FEDERAL COURT OF AUSTRALIA

Australian Trade Commission v Isaac Jewellery Pty Ltd (No. 2) [2009] FCA 218

PRACTICE AND PROCEDURE – Costs – whether costs order should be made in favour of successful applicant – whether special circumstances existed

PRACTICE AND PROCEDURE – Costs Certificate – costs of unsuccessful respondent – circumstances in which certificate should be given

Export Market Development Grants Act 1997 (Cth) ss 94(1)(b)(i), 94(1)(b)(ii)

Export Market Development Grants (Change in Ownership of Business) Guidelines 2006 (Cth)

Federal Court of Australia Act 1976 (Cth) s 43

Federal Proceedings (Costs) Act 1981 (Cth) ss 3, 6

Local Government Act 1919

Acerose Pty Ltd v Workcover Authority of New South Wales (unreported, Sup Ct, NSW, Carruthers AJ, 30 July 1998) distinguished

Attrill and Others v Richmond River Shire Council (1995) 38 NSWLR 545 distinguished

Australian Trade Commission v Isaac Jewellery Pty Ltd [2009] FCA 37 cited

Bullock and Others v Federated Furnishing Trades Society of Australasia and Others (No 2) (1985) 5 FCR 476 referred to

Cretazzo v Lombardi (1975) 13 SASR 4 referred to

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

Independent Commission Against Corruption v Cripps and Anor (unreported, Sup Ct, NSW, Sully J, 27 August 1996) distinguished

Latoudis v Casey (1990) 170 CLR 534 referred to

Oshlack v Richmond River Council (1998) 193 CLR 72 cited

Repatriation Commission v Cornelius (2002) 69 ALD 250 followed

Repatriation Commission v Milenz [2007] FCA 50 followed

Re Mersey Railway Co (1888) 37 Ch D 610 referred to

Ruddock and Others v Vadarlis and Others (No 2) (2001) 115 FCR 229 referred to

The Wilderness Society Inc v Turnbull, Minister for the Environment and Water Resources and Another (2007) 98 ALD 651 cited

Wilderness Society Inc v Turnbull, Minister for the Environment and Water Resources and Another (2008) 101 ALD 1 cited

AUSTRALIAN TRADE COMMISSION v ISAAC JEWELLERY PTY LTD

NSD 1532 of 2008

COWDROY J

13 MARCH 2009

SYDNEY

THE COURT ORDERS THAT:

1.             The Respondent pay the costs of the Applicant.

THE COURT CERTIFIES THAT:

1.             In the opinion of the Court it would be appropriate for the Attorney-General to authorise a payment under the Federal Proceedings (Costs) Act 1981 (Cth) to the Respondent in respect of:

a)        the costs incurred by the Respondent in the appeal from the Administrative Appeals Tribunal which was allowed by order of the Court made on 3 February 2009; and

b)        the costs incurred by the Applicant in relation to the appeal which are required to be paid by the Respondent to the Applicant in pursuance of the above order of the Court.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT: COSTS

1                     The Court delivered its judgment in these proceedings on 3 February 2009 (see Australian Trade Commission v Isaac Jewellery Pty Ltd [2009] FCA 37 (‘Isaac No. 1’)). At the request of the parties the Court reserved the question of costs. The Court has now heard the party’s submissions in relation to costs which are summarised hereunder.

AUSTRADE’S SUBMISSIONS

2                     The applicant (‘Austrade’) submits that it is entitled to an order that the respondent (‘Isaac Jewellery’) pay its costs in consequence of the determination of the Court in favour of Austrade that the challenged decision of the Administrative Appeals Tribunal (‘the Tribunal’) be set aside and be re-determined. Austrade submits that in accordance with the usual principle that costs follow the event, an award of costs should be made in its favour. In support of its submission Austrade relies upon the decision of the Full Bench in Ruddock and Others v Vadarlis and Others (No 2) (2001) 115 FCR 229 which extensively considered the principles to be applied by the Court when exercising its discretion to award costs. Ruddock was followed in The Wilderness Society Inc v Turnbull, Minister for the Environment and Water Resources and Another (2007) 98 ALD 651 and Wilderness Society Inc v Turnbull, Minister for the Environment and Water Resources and Another (2008) 101 ALD 1.

SUBMISSIONS OF ISAAC JEWELLERY

3                     Isaac Jewellery submits that the Court should order that Austrade pay its costs or alternatively that no order for costs be made. If an order is to be made against Isaac Jewellery, then it submits that it should be entitled to a costs certificate under the Federal Proceedings (Costs) Act 1981 (Cth) (‘the Costs Act’).

4                     Isaac Jewellery claims that there are special circumstances which should lead to Austrade’s application for costs being refused. Isaac Jewellery refers to the fact that the Court found that s 94(1)(b)(i) of the Export Market Development Grants Act 1997 (Cth) (‘the EMDG Act’) was inapplicable because the former business had ceased to operate. Isaac Jewellery submits that Austrade made no submissions pertaining to that finding and accordingly it was responsible for the error in the Tribunal’s interpretation of s 94(1)(b)(i) of the EMDG Act. For its part, Isaac Jewellery submits that it was in no way responsible for the error of the Tribunal and that its submissions before this Court in relation to the appeal were at least arguable.

5                     Isaac Jewellery further submits that Austrade’s success in the Federal Court was a minor one made on a ground that did not impeach the thrust of the Tribunal’s decision to approve a grant to Isaac Jewellery under s 94(1)(b)(ii).

6                     Additionally, Isaac Jewellery submits that, as a matter for the exercise of the Court’s discretion, the Court should take into consideration the fact that Austrade had suggested that, in an exchange of emails between Garry Dennis, a consultant acting on behalf of Isaac Jewellery, and David Tonkin, a representative of Austrade, the Court’s decision would be useful in future assessments made by it under the EMDG Act. Isaac Jewellery submits that the appeal was in the nature of a test case, and that Austrade prosecuted the appeal in the public interest.

7                     Isaac Jewellery refers to the decision of Attrill and Others v Richmond River Shire Council (1995) 38 NSWLR 545 in which the Court, having resolved a difference of judicial opinion concerning the interpretation of a provision in the Local Government Act 1919, ordered each party to pay its own costs of the appeal because the Court found the resolution of the issue to be in the public interest.

8                     Isaac Jewellery also relies upon the decision of Acerose Pty Ltd v Workcover Authority of New South Wales (unreported, Sup Ct, NSW, Carruthers AJ, 30 July 1998) in which the successful defendant sought an order that the unsuccessful plaintiff pay its costs. Carruthers AJ, refusing such order and instead ordering that each party pay its own costs, said as follows:

Also these proceedings are, as I have already indicated, by their nature a test case as far as other Spinner’s franchisees are concerned, and I take into consideration the line of authority applied in decisions such as that of Cummins J in Lyser v Camberwell City Council (1989) 69 LGRA 250, where his Honour was dealing with the construction of certain Local Government by-laws. His Honour there deviated from the general rule that costs should follow the event because the matters which were debated before him were matters of much general interest in so far as Local Government administration was concerned.

9                     Isaac Jewellery also relies upon the decision in Independent Commission Against Corruption v Cripps and Anor (unreported, Sup Ct, NSW, Sully J, 27 August 1996) which it submitted was an example of a Court declining an award of costs in favour of a public body given that the public body was pursuing a matter of public interest and the public body was not an indigent private person.

AUSTRADE’S SUBMISSIONs IN REPLY

10                  Austrade rejects the implication that its submissions before the Tribunal were in any way responsible for the Tribunal’s erroneous conclusions concerning the operation of s 94(1)(b)(i) and s 94(1)(b)(ii) of the EMDG Act. Its submissions before the Tribunal addressed both sub-sections for the Tribunal’s consideration but neither party suggested that the Export Market Development Grants (Change in Ownership of Business) Guidelines 2006 (‘the Guidelines’) applied to s 94(1)(b)(i). Austrade submits that it was the Tribunal’s error to erroneously apply the Guidelines to such subsection.

11                  Austrade also submits that there is no major public interest in the Court’s decision which should lead the Court to depart from the usual practice of ordering that the successful party receive a costs order in its favour. Further, Austrade emphasises that the suggestion that the public interest was to be served by the appeal first arose from a comment by Gary Dennis, Isaac Jewellery’s consultant, and that Mr Tonkin’s response clearly stated that Austrade would not pay Isaac Jewellery’s costs.

12                  Austrade submits that the appeal was argued on a narrow ground, namely whether there had been an erroneous application of the Guidelines by the Tribunal. No question of public interest was involved. The only question for determination was whether a grant was payable to Isaac Jewellery under the EMDG Act.

13                  Austrade submits that the decisions of State Courts relied upon by Isaac Jewellery should be treated with caution. In Attrill the Court was faced with a difference of judicial opinion relating to a local government statute and such factor clearly demonstrated a distinct public interest. No such consideration arises in the present appeal.

14                  Similarly, the decision of Acerose is distinguishable since the Court in that matter was clearly of the opinion that the case before it constituted a test case. As to the decision in Cripps, Austrade submits that it does not stand for the principle that non-indigent public authorities cannot be awarded costs.

FINDINGS

15                  The power of the Court to award costs is contained in s 43 of the Federal Court of Australia Act 1976 which relevantly provides:

(1)     Subject to subsection (1A), 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.

16                  In Ruddock the Full Court considered the principles governing the award of costs at [9]-[25]. Since there is no challenge to those principles it is unnecessary to restate them, save to observe that the decision confirms the practice that a successful party is usually entitled to be compensated for its costs by an award made against the unsuccessful party.

17                  The basic rule remains that the Court has an absolute and unfettered discretion in relation to costs subject only to the requirement that the discretion be exercised judicially and not arbitrarily or capriciously and not on grounds unconnected with the litigation: see Cretazzo v Lombardi (1975) 13 SASR 4 at 11.

18                  Secondly, it remains the established principle that an award of costs to the successful party is compensatory: see Latoudis v Casey (1990) 170 CLR 534 per Mason CJ at 543; McHugh J at 567. In Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136 Toohey J observed:

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 K.B. 47.

19                  The Tribunal’s decision resulted from its own deliberation on the evidence and submissions before it, and the Court is not in a position to discern that the submissions of either party necessarily resulted in the Tribunal being deflected from the correct finding relating to the application of the Guidelines to the case before it. The Court therefore rejects the submission that Austrade was responsible, in whole or in part, for not submitting that the Guidelines had no application to s 94(1)(b)(i) and that s 94(1)(b)(i) had no application on the facts before the Tribunal.

20                  In Attrill there had already been a division of judicial opinion within the Supreme Court and the New South Wales Court of Appeal found that the determination of that dispute in the Court was a matter in the public interest. For this reason it ordered that each party pay its own costs. In Acerose and Cripps public interest was found to be involved in the decision.

21                  The Court does not consider that there is any wide public interest established in the result of this appeal to justify an order that each party pay its own costs, as was ordered in the authorities relied upon by Isaac Jewellery and the rational for which was considered in Oshlack v Richmond River Council (1998) 193 CLR 72. If an appeal raises a novel question of ‘much general importance and some difficulty’ (see Ruddock at [17]), the appeal Court may refuse an order for costs against the unsuccessful appellant: see Re Mersey Railway Co (1888) 37 Ch D 610 at 619 and 621. No such consideration arises in the present appeal.

22                  The suggestion that Austrade in some way regarded the appeal as a test case is not supported by the emails relied upon by Isaac Jewellery. In the exchange a request was made by Mr Dennis whether there was any provision for Austrade to bear Isaac Jewellery’s costs in the forthcoming appeal, stating as follows:

If possible, Isaac Jewellery would also like to see the justification for appealing the AAT decision to the Federal Court. It is unclear as to how the public interest is being served by further appealing this matter. Isaac Jewellery can not obtain EMDG benefits unless it spends its own money. If it spends its own money it will further the objectives of the EMDG Act and benefit the Australian community generally and the public interest. Also, the AAT decision appears unlikely to establish a precedent as the circumstances in this case are unique to Isaac Jewellery.

23                  In the reply Mr Tonkin advised that there was no basis for Austrade to pay the costs of another party, stating:

We consider the public interest best served by correcting a decision that, we consider, has been made in error and that may produce an anomalous outcome in future assessments of this nature under the Act.

24                  The email exchange shows that Austrade’s purpose in the appeal was solely to rectify a perceived error by the Tribunal. Its purpose was vindicated by the Court’s finding.

25                  As stated, an award of costs is in its nature compensatory, and not punitive. McHugh J at 567 of Latoudis observed that a costs order may, ‘and usually will, be made even though the action has failed through no fault of the unsuccessful party’. The Court is unable to discern any factor to justify the Court exercising its discretion in favour of Isaac Jewellery so as to deny Austrade its entitlement to costs.

Application for Costs Certificate

26                  Section 6 of the Costs Act relevantly provides:

(1)     Subject to this Act, where a Federal appeal succeeds on a question of law, the court that heard the appeal may, on the application of a respondent to the appeal, grant to the respondent a costs certificate in respect of the appeal.

(2)     …

(3)     The certificate that may be granted under subsection (1) or (2) by a court to a respondent to a Federal appeal is a certificate stating that, in the opinion of the court, it would be appropriate for the Attorney‑General to authorize a payment under this Act to the respondent in respect of:

         (a)     the costs incurred by the respondent in relation to the appeal; and

         (b)     any costs incurred by an appellant in relation to the appeal that have been, or are required to be, paid by the respondent to the appellant in pursuance of an order of the court, not being costs to which a costs certificate granted under section 7 relates.

27                  Section 3 defines ‘Federal appeal’ to include:

         (g)     an appeal to the Federal Court from a decision of the Administrative Appeals Tribunal…

‘Federal Court’ is defined in the same section to include the Federal Court of Australia.

28                  In Repatriation Commission v Cornelius (2002) 69 ALD 250 Branson J observed at [11] that costs certificates may be granted in the following circumstances:

The restricted circumstances in which costs certificates may be granted indicates that the Act is not intended to provide, in effect, an alternative source of legal aid but is intended to advance a more specific public interest. That public interest would seem to be the alleviation of the costs burden that can fall on an individual who appropriately and successfully institutes a proceeding before the Administrative Appeals Tribunal or a federal court yet thereafter finds himself or herself a respondent to a successful "appeal" on a question of law or as to the amount of damage awarded at first instance.

29                  This public interest as described above appears to be similar to the factual scenario of the present proceedings. Nothing in this Court’s decision to uphold Austrade’s appeal form the AAT suggests that Isaac Jewellery did not ‘appropriately and successfully’ institute a proceeding before the AAT, and Isaac Jewellery now finds itself as a respondent to the successful appeal on a question of law by Austrade.

30                  Provided the Court exercises its discretion judicially, its power to award a certificate is unfettered: see Bullock and Others v Federated Furnishing Trades Society of Australasia and Others (No 2) (1985) 5 FCR 476 at 477.

31                  Austrade has obtained a benefit of a similar kind to that considered in Repatriation Commission v Milenz [2007] FCA 50. Finn J at [4] found that the successful appellant obtained a benefit in ensuring that ‘administrative decisions made under the Veterans’ Entitlement Act are made according to law’ and thus ‘making a respondent … bear the costs of the appeal in these circumstances undercuts the public interest served by the Federal Proceedings (Costs) Act’. By analogy, Austrade has an interest in ensuring that decisions made under the EMDG Act are made by the application of the correct principles. In this respect a benefit has resulted in Austrade’s favour from the determination of the appeal. Further, the respondent in this case is a small business of limited financial means and thus making Isaac Jewellery bear the full cost of the appeal would undercut the public interest as described by Branson J at [11] of Cornelius.

32                  The Court is therefore of the opinion that a certificate under s 6(3) of the Costs Act should be granted to Isaac Jewellery.

Associate:

Dated:         13 March 2009