FEDERAL COURT OF AUSTRALIA

Saizeriya Co Ltd & Anor v Peregrine Management Group Ltd Pty & Ors [2005] FCA 1174

PRACTICE AND PROCEDURE — costs — application for costs in respect of various interlocutory steps in proceeding — indemnity costs — gross sum costs — no statement of principle

Federal Court of Australia Act 1976 (Cth) ss 43, 53B

Federal Court Rules O 35 r 7(2), O 62 rr 3(2) and (3), O 62 r 23

Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119, discussed

Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006, referred to

Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228; (2005) 64 IPR 18; 215 ALR 788, referred to

Hadid v Lenfest Communications Inc [2000] FCA 628, referred to

Harrison v Schipp (2000) 54 NSWLR 738, referred to

Re Wilcox; ex parte Venture Industries Pty Ltd (1996) 141 ALR 727, applied

Abbott v Random House Australia Pty Ltd [1999] FCA 1540, referred to

SAIZERIYA CO LTD AND SAIZERIYA AUSTRALIA PTY LTD v PEREGRINE MANAGEMENT GROUP PTY LTD AND MICHAEL PAYNTER AND INTEGRATED MAINTENANCE SERVICES PTY LTD AND GLENN TRIGGS

VID 637 OF 2003

KENNY J

24 AUGUST 2005

MELBOURNE

THE COURT ORDERS THAT:

1.                  The first and second respondents prepare a bill of costs in respect of:

(a)        the motion, notice of which was dated 11 November 2003; and

(b)        the application on 24 June 2005 to extend the timetable for the preparation of witness statements and vary the date fixed for trial (“the 24 June application”)-

such bill of costs to be taxed as soon as practicable upon the request of the first and second respondents.

2.                  The applicants pay forthwith the first and second respondents’ costs of and incidental to the motion, notice of which was dated 11 November 2003, to be taxed in default of agreement pursuant to paragraph 1 hereof.

3.                  The applicants pay forthwith the first and second respondents’ costs of and occasioned by the 24 June application, on an indemnity basis, to be taxed in default of agreement pursuant to paragraph 1 hereof.

4.                  The applicants pay forthwith the fourth respondent’s costs of and occasioned by the 24 June application, to be taxed in default of agreement.

5.                  The applicants pay forthwith 70% of the third respondent’s costs of and occasioned by the 24 June application, to be taxed in default of agreement.

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

REASONS FOR JUDGMENT

1                     In submissions filed on 23 June 2005 and, orally, at a subsequent hearing, the first and second respondents made an application for orders that the applicants pay certain costs on an indemnity basis, to be assessed as a gross sum and paid forthwith.  These costs are sought in respect of:

1.                  the first and second respondents’ notice of motion dated 11 November 2003 (“the strike-out application”);

2.                  the consent orders of 14 April 2005, including the costs of correspondence leading to the order;

3.                  the case management conference before Registrar Efthim on 6 June 2005; and

4.                  the directions hearing on 24 June 2005.

The Strike-out Application

2                     By motion, notice of which was dated 11 November 2003, the first and second respondents sought orders that certain parts of the applicants’ amended statement of claim be struck out pursuant to O 11 r 16 of the Federal Court Rules (“the Rules”).  They were largely successful; and the court ordered that the applicants pay their costs of the motion.  The first and second respondents submitted, however, that they had been out of pocket for the costs of the strike-out application for more than a year and a half; and, on this basis, they sought an order that these costs be paid forthwith pursuant to O 62 r 3(2) of the Rules.  The applicants did not oppose such an order, but submitted that it should be preceded by an order under O 62 r 3(3) entitling the respondents to have their bill of costs taxed immediately.  In the circumstances, having regard to the complexity of the proceeding, which has not yet gone to trial, I would make these orders. 

Consent orders of 14 April 2005

3                     On 14 April 2005, orders were made by consent varying the timetable for trial.  The background to these orders was set out in an affidavit sworn on 9 June 2005 by the second respondent, Mr Michael Paynter, and an affidavit sworn on 14 June 2005 by the applicants’ solicitor, Mr David Opperman. 

4                     Mr Paynter deposed that the parties to the proceeding attended mediation on 7 April 2005.  On that date, according to Mr Paynter, the first and second respondents agreed to the applicants’ request to adjourn the mediation for the purposes of inviting the Victorian Government to participate.  At the same time, the first and second respondents agreed to an amendment of the timetable for the filing of witness statements, upon the assurance of the applicants’ legal representatives that the applicants were committed to keeping the trial date and that the variation to the timetable would not prejudice that date.  The first and second respondents said that costs were incurred in giving effect to the amendment to the timetable. 

5                     As it transpired, the Victorian Government declined the invitation to participate in the mediation.  In seeking the costs of the amendment to the timetable, the first and second respondents claimed that the applicants had deceived them about the Victorian Government’s attitude towards mediation.  Referring to exhibit “DAO2” to Mr Opperman’s affidavit of 6 June 2005, which in turn referred to a letter of 6 April 2005 (the day before the mediation) addressed to the applicants’ solicitors indicating that the Victorian Government would not participate in the mediation, the first and second respondents submitted that, had the letter of 6 April 2005 been drawn to their attention on 7 April 2005, when the applicants sought concessions about the timetable and the adjournment of the mediation, they would not have agreed to the variation of the timetable and the adjournment of the mediation.  Upon this basis, they claimed the costs incurred by reason of the applicants’ failure to inform them of the letter of 6 April 2005.

6                     Mr David Opperman deposed that the request for the adjournment of the mediation was made by the third and fourth respondents, not by the applicants, and was endorsed by the mediator and agreed to by the applicants.  The mediator was himself aware of the position that had been taken by the Victorian Government at that time.  Mr Opperman and, it seems, the mediator were, however, hopeful that the Victorian Government would reconsider its position if a joint request was made by all the parties and endorsed by the mediator.  At the time of the adjournment, Mr Opperman did not anticipate that the amendments would affect the trial date.

7                     The applicants submitted that the first and second respondents’ claim for costs was misconceived. The applicants “strongly denied” that there was “concealment (in the wilful sense) or deception”; and also referred to s 53B of the Federal Court of Australia Act 1976 (Cth) which, they said, constrained them from disclosing what occurred at the mediation.  They added:

Although the applicants’ advisors cannot vouch that the 1st and 2nd respondents were in fact told of the Government’s stated position … it comes as a surprise to those advisers that those respondents did not know that position.  Perhaps those advisers assumed too much as to what those respondents had gleaned from the various exchanges that occurred in the informal sessions of the mediation, but, however that may be, the suggestion of concealment or deception is directly and emphatically refuted.

8                     The applicants noted that the first and second respondents’ claim that they would not have agreed to the consent orders was “put forward after the event and in the context of an application for costs”.  Moreover, the applicants denied that, in consequence of the consent orders, the respondents had incurred more in legal costs than they would otherwise have done.

9                     In reply, the first and second respondents contended that the parties had waived any privilege attaching to the circumstances in which the mediation was adjourned.  They reiterated that the knowledge that the Victorian Government had declined to participate in the mediation “would plainly have been of great significance” to their decision to consent to the applicants’ request.  They asserted that, if the applicants had applied to adjourn the mediation and extend the timetable, their application “would more likely have been dismissed with costs”.

10                  The consent orders of 14 April 2005, which have been entered, not only varied the timetable, they also specifically provided that there be no order as to costs.  Although O 35 r 7(2)(c) of the Rules empowers the court to vary an interlocutory order after it has been entered in circumstances like the present, for the reasons that follow, I do not consider it appropriate to exercise this power.

11                  First, by virtue of s 53B of the Federal Court of Australia Act 1976 (Cth), evidence of anything said at a mediation under s 53A is inadmissible in proceedings in this Court.  It is, therefore, inappropriate to inquire into, or speculate about, what may have occurred in the mediation. In any case, on the evidence before me, I am not satisfied that there was any wilful concealment, on the applicants’ part, of their previously unsuccessful approach to the Government.  Secondly, I accept that, as the applicants submitted, the proposal to which the first and second respondents’ agreed was not the same as the approach to the Victorian Government that had previously failed.  The applicants’ conduct is consistent with their submission that they considered an all-parties’ invitation, endorsed by the mediator, was a “highly significant departure” from the unilateral approach that they had previously taken.  I am not satisfied that, even if the first and second respondents had been fully aware of the applicants’ previous approach, they would have acted any differently by declining to consent to the variation of the timetable and the adjournment of the mediation.  I observe too that Mr Paynter deposed that he had given his consent even though he was sceptical that the Victorian Government would participate in the mediation. Thirdly, it is virtually impossible to say what would have happened if there had been a contested application to extend the timetable, because, in this event, presumably the parties would have taken different and now unascertainable positions in respect of one another.  Finally, I am not satisfied that, in consenting to extend the timetable, the first and second respondents incurred costs that they would not otherwise have incurred. 

12                  Accordingly, I refuse the first and second respondents’ application for costs in respect of the consent orders of 14 April 2005.

The Case Management Conference on 6 June 2005

13                  The first and second respondents also claimed the costs of the case management conference before Registrar Efthim on 6 June 2005. 

14                  On 27 May 2005, the applicants and the third and fourth respondents requested the other parties’ consent to an extension of time for the filing of their witness statements.  The first and second respondents objected to any adjustment of the timetable and wrote to the Registrar requesting an urgent case management conference.  Their letter led the Registrar to fix a case management conference for 6 June 2005.  I accept, as the applicants submitted, that if the first and second respondents were to have their costs of that conference, the burden of such an order should be borne equally by the applicants and the third and fourth respondents, notwithstanding that the third and fourth respondents opposed the making of any order that made them so liable.  For the following reasons, I am not, however, disposed to make an order of the kind the first and second respondents sought. 

15                  As the applicants stated, this claim was part of a rolled-up contention that the first and second respondents should have their costs of the applicants’ failure to comply with the timetabling orders of 14 April 2005.  The orders preparatory to trial made it clear that there would, in any event, be a case management conference prior to trial.  This is the usual course in complex matters, such as the present proceeding: compare orders made on 14 April 2005, which provided for a case management conference on 15 June 2005.  There was, as the applicants pointed out, always to have been such a conference.  What happened was that the conference scheduled for 15 June 2005 was brought forward to 6 June 2005, following the first and second respondents’ request to the Registrar of 27 May 2005.  I accept that, as the applicants submitted, the first and second respondents were out of pocket for no more in costs than would have arisen in the normal course.  By virtue of the applicants’ position at the case management conference, there was a further hearing, in the course of which the applicants made an application to vacate the trial date. I deal with the costs of this application below.

16                  The first and second respondents submitted that, had the parties been able to comply with the timetable, the case management conference would have been of a different character.  It would, so these respondents said, have been of shorter duration and required less preparation; and it would not have necessitated the attendance of counsel and solicitor.  It seems to me, however, that the matters that the respondents assert are very largely speculative; and that, in view of the complexity of the proceeding, it is difficult to say that some degree of preparation and the attendance of counsel would not have proved needful at any case management conference held prior to trial. I am not satisfied that the costs of the case management conference on 6 June 2005 were higher than they would have been for any other case management conference held prior to the trial of this proceeding.

17                  On 30 June 2005, the third and fourth respondents each filed written submissions on the costs matters now in dispute.  The third and fourth respondents also sought their costs of the case management conference of 6 June 2005, upon the basis that the parties might have been able to agree on a timetable and retain much of the period fixed for trial but for the position adopted by the applicants.  For the reasons stated, the costs of the case management conference should lie where they fall.  There should be no order as to the costs of the conference.   The fact that the position taken by the applicants required a variation of the trial date and necessitated a hearing before me on 24 June 2005 is, however, a reason for requiring the applicants to pay the other parties’ costs of that hearing.

18                  Accordingly, I refuse the first and second respondents’ application for the costs of the case management conference of 6 June 2005.

The hearing of 24 June 2005

19                  Finally, the first and second respondents sought the costs thrown away as a consequence of the applicants’ application to vacate the trial date. 

20                  As foreshadowed at the case management conference, at the hearing on 24 June 2005, the applicants sought to vacate the trial date, relying on Mr Opperman’s affidavits of 6 June 2005 and 14 June 2005.  The first and second respondents opposed this application. 

21                  The applicants noted that their witness statements were not ready and that they required a good deal longer to complete these statements than they had originally estimated.  In his affidavit of 6 June 2005, Mr Opperman deposed that:

As at 27 May 2005, I was optimistic that witness statements could be finalised within a further two week period, or that statements would be able to be progressively delivered from that time. … I cannot express the same optimism.  On the contrary, having regard to the difficulties that have been experienced with the preparation of witness statements and the availability of witnesses, I do not consider that I can confidently estimate the time required to finalise the applicants’ witness statements, beyond saying that at least a further 10 to 12 weeks would presently seem to be required, subject to the availability of counsel.

This matter is currently set down for trial from 15 August 2005 for a period of 6 weeks.  In view of the time required to finalise the applicants’ witness statements, I now believe that the applicants will not be in a position to proceed to trial at this time.

22                  Whilst the applicants accepted that O 62 r 23 applied in this situation, they submitted that, in the circumstances where no party actually applied, both the applicants and the third respondent were properly to be treated as the notional applicants for an extension of time, and that each should be responsible for the payment of one half of the costs of the first and second respondents of the hearing of 24 June 2005.  They pointed out that the third respondent had indicated that it required a further 6 to 7 weeks to complete its witness statements and proposed to make further discovery.  In written submissions, they maintained:

If the question is: who was responsible for the necessity to come before the Court on 24 June? the answer must be: the 3^rd respondent, to at least the same extent as the applicants.

To rely on the fact that, in its written submissions dated 16 June 2005, the 3^rd respondent did not (by then) argue for an extension of time in the trial date itself is to point to a distinction without a difference, at least apropos costs of 24 June 2005.  It has little or nothing to do with the fact that a hearing was required on that day.

It likewise follows that the 3^rd respondent is not entitled to have the applicants pay its costs of that day.

Although the 1^st and 2^nd respondents are entitled to their costs, no proper reason has been advanced why they should be paid on an indemnity basis.

In his solicitor’s correspondence dated 16 June 2005, the 4^th respondent aligned himself, procedurally, with the 3^rd respondent.  In particular, while stating that his witness statements would be substantially complete by 24 June 2005 – already some 4 weeks in arrears of the date provided in the orders of 14 April 2005 – he resisted any proposal that he should file in advance of the 3^rd respondent.  In the circumstances, there is no basis for any suggestion that the applicants should pay the 4^th respondent’s costs of 24 June 2005.

23                  Thethird respondent contended that there was no basis for making an order for costs against it, saying that “there can be no suggestion that any delay to the trial was caused by IMS’ further discovery or provision of further and better particulars of is defence and cross claim”.  The third respondent pointed out that, in conformity with the Registrar’s orders, it had provided the further discoveryand further and better particulars; and that the applicants had not claimed that these matters had occasioned it any difficulties in preparing witness statements.  The third respondent submitted that the reason for the delayed trial was the applicants’ neglect in the preparation of their witness statements including expert reports and that it should therefore bear the costs. 

24                  The third respondent also submitted that the applicants should pay its costs of the hearing of 24 June 2005.  This was largely because it had been instrumental in proposing and securing orders that accommodated the needs of the second respondent and the difficulties of the applicants.

25                  The fourth respondent also sought an order that the applicants pay the costs of the hearing on 24^th June 2005, upon the basis that the hearing would not have been necessary but for “the applicants’ extraordinary delay in completing witness statements”.  The fourth respondent submitted that, but for this delay, it would have been unnecessary to restructure the hearing; and that he had incurred costs solely as a result of the applicants’ conduct. The fourth respondent submitted that the court should make an order that his costs be paid forthwith pursuant to O 62 r 3(2).  His position was, he said, no different in this respect to that of the first and second respondents.

26                  The fourth respondent submitted that the applicants’ characterisation of his position as that of alignment with the third respondent was misleading.  The fourth respondent did not, so he submitted, resist any proposal to file statements prior to the third respondent.  Rather, according to the fourth respondent, his submissions “merely noted that the witnesses for the fourth respondent were the same people as the witnesses for the third respondent, and that to avoid a duplication of statements, it was intended that a single consolidated witness statement would be prepared for each witness”.  As the fourth respondent pointed out, this submission was made against the background of the applicants’ statement that they would not be in a position to complete their witness statements for almost three months.

27                  The applicants properly conceded that O 62 r 23 of the Rules applies as between them and the first and second respondents; and I accept that the fourth respondent’s position was not materially different from that of these respondents.  Accordingly, the applicants should pay the first, second and fourth respondents’ costs of and incidental to what, at the hearing, amounted to the applicants’ application to extend the timetable for the preparation for trial and vary the trial date.

28                  Further, the applicants should pay 70% of the third respondent’s costs of the application to extend the timetable for the preparation for trial and vary the trial date, upon the basis that there was delay on the part of both the applicants and the third respondent, but the paramount reason for the hearing on 24 June 2005 was the applicants’ inability to have their witness statements ready in time for the date previously fixed for trial.  The delay on the third respondent’s part was not of the same magnitude as that of the applicants.  It was largely the applicants’ delay that required the restructuring of the trial and the alteration of the trial dates. Nonetheless, the third respondent’s lack of timeliness contributed to the need for the case management conference on 6 June 2005 and the hearing on 24 June 2005.  Accordingly, taking this into account, I would make a more limited costs order in the third respondent’s favour than in favour of the other respondents.

29                  In all the circumstances, it is appropriate that the costs payable by the applicants be paid forthwith, and taxed in default of agreement.

Gross sum costs?

30                  The first and second respondents submitted that it was appropriate for the court to further order that, instead of taxed costs, they be entitled to a gross sum, which was subsequently to be ascertained.  They relied on Mr Paynter’s evidence about his difficulty in funding his defence. The first respondent, so they said, had no assets and could not afford to fund the proceeding from its own resources.  The applicants opposed the making of any order that costs to which the respondents were entitled be assessed on a gross sum basis.

31                  The court has power to make a gross sum order pursuant to O 62 r 4(2)(c) of the Rules notwithstanding that the making of an earlier costs order that contemplated taxation in the ordinary way:  see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 (“Beach Petroleum”) at 120 per von Doussa J.  In Beach Petroleum, von Doussa J held, at 123, it was appropriate to make such an order in that case because “the preparation of a bill in taxable form [was] an unrealistic demand which would require quite unreasonable time and expense”.  The circumstances that were before his Honour were different from those presently before me.  It does not seem to me unreasonable to require that, in default of agreement, there be required a bill in taxable form. Further, I am not persuaded that it is appropriate for any other reason that I should depart from the usual course in the case of these orders for costs: compare Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; Sony Entertainment (Australia) Ltd v Smith [2005] FCA 228; (2005) 64 IPR 18; 215 ALR 788 at [188] and following per Jacobson J; Hadid v Lenfest Communications Inc [2000] FCA 628 at [25] per Lehane J; and Harrison v Schipp (2000) 54 NSWLR 738 at [21] per Giles JA.  I was not persuaded of the utility of such a course, which also required the expenditure of time and expense, in this instance, in respect of two interlocutory costs orders arising from applications of no particular complexity or other notable feature.  As the first and second respondents acknowledged, they “would still need to satisfy the Court as to the costs they have incurred, and provide a proper basis for their submissions about the amount of costs that ought to be awarded”.

Indemnity costs?

32                  The first and second respondents also sought costs on an indemnity basis, which may be ordered in exercise of the power conferred on the court by s 43 of the Federal Court of Australia Act 1976 (Cth).  The applicants submitted that no proper reason had been advanced why costs should be paid on this basis.  The circumstances in which indemnity costs might be awarded were considered by a Full Court in Re Wilcox; Ex parte Venture Industries Pty Ltd (1996)141 ALR 727 at 729-730 per Black CJ and 732-733per Cooper and Merkel JJ, in a passage referred to with approval in Abbott v Random House Australia Pty Ltd [1999] FCA 1540 at [5] per Beaumont, Miles and Drummond JJ. At 732-733, Cooper and Merkel JJ said that, in order to exercise the discretion as to costs judicially: (a) the court ought not to depart from the usual party/party basis for costs unless this was warranted by the circumstances of the case; and (b) these circumstances arise “as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the court in departing from the usual course”.  Their Honours added, at 733, that, while the decided cases offer a guide, “the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis”.

33                  The first and second respondents submitted that there were “two special or unusual features of this case” that warranted an award of indemnity costs. They said:

The first feature is the most cogent one, and relates to the enormous disparity in the resources of the applicants on the one hand, and Mr Paynter and Peregrine on the other.  The costs associated with the applicants’ delinquencies, particularly with respect to the application to vacate the trial, has involved extensive submissions both orally and in writing, and has, as a consequence, been very expensive.

34                  I accept that there may be a significant difference between the costs recovered on a party/party basis and those recovered on an indemnity basis; and that the recovery of costs on an indemnity basis may be especially desired by litigants in the pecuniary positions of Mr Paynter and Peregrine. By itself, however, this feature would not entitle them to an award of costs on an indemnity basis. 

35                  The first and second respondents also referred to the exceptional nature of the applicants’ conduct.  They submitted:

In particular, the circumstances surrounding the applicants’ application to vacate the trial date were extraordinary: as was submitted in Mr Paynter’s and Peregrine’s submissions dated 16 June 2005, the applicants’ failure to comply with the timetable for filing and service of witness statements was attributable to the fact that the applicants did not turn their mind to preparation until a very late stage, in spite of the indulgence that had been granted them since the timetable as first ordered on 13 October 2004, and in spite of the fact that they knew that Mr Paynter and Peregrine were very concerned to ensure that the trial commenced on the date ordered.  In the circumstances, therefore, the application was exceptional, and the costs associated with the application were not of the kind that a litigant in the position of Mr Paynter and Peregrine would ordinarily expect to have to bear.

36                  I accept that, through their legal representatives, at the mediation on 7 April 2005 and in correspondence, the first and second respondents made known to the applicants their anxiety to ensure that the trial proceeded on the fixed date.  In keeping with this stated concern, they acted promptly in bringing the slipping of the timetable to the Registrar’s attention on 27 May 2005.  Their conduct was designed to ensure that the court and the parties did all that could be done to keep the trial date.  They have not been dilatory in their preparation for trial. 

37                  The trial date was originally fixed in March 2005.  The need to abandon the trial date and to restructure the trial in order that it might proceed this year is attributable to the applicants’ delay in the preparation of witness statements.  The applicants have not given a satisfactory explanation for this delay, which was of some magnitude.  They have not, moreover, given any satisfactory explanation as to why it was that, by their letter of 27 May 2005, they merely sought a variation of the timetable for witness statements, whilst shortly afterwards, at the case management conference of 6 June 2005, they said that they were unable to proceed on the date set for trial.  Given that the applicants must have known of the first and second respondents’ anxiety to maintain the trial date, the magnitude of the delay, and the lack of any real explanation for it, the applicants should pay the first and second respondents’ costs in respect of the hearing on 24 June 2005 on an indemnity basis. 

38                  Neither the third or fourth respondents sought costs on an indemnity basis. The differences between their positions and that of the first and second respondents indicate why this was so.  The applicants should pay the third and fourth respondents’ costs on a party/party basis. 

Disposition

39                  For the reasons stated, the orders I would make are as follows:

1.                  The first and second respondents prepare a bill of costs in respect of:

(a)        the motion, notice of which was dated 11 November 2003; and

(b)        the application on 24 June 2005 to extend the timetable for the preparation of witness statements and vary the date fixed for trial (“the 24 June application”) -

such bill of costs to be taxed as soon as practicable upon the request of the first and second respondents.

2.                  The applicants pay forthwith the first and second respondents’ costs of and incidental to the motion, notice of which was dated 11 November 2003, to be taxed in default of agreement pursuant to paragraph 1 hereof.

3.                  The applicants pay forthwith the first and second respondents’ costs of and occasioned by the 24 June application, on an indemnity basis, to be taxed in default of agreement pursuant to paragraph 1 hereof.

4.                  The applicants pay forthwith the fourth respondent’s costs of and occasioned by the 24 June application, to be taxed in default of agreement.

5.                  The applicants pay forthwith 70% of the third respondent’s costs of and occasioned by the 24 June application, to be taxed in default of agreement.

Associate:

Dated:              24 August 2005