FEDERAL COURT OF AUSTRALIA

AMP Services Ltd v Manning (No 3) [2007] FCA 510

COSTS – speculative action – solicitor and client costs awarded – O 62 r 36A – not applicable where claims are bona fide and complex – costs apportioned between issues

Federal Court Rules (Cth) O 62 r 36A

AMP SERVICES LTD AND ARRIVE WEALTH MANAGEMENT LTD v ANGELA MANNING AND POLLIANNA HARKNESS

NSD 983 of 2004

FINKELSTEIN J

11 APRIL 2007

MELBOURNE

THE COURT ORDERS THAT:

1. The firstnamed defendant pay 75 per cent of the secondnamed plaintiff’s costs of the action on a party and party basis, such costs not otherwise to be reduced by reason of O 62 r 36A and to be taxed in default of agreement.
2. The plaintiffs pay the secondnamed defendant’s costs of the action on a solicitor client basis, such costs 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                     The final issue in this protracted battle is that of costs.  I propose to deal with them briefly, despite having received lengthy submissions from the parties that referred me to quite a number of cases.  In the end the authorities are of marginal assistance only.  Each case has its own peculiar facts that bear upon costs and it is difficult to translate the facts from one to another. 

2                     First I will deal with the claim against Ms Manning.  To recapitulate, if recapitulation be necessary, the plaintiffs sought to recover from Ms Manning damages which they assessed at around $4.3 million on the basis of alleged breaches of contract, breaches of the Corporations Act 2001 (Cth) and breaches of fiduciary duty.  The trial occupied six days and a further three days were spent on the assessment of damages.  In the result, Arrive Wealth Management obtained an order for compensation in the amount of $45,000.  The claim by AMP Services was dismissed.  Arrive Wealth Management now seeks an order that Ms Manning pay its costs (AMP Service’s costs cannot be covered because it failed on its causes of action) on a party and party basis, with no reduction pursuant to O 62, r 36A. 

3                     I can put to one side O 62, r 36A, the principal purpose of which is to discourage plaintiffs from prosecuting small claims in the Federal Court.  Here the claims which the plaintiffs pursued were for the most part reasonably complex although, apart from one, they did not find favour with me.  Nevertheless, all the claims were bona fide, were seriously put and strongly argued.  Moreover, the claims were sufficiently complex to warrant the retention of senior counsel on both sides.  It would be inappropriate to allow O 62, r 36A to act as a deterrent in such cases and I will make an order that the costs ordered to be paid not be reduced by reason of this rule.

4                     On the other hand I am a strong proponent of the view that while costs should ordinarily should follow the event, if the successful party has failed on issues that have taken up significant time or put the opposition to considerable expense the successful party should be deprived of the costs that relate to those issues.  Indeed, in some cases the successful party might even be ordered to pay the other party’s costs.  If courts begin to adopt this approach more readily than in the past, it will force parties to concentrate their attention on those causes of action or lines of defence that are worth pursuing and eschew a scattergun approach to litigation.  This will result in the more efficient conduct of litigation, the cost of which is now all but prohibitive. 

5                     This is not to suggest that it will always be easy to apportion costs between successful and unsuccessful issues.  Often the task will only be impressionistic.  But that difficulty should not stand in the way of an apportionment order.  Even if the judge makes a rough and ready estimate of the time spent on unsuccessful issues the result should be fair. 

6                     In this case I do not think Arrive Wealth Management should recover all its costs.  That would not be a just reflection of the outcome of the case.  In my view Arrive Wealth Management’s costs should be reduced by a factor that takes into account the time taken in pursuing claims in which it failed, particularly its claim in damages.  Indeed, if Arrive Wealth Management’s money claim had been kept within reasonable bounds it is likely that the case would have been compromised.  In all the circumstances it is reasonable, in my opinion, to reduce Arrive Wealth Management’s costs by 25 per cent. 

7                     The claim against Ms Harkness gives rise to different considerations.  In my reasons I said that the claim against her was hopeless and that I would consider awarding costs in her favour on a solicitor and client basis.  I am still minded to take that course notwithstanding the strong submissions made by the plaintiffs that Ms Harkness should only recover costs on a party and party basis.  The plaintiffs’ claim against Ms Harkness can only be described as speculative.  There was no direct evidence implicating her in any wrongdoing and the inferential case was less than borderline.  I trust the order will discourage other litigants from bringing hopeless actions. 

8                     There will be orders that Ms Manning pay 75 per cent of Arrive Wealth Management’s costs and that the plaintiffs pay Ms Harkness’ costs on a solicitor client basis. 

Associate:

Dated:              11 April 2007