

Dated:              3 April 2003