FEDERAL COURT OF AUSTRALIA

BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557

COSTS – discretion to award – discussion of general principles – whether successful party not entitled to costs in respect of those issues or inquiries on which the party failed – whether statutory body not entitled to costs in respect of evidence relating to distinct inquiry or issue on which it failed

Federal Court of Australia Act 1976 (Cth), s 43

Aiden Shipping Co Ltd v Interbulk Ltd (1986) 2 All ER 409 cited

Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 cited

BHP Billiton Iron Pty Ltd v National Competition Council [2006] FCA 1764 referred to

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

Cretazzo v Lombardi (1975) 13 SASR 4 cited

Cummings v Lewis (1993) 41 FCR 559 cited

Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 cited

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

Hamersley Iron Pty Ltd v National Competition Council (1999) 164 ALR 203 referred to

Hamersley Iron Pty Ltd v National Competition Council [1999] FCA 1078 applied

Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748 cited

Jamal v Secretary, Department of Health (1988) 14 NSWLR 252 cited

Latoudis v Casey (1990) 170 CLR 534 cited

Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460 cited

National Competition Council v Hamersley Iron Pty Ltd (1999) 167 ALR 109 applied

Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (unreported, Supreme Court of New South Wales, Hodgson CJ, 3 June 1998) discussed

Roberts v Rodier [2006] NSWSC 1084 cited

Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 cited

BHP BILLITON IRON ORE PTY LTD (ACN 008 700 981) v THE NATIONAL COMPETITION COUNCIL AND FORTESCUE METALS GROUP LIMITED (ABN 57 002 594 872)

VID 1641 OF 2004

FORTESCUE METALS GROUP LIMITED (ABN 57 002 594 872) v THE NATIONAL COMPETITION COUNCIL AND ORS

WAD 39 OF 2005

MIDDLETON J

19 APRIL 2007

MELBOURNE

THE COURT ORDERS THAT:

1.                  The costs of the proceeding be assessed and taxed together with proceeding number WAD 39 of 2005.

2.                  The applicant pay the first respondent’s costs of the proceeding, excluding the first respondent’s costs solely of or in connection with the positive contentions stated in paragraph 16 in the first respondent’s points of defence dated 8 April 2005 and paragraph 17 in the first respondent’s amended points of defence dated 25 September 2006.

3.                  The applicant pay the second respondent’s costs of the proceeding.

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

THE COURT ORDERS THAT:

1.         The costs of the proceeding be assessed and taxed together with proceeding number VID 1641 of 2004.

2.         The first-named second respondent pay the applicant’s costs of the proceeding. 

3.         The first-named second respondent pay the first respondent’s costs, excluding the first respondent’s costs solely of or in connection with the positive contentions stated in paragraph 37 in the first respondent’s points of defence dated 2 May 2005 and amended points of defence dated 25 September 2006. 

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

REASONS FOR JUDGMENT

1                     These two proceedings were heard together, namely proceeding number VID 1641 of 2004 and proceeding number WAD 39 of 2005 (‘the proceedings’).  There was one principal question raised for determination in the proceedings, being whether each of the railway services which were the subject of an application filed under s 44F(1) of the Trade Practices Act 1974 (Cth) (‘the Act’) and dated 11 June 2004 by Fortescue Metals Group Limited (‘Fortescue’) to the National Competition Council (‘the NCC’) was a “service” within the meaning of s 44B of the Act.  In order to determine that question, the Court needed to consider whether the “production process” exception in para (f) of the definition of “service” applied.

2                     On 18 December 2006, I delivered judgment in the proceedings.  In that judgment I found in favour of Fortescue and the NCC that each of the relevant services was a “service” within the meaning of s 44B of the Act, and that the services relevantly did not fall within the “production process” exception in that section.  I stood over the question of costs, and have now received submissions by the parties on the question of costs.

BHPBIO’s submissions

3                     BHPBIO did not seek any costs order in its favour, in that any other party be ordered to pay its costs.  BHPBIO’s submissions were directed to the question of whether any cost order made in favour of the successful parties should be discounted. 

4                     In relation to Fortescue’s costs, BHPBIO contended that because I rejected Fortescue’s principal argument that the operations of BHPBIO produced a “marketable commodity” prior to the railing by BHPBIO of iron ore from its mine sites, costs associated with that argument should be borne by Fortescue.  BHPBIO further contended that in addition to the “marketable commodity” issues, Fortescue put in issue a significant number of facts and matters pleaded by BHPBIO in the proceedings which were really not in contention.  It was submitted that as a result BHPBIO needed to adduce a substantial amount of evidence to establish those facts and matters in the proceedings.  Accordingly, BHPBIO submitted that, in light of the considerable and unnecessary time and expense incurred by BHPBIO in responding to Fortescue’s unsuccessful arguments, Fortescue ought bear its own costs to the extent that those matters identified above were resolved in BHPBIO’s favour, being an amount no less than 50% of Fortescue’s costs in the proceedings.

5                     In relation to the NCC’s costs in the proceedings, BHPBIO contended that not less than 50% of the time and costs incurred by the NCC were likely to have been directly attributable to its preparation of material relating to, and the arguing of, the application of the economic test propounded by it as part of its case.  The reference to the “economic test” is a convenient way to refer to the positive contentions raised by the NCC in paragraph 16 in the NCC’s points of defence dated 8 April 2005 and paragraph 17 in the NCC’s amended points of defence dated 25 September 2006 in proceeding VID 1641 of 2004 and paragraph 37 in the NCC’s points of defence dated 2 May 2005 and amended points of defence dated 25 September 2006 in proceeding WAD 39 of 2005.  BHPBIO submitted that in my rejecting the economic test as formulated by the NCC as irrelevant to the interpretation of the phrase “production process” in s 44B of the Act, the extent to which the NCC’s costs related to that test should be borne by the NCC.  Accordingly, in BHPBIO’s submission, the NCC ought bear 50% of its costs in the proceedings.  In support of this percentage, BHPBIO tendered some material indicating the extent of the interlocutory matters concerned with the introduction of the NCC’s economic test.

Fortescue’s submissions

6                     Fortescue submitted that as the successful litigant in the proceedings it should receive its whole costs.  Fortescue submitted that this was not a case in which the circumstances required departure from the usual order.  It submitted that all the issues contended for at trial were connected to the principal question in the proceedings. 

7                     Fortescue also submitted that whilst it was unsuccessful on certain questions of fact and law, in the circumstances of the case, this alone was not a reason to deprive Fortescue of any of its costs in relation to the principal question.  In particular, Fortescue submitted that the matters contended for at the hearing did not inappropriately lengthen the trial and that given the matters to which the Court had regard in its judgment, these issues were not unreasonably investigated and tested.  Fortescue submitted that, on this basis, it could not be said that its conduct of the case in any respect was unreasonable or inappropriate.

NCC’s Submissions

8                     The NCC submitted that its role in the proceedings was consistent with its statutory responsibilities, including, in particular, making submissions in litigation which concerned the fundamental principles of the operation of Pt IIIA of the Act.  The NCC submitted that its role was limited to making written submissions concerning the main legal issues, and calling one economic expert witness, Professor Rey.  The NCC submitted that, as a successful litigant in the proceedings, it ought to be entitled to its costs in the proceedings, and that no special circumstances existed to warrant a departure from the usual order.

9                     The NCC also submitted that whilst the Court did not accept the NCC’s proposed construction of the term “production process”, the other parties to the proceedings both prior to and during the hearing spent very little time considering the NCC’s economic test.  It was contended that whilst the Court ruled that Professor Rey’s evidence was to be rejected to the extent that it was directed to the proper construction of the term “production process”, nevertheless the evidence was admissible, albeit for the limited purpose of informing the Court of the nature of and context in which Pt IIIA was to operate.  The NCC submitted that, given the evidence was admitted, albeit for the limited purpose, it was not possible to apportion the costs of and incidental to the expert evidence in respect of the other purpose.

10                  Accordingly, the NCC submitted that there were no special circumstances to justify a departure from the usual exercise of the court’s discretion to be awarded its costs as a successful litigant.

Principles

11                  The parties were in agreement that I could and should make a global order for costs relating to the proceedings.  I am content to proceed on this basis: see Aiden Shipping Co Ltd v Interbulk Ltd (1986) 2 All ER 409 and Dr Martens Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602.

12                  The power of the Court to make orders for costs derives from s 43 of the Federal Court of Australia Act 1976 (Cth).  As a general rule, the successful litigant in a proceeding is entitled to receive its costs – ordinarily, costs follow the event.  The power to order costs is discretionary, although it must be exercised judicially and not against the successful party except for some good reason connected with the case: Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460 at 477; Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234; and Cretazzo v Lombardi (1975) 13 SASR 4 at 11 per Bray CJ.  It is well established that the discretion conferred on the Court is very wide, and enables the Court to respond to the wide variety of circumstances that may arise in relation to the making of costs orders.

13                  Justice Toohey said in Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748 at 48,136:

The discretion [in respect of costs] must of course be exercised judicially.  There are decisions, both of Australian and English courts, that throw light on the way in which the discretion is to be exercised.  I shall not refer to those decisions in any detail; I shall simply set out in a summary way what I understand to be their effect.

1.      Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.  Ritter v Godfrey [1920] 2 KB 47.

2.      Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.  Forster v Farquhar [1893] 1 QB 564.

3.      A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them.  In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.  Cretazzo v Lombardi (1975) 13 SASR 4 at 12.

There is no difficulty in stating the principles; their application to the facts of a particular case is not always easy.  Also it is necessary to keep in mind the caveat by Jacobs J in Cretazzo v Lombardi at 16.  His Honour sounded what he described as “a note of cautious disapproval” of applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial.  His Honour commented:

“But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law.  The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case.  There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike.  I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues”.

These observations were approved by Cooper J (with whom Sheppard and Neaves JJ agreed) in Cummings v Lewis (1993) 41 FCR 559 at 602‑603. 

14                  The ordinary rule applies even though the losing party may have had good legal grounds for its stance and conducted itself reasonably and appropriately: see Ruddock 115 FCR at 235.  In exercising its discretion, the court is looking at the matter primarily from the perspective of the successful litigant: see Latoudis v Casey (1990) 170 CLR 534 at 542-3 per Mason CJ; 564 per McHugh J.

15                  Considerations of public policy and, in particular, the need for greater economy and efficiency in the conduct of litigation are relevant considerations in the exercise of the discretion when considering whether a successful party is entitled to all its costs: see, e.g. Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) Lane Industries Pty Ltd (1993) 26 IPR 261 at 271-272.

16                  In Commissioner of the Australian Federal Police v Razzi (No 2) (1991) 30 FCR 64 at 69 Wilcox J said:

In these days of extensive court delays and high legal costs the courts should use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation.  If parties come to realise that they will not necessarily recover the whole of their costs, even though they have unsuccessfully raised a discrete issue, they are likely better to consider whether the raising of that issue is a justifiable course to take.

17                  Although, I note that Cooper J, in referring to the above passage of Wilcox J, in the decision of Cummings 41 FCR at 603 said:

Wilcox J was of the view that to persist in a denial that the statements as found were made was unreasonable and was conduct which unreasonably prolonged the proceedings.  It is no answer to say that a party is entitled to test the evidence to show that nothing was said which might amount to the representations as pleaded.  A party always has that right in litigation.  However, the question which is relevant to the issue as to costs is whether or not the exercise of that right, or the manner in which it was exercised, was reasonable in all the circumstances; and, whether the exercise of the right had the effect of unreasonably prolonging the proceedings.  It was this issue which Wilcox J found against the respondents and upon which he based his decision.

18                  There must be some element connected to the proceeding to make it fair and reasonable to deprive a successful litigant of its costs.  A good reason not to follow the ordinary rule may arise because of the unreasonable or inappropriate conduct of the successful litigant.  It may also arise where there is an ability to identify separate issues or inquiries where the successful litigant has failed. 

19                  There may be other circumstances in which there needs to be some qualification to the starting point of presuming that the successful party is entitled to its costs where justice requires it.  Any determination will always depend on the circumstances arising for the decision of the judge who has conducted the trial and who is considering the appropriate order as to costs.

20                  However, it is to be observed that ordinarily a discount is applied, or said to apply, because of the inappropriate or unreasonable conduct of the successful party: see Ruddock 115 FCR at 236-237 and Latoudis 170 CLR at 544 per Mason CJ; 565-566 per Toohey J.

21                  The fact that a successful party has lost on a particular issue or inquiry does not necessarily mean that the party has acted in the litigation inappropriately or unreasonably.  Nevertheless, in certain circumstances, it may be an appropriate exercise of the court’s discretion to apportion costs according to success or failure on a particular distinct or severable issue or inquiry irrespective of any inappropriate or unreasonable behaviour on the part of the successful party:see Cummings 41 FCR at 599-604; Hughes [1986] ATPR at 48,136.

22                  As Goldberg J observed in Dr Martens [2000] FCA 602 at [54]:

[A] court should be reluctant to embrace the proposition that, as a general rule, it is appropriate to undertake an enquiry as to who was successful in relation to particular issues in a case to determine whether there should be an apportionment of costs against a successful party.  A court should not be too ready to disallow costs simply because a party has failed upon an issue, unless it be quite a separate and distinct issue from the issues in respect of which it succeeded or unless there be some element of unreasonableness or inappropriate conduct in relation to that issue: cf Verna Trading Pty Ltd v New India Assurance Pty Ltd [1991] 1 VR 129 at 152-154.

23                  It seems appropriate when considering separate and distinct issues or inquiries, where there is no element of unreasonableness or inappropriate behaviour on behalf of the successful litigant, to consider appropriate case management principles, the relative merits or strengths of the lost issue or inquiry, whether the length of the proceedings had been greatly increased by the lost issue or inquiry on which the successful party failed, and whether the issue or inquiry on which the successful party failed otherwise was of sufficient significance in proportion to the whole case to warrant a special order to deprive that party of the costs of that issue.

24                  This approach was essentially adopted by Hodgson CJ in Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (unreported, Supreme Court of New South Wales, Hodgson CJ, 3 June 1998), where, after discussing the competing considerations of encouraging selectivity of issues and not penalising a party for supporting their case in every reasonable way, his Honour stated at 13:

Apart from that consideration, in general terms I accept that if an issue is raised reasonably and is not disproportionate to the whole case, then normally the successful party should get his or her costs.  However, particularly in relation to severable issues, the lesser the strength of the point raised and the greater the proportion it bears to the whole case, the more likely it is that the successful party may be deprived of costs; and if the Court comes to the view that it was unreasonable to raise the issue, then the successful party may have to pay the costs of that issue.

See also Razzi 30 FCR 64; and Jamal v Secretary, Department of Health (1988) 14 NSWLR 252 at 271-272 per Mahoney JA.

25                  I should interpolate that there may not need to be the ability to precisely identify separate costs in respect of particular issues.  As Campbell J said in Roberts v Rodier [2006] NSWSC 1084 at [33]:

… I do not accept that the appropriate way of exercising the costs discretion is limited to the identification of separate costs of particular issues.  It could sometimes be within the scope of a proper exercise of discretion, where the costs of certain evidence was relevant to issues on which a plaintiff succeeded and also to issues on which the plaintiff failed, to decide to allow the plaintiff a proportion only of those costs.

26                  Whilst the cases referred to above throw light on the relevant principles to be applied in the exercise of the discretion, their application to the facts of a particular case is sometimes difficult when competing considerations apply.

27                  As I understand the principles relevant to my task, they can be summarised as follows:

1.                  A successful litigant is ordinarily entitled to its costs even if the losing party had good legal grounds for its position and conducted itself in the litigation reasonably and appropriately;

2.                  The successful litigant will be so entitled to its costs unless some good reason connected to the case is shown to the contrary;

3.                  Without limiting the general discretion available, a good reason to the contrary may arise:

3.1              Where the conduct of the successful litigant in connection with the case was unreasonable or inappropriate;

3.2              Where no such unreasonable or inappropriate conduct of the successful litigant is found, but nevertheless there were clearly distinct and severable issues or inquiries that were lost by the successful litigant;

4.                  If the conduct of a successful litigant was inappropriate or unreasonable in connection with the case, the successful litigant will usually be denied all or part of its costs;

5.                  Where the court is considering the question of costs in respect of a lost distinct or severable issue or inquiry, which can clearly be treated as distinct and severable, then to determine whether the successful party will lose some or all of its costs, it will be necessary to consider and weigh up case management principles, the significance of the issue or inquiry in proportion to the proceeding as a whole, and whether the issue or inquiry had any relative strength or merit;

6.                  The court has the discretion to apportion costs even if it cannot identify separate costs in respect of distinct or severable issues or inquiries on which the successful litigant failed, but the matters on which the party failed must be at least capable of separation from the matters on which the litigant was successful.

Fortescue’s costs in the proceedings

28                  It is plain enough that Fortescue as the successful litigant would ordinarily be entitled to its costs.  The question then arises as to whether, by reference to the circumstances of the proceedings, some good reason connected to the case is shown to the contrary. 

29                  It is significant to recall that all parties needed to confront the principal question in the proceedings on the basis there existed only one previous decision of the Court – that of Hamersley Iron Pty Ltd v National Competition Council (1999) 164 ALR 203 (‘Hamersley’) – which dealt with the interpretation of the term “use of a production process” within s 44B of the Act and which involved a very similar factual scenario to the proceedings.  Fortescue’s principal contention was that, applying the “marketable commodity” test to the factual scenario as contended for by Fortescue, a “marketable commodity” was produced in BHPBIO’s operations before the iron ore was railed to the port.  As an alternative contention, Fortescue sought to distinguish Hamersley on a number of grounds.

30                  BHPBIO had good legal grounds for its position and conducted itself in the litigation reasonably and appropriately.  Nevertheless, BHPBIO was the losing party, and Fortescue would ordinarily be entitled to its costs.  However, despite Fortescue’s ultimate success in the proceedings, I did not find in favour of Fortescue on certain factual and legal issues or inquiries.  Nevertheless, I do not consider it appropriate in the circumstances to disentitle Fortescue to its whole costs in the proceedings. 

31                  The conduct of Fortescue in this proceeding was neither inappropriate nor unreasonable.  Fortescue structured its case primarily on the basis of the correctness of the decision in Hamersley.  Therefore, it seems to me that seeking to apply the “marketable commodity” test as expounded in that decision was an entirely appropriate and reasonable approach.  Further, it seems to me that Fortescue seeking in the alternative to distinguish the Hamersley decision on a number of grounds was similarly appropriate and reasonable.  In addition, I do not see any inappropriate or unreasonable behaviour on the part of Fortescue in its approach to putting BHPBIO to proof on factual matters or contentions.  The Court accepted in essence the actual process and operations as contended for by BHPBIO.  However, the conclusions of the Court were determined objectively and not by reference to BHPBIO’s own subjective views or characterisations, or by reference to the subjective views or characterisations of the witnesses called on behalf of BHPBIO.  Fortescue was entitled to test the evidence put forward by BHPBIO, especially in respect of such subjective views and characterisations.

32                  In Hamersley, the learned trial judge held the term “production process” meant “a series of operations by which a marketable commodity is created or manufactured”: at 213.  The test required, as a question of “fact and degree”, a consideration of “the actual operation of the activities in question, considered as a whole”: at 213.  The evidence as to “marketable commodity”, whilst it may be separately identified, was all part of the material the Court needed to consider in determining the actual operation of the activities in question.  Accordingly, it does not seem unreasonable for Fortescue to have approached in the way it did the material placed before the Court.  The principal question for determination in the proceedings was not a mere matter of statutory interpretation of the term “the use of a production process” that could be dealt with by demurrer.  Rather, the Court was required to consider, in detail, the factual evidence of BHPBIO’s operations and apply the construction of the term “the use of a production process”, whether that construction be the one set out in Hamersley, or the construction for which the Court ultimately found.  There does not seem to me to be any element of unreasonableness or inappropriateness in Fortescue directing its evidence, submissions and cross-examination to the application of that test to the facts of this case.

33                  This is not the end of the inquiry.  As I have indicated, the exercise of the discretion to make an order as to costs is not just limited to a consideration of the reasonableness or appropriateness of the conduct of a party in connection with the proceedings.  It may also be appropriate to discount an order in favour of a successful litigant in circumstances where it has lost certain issues or inquiries which can clearly be treated as distinct and severable.

34                  At the outset, I do not consider that the matters upon which Fortescue was unsuccessful were relevantly distinct or severable although they can be identified.  Rather, the matters on which Fortescue was unsuccessful were alternative arguments in support of the one principal question in the proceedings, that is, whether either of the relevant services was a “service” within the meaning of s 44B of the Act.  The matters raised by Fortescue were sufficiently linked to this principal question in the proceedings.  Fortescue did not seek to raise a separate matter for determination by way of a positive defence.

35                  However, to the extent the issues or inquiries upon which Fortescue lost can be identified, and even if they be relevantly distinct and severable, in my view, none of the matters sought to be addressed by Fortescue were so disproportionate to the whole case, or so lacked merit, or so adversely impacted upon the economy and efficiency of the proceedings, according to case management principles, as to warrant an order to deprive Fortescue of some or all of its costs.  As I have said, I was required to consider in detail the factual evidence and apply that evidence to the construction of the term “use of a production process”, which Fortescue reasonably contested.  The ultimate ends of justice would not be served by Fortescue not recovering its costs because of its failure on some identifiable (or even distinct and severable) issues or inquiries, when those issues or inquiries needed to be canvassed as being material to the reaching of a decision.

36                  For these reasons, I do not consider that Fortescue should be deprived of any of its costs in the proceedings.

The NCC’s costs in the proceedings

37                  The position of the NCC is slightly different.  Subject to one matter, it seems to me that the NCC is entitled to its costs of the proceedings as a successful litigant.  The NCC adopted an appropriate role in the proceedings consistent with its statutory responsibilities: see National Competition Council v Hamersley Iron Pty Ltd (1999) 167 ALR 109 at 114.  The NCC did successfully contend that Hamersley was clearly wrong. 

38                  However, the court has a general discretion in relation to costs even where a statutory body is acting in a limited role before the court: see generally Re Dr Ken Michael AM; Ex parte Epic Energy (WA) Nominees Pty Ltd [2002] WASCA 231 (S) at [18]. 

39                  In my view, there was a clear separate and distinct inquiry or issue upon which the NCC was unsuccessful, and which it sought positively to contend, namely the economic test. 

40                  The NCC sought to tender expert economic evidence on the economic test.  At [169] of my reasons for judgment I said:

No party asserted that the term ‘production process’ has a technical or specialised meaning in economics.  On that basis, it is not possible for the Court to construe those words other than in accordance with their most ordinary and natural meaning.  It is therefore not permissible to receive the views of witnesses, expert or lay, as to their preferred interpretation or to explain how the words of a statute would be expected to be applied to the circumstances of the case: Royal Insurance Australia Ltd v Government Insurance Office (NSW) [1994] 1 VR 123 at 133-4.  Such evidence is nothing more than submission and argument and indeed an attempt to usurp the judicial function.

I then concluded at [170]:

Accordingly, each of the tests proposed by the experts, and the application of the facts of this case, is irrelevant.  I therefore accept BHPBIO’s submission and reject the expert evidence to the extent that it is directed to the meaning to be given by the Court to the term ‘production process’.

41                  Whilst I later accepted that the expert evidence was admissible to inform the Court as to the nature of the context in which Pt IIIA of the Act was to operate, the evidence of Professor Rey on this matter was very limited.

42                  In Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 Burchett J noted that the successful first respondent had raised a number of objections on which it failed, which added the last half day to the hearing.  In exercising his discretion against the first respondent on this issue, his Honour held at 169:

A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at every reasonable point along the path of assault.  At the same time, if he multiplies issues unreasonably, he may suffer in costs.  Ultimately, the question is one of discretion and judgment.  In my judgment, the competing considerations will be reflected, and justice will be done, if the costs to be recovered by the first respondent are shorn of any amount attributable to the last day of hearing.

43                  In Hamersley Iron Pty Ltd v National Competition Council [1999] FCA 1078, Kenny J considered the apportionment of costs and reduced the costs awarded to the successful applicant to reflect, amongst other things, costs associated with certain affidavit evidence ruled to be inadmissible. 

44                  Similarly, here, a reduction of costs awarded to NCC would be appropriate in view of my rejection of the economic test.  This was an issue which could be treated as clearly distinct and severable, it being in effect a positive contention raised by the NCC in its points of defence and amended points of defence, which had little merit and did add to the costs of preparation of the parties for trial.  Whilst I do not have sufficient material to assess such costs, I am satisfied they are not merely minimal. 

45                  Professor Rey (the economic expert called on behalf of the NCC) and the other economic experts before me agreed that the term “production process” had no technical or specialised meaning in economics.  In these circumstances, it is difficult to see how the economic test could be relevant to the contention that Hamersley was wrongly decided or could provide an appropriate replacement test.

46                  Unlike the position of Fortescue, who was responding to the Hamersley decision, the NCC sought to introduce an economic test which could amount to nothing more than submission and argument.  It seems to me that to adduce expert evidence going to the economic test introduced an element into the conduct of the proceedings which was of no utility and unnecessarily added to the time and expense of the proceedings including interlocutory steps in preparation for trial.  Whilst BHPBIO and Fortescue also sought to tender economic expert evidence, it was in response to the NCC’s evidence, and I do not think this impacts upon the significance of the unnecessary introduction of the economic expert evidence by the NCC for the purposes of considering costs.

47                  It is sometimes preferable after apportioning issues as I have done to avoid leaving the quantification and fixing of costs of those issues to taxation.  I am mindful that an allocation of costs in the case of a mixed result can rarely be achieved with mathematical precision and such is not necessary: Dodds 26 IPR at 272 per Gummow, French and Hill JJ.  Unfortunately, I do not have any appropriate material to estimate the amount of costs or time spent on the preparation and consideration of the economic test prior to trial, and so cannot make any percentage apportionment of the costs to be discounted.  I therefore propose to order a deduction in the costs awarded to the NCC by reference to the NCC’s points of defence and amended points of defence which will unfortunately leave the quantification and fixing of costs of the economic test issue to taxation in default of agreement between the relevant parties.

48                  Therefore, I propose to order as follows:

In proceeding number VID 1641 of 2004:

1.                  The costs of the proceeding be assessed and taxed together with proceeding number WAD 39 of 2005.

2.                  The applicant pay the first respondent’s costs of the proceeding, excluding the first respondent’s costs solely of or in connection with the positive contentions stated in paragraph 16 in the first respondent’s points of defence dated 8 April 2005 and paragraph 17 in the first respondent’s amended points of defence dated 25 September 2006.

3.                  The applicant pay the second respondent’s costs of the proceeding.

In proceeding number WAD 39 of 2005:

1.         The costs of the proceeding be assessed and taxed together with proceeding VID 1641 of 2004.

2.         The first-named second respondent pay the applicant’s costs of the proceeding. 

3.         The first-named second respondent pay the first respondent’s costs, excluding the first respondent’s costs solely of or in connection with the positive contentions stated in paragraph 37 in the first respondent’s points of defence dated 2 May 2005 and amended points of defence dated 25 September 2006. 

Associate:

Dated:         18 April 2007