FEDERAL COURT OF AUSTRALIA

Horizontal Falls Adventure Tours Pty Ltd (ACN 108 455 410) v Thomas (No 3) [2009] FCA 1205

COSTS – s 43(2) of the Federal Court of Australia Act 1976 (Cth) – applicant’s claims in relation to aspect of application dismissed – whether costs should be reserved – whether indemnity costs warranted – applicant conceded no case made out in respect of the first respondent – whether first respondent incurred separate costs – whether case against respondents hopeless or groundless – applicant raised undisclosed bases of liability in written submissions after the hearing

Held: the applicant pay the costs of the first respondent on an indemnity basis and the costs of the second respondent on a party-party basis

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

Allstate Life Insurance Co and Ors v Australia and New Zealand Banking Group Limited (No 13) [1995] FCA 1459 cited

Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 cited

Colgate-Palmolive v Cussons (1993) 46 FCR 225 cited

De Alwis v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 77 cited

Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354 cited

Horizontal Falls Adventure Tours Pty Ltd (ACN 108 455 410) v Thomas (No 2) [2009] FCA 1084 cited

InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 cited

Latoudis v Casey (1990) 170 CLR 534 cited

HORIZONTAL FALLS ADVENTURE TOURS PTY LTD (ACN 108 455 410) v TROY ROBERT THOMAS and RHYS HENRY THOMAS

QUD 115 of 2009

COLLIER J

27 OCTOBER 2009

BRISBANE

THE COURT ORDERS THAT:

1.         The applicant pay costs incurred by Mr Troy Thomas on an indemnity basis.

2.         The applicant pay costs incurred by Mr Rhys Thomas on a party-party basis.

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

1                          In Horizontal Falls Adventure Tours Pty Ltd (ACN 108 455 410) v Thomas (No 2) [2009] FCA 1084 (“the judgment”) I dismissed the claim of the applicant. The applicant sought relief pursuant to Pt A para 7 of the application filed 13 May 2007. After delivering judgment I ordered the parties to file and serve separate submissions as to costs incurred in respect of hearings leading to the judgment.

2                          Except as provided by any other Act, the award of costs is in the discretion of the Court: s 43(2) of the Federal Court of Australia Act 1976 (Cth). Two clear issues for determination arise from these submissions. They are:

1.         Whether costs should be reserved until the conclusion of the substantive proceedings; and

2.         In light of the concession of the applicant that costs should follow the event – whether the respondents’ costs should be awarded on a party-party basis or an indemnity basis.

1. Should costs be reserved?

3                          The applicant has submitted that costs should be reserved to the trial of the balance of the proceedings, when the Court will have a more extensive understanding of the parties’ conduct, and will be able to form a more informed and balanced view of where costs should ultimately fall.

4                          In my view however there is no advantage to either the Court or the successful respondents in reserving costs until this time, nor circumstances justifying such an order.

5                          Following agreement of the parties, the Court had ordered that the claims of the applicant in Pt A para 7 of the application be heard and determined separately. The judgment constituted the Court’s orders and reasoning in respect of these discrete claims. The discretion to be exercised by the Court in relation to these claims relates to matters relevant to these claims, and not to other parts of the substantive proceedings.

6                          Order 62 rule 3 provides as follows:

(1) The Court may in any proceeding exercise its powers and discretions as to costs at any stage of the proceeding or after the conclusion of the proceeding.

7                          In Allstate Life Insurance Co and Ors v Australia and New Zealand Banking Group Limited (No 13) [1995] FCA 1459, where the respondents had been successful in meeting appeals dealing with a discrete question and the Court had ordered that the appellants pay the respondents’ costs of the appeals, Lockhart, Lindgren and Tamberlin JJ observed:

[4] The proceeding has been set down for hearing commencing on 18 March 1996 and unless settled may subsist for a substantial time. The litigation is complex. It is unlikely that final judgment will be given until late 1996 or even later. The successful parties to the appeals before this Court will therefore, in the ordinary course of events, not recover their costs for a long time.

[5] It would be wrong if the successful parties do not enjoy the fruits of their order for costs for such a long time. The parties entitled to the benefit of the order for costs which this Court has made in appeals from interlocutory orders should not be deprived of that benefit until the case has been finally disposed of.

8                          In my view similar principles apply in this case. The respondents, who were successful in respect of issues arising in relation to Pt A para 7 of the application, have incurred costs to which they are now entitled. The applicant’s claims in the substantive proceedings will not be heard until early 2010. There is no justification for leaving a determination of costs arising from the separate hearing of Pt A para 7 of the application until that time.

2. Basis of costs award

9                          The respondents submit that they should both be entitled to an award of costs on an indemnity basis.

Mr Troy Thomas

10                        In relation to Mr Troy Thomas, the applicant submits that there was no basis for a claim that Mr Thomas had incurred separate costs and in any case that an award of costs should not be on an indemnity basis. However the respondents submit that:

·          Mr Troy Thomas was separately named as a respondent;

·          he was required to produce and swear four separate and substantial affidavits and was cross-examined at the trial;

·          he was required to produce records relating to his business; and

·          he otherwise retained lawyers to represent his interests in defence of the applicant’s accusations.

11                        It is well settled that the purpose of an order for costs is to indemnify or compensate the person in whose favour it is made, not to punish the person against whom it is made: Latoudis v Casey (1990) 170 CLR 534, De Alwis v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 77. Although the usual rule is that costs be awarded against the unsuccessful party on a party-party basis, the Court has a discretion to award costs on an indemnity basis in appropriate cases: Colgate-Palmolive v Cussons (1993) 46 FCR 225 at 231-234. Circumstances where the Court may consider awarding costs on an indemnity basis include:

·          where allegations have been made which ought never to have been made, or the proceedings unduly prolonged by groundless contentions (Sheppard J in Colgate-Palmolive (1993) 46 FCR at 233);

·          where an application has “no chance of success” or is “hopeless”; InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 at [11];

·          where there are some special or unusual features in a case so as to justify the Court exercising its discretion in this way (InterTAN Inc [2005] FCAFC 54 at [11]).

12                        While it was clear at the hearings of 11 June 2009 and 22 June 2009 that there was substantial identity of interest between the respondents, nonetheless I accept the submission of the respondents that Mr Troy Thomas incurred costs separately from Mr Rhys Thomas. Further, I consider that there is a sound basis for an order awarding Mr Troy Thomas his costs incurred in these proceedings on an indemnity basis.

13                        As I observed in the judgment, notwithstanding that Mr Troy Thomas was required to meet the proceedings, HFAT did not open a case against him, nor did HFAT produce evidence in support of its claims against him in terms of Pt A para 7. Indeed, the applicant conceded in its submissions that, given the state of the evidence, there was no sufficient basis for an order against Mr Troy Thomas in relation to this aspect of the application. I consider that the claims against Mr Troy Thomas in terms of Pt A para 7 were of the nature described in Colgate-Palmolive (1993) 46 FCR and InterTAN [2005] FCAFC 54, namely allegations which ought never to have been made, and which had no chance of success. Taking this view, and particularly in light of the fact that Mr Troy Thomas was required to take steps to defend himself against the applicant’s case including engaging legal representation, I consider that the case against Mr Troy Thomas exhibits special features justifying the Court exercising its discretion to order costs incurred by him to be paid on an indemnity basis.

Mr Rhys Thomas

14                        It was clear throughout the proceedings that the applicant’s primary case in respect of the removal of the booking records was against Mr Rhys Thomas. In relation to costs incurred by Mr Rhys Thomas however I do not consider an award of costs on an indemnity basis is warranted. I do not consider that the claim against Mr Rhys Thomas had no chance of success or was hopeless or groundless, nor do I consider that the case against him exhibited special features so as to warrant the Court exercising its discretion to award indemnity costs. I form this view because I consider that:

·          Notwithstanding that there was no direct evidence that Mr Rhys Thomas took the relevant booking records from the HFAT office, there was some evidence given by Ms Sophie Bishop in relation to this matter supporting the applicant’s claim against Mr Rhys Thomas, and upon which the applicant relied. The allegations of the applicant against Mr Rhys Thomas were not deliberately false or vexatious (cf comments of Basten JA in Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [106]).

·          The inference which the applicant invited the Court to draw in respect of the alleged removal of the booking records, namely that Mr Rhys Thomas removed the booking records in light of the breakdown of his relationship with Ms Cummins and the new business established by Mr Troy Thomas, was, although not substantiated, not unreasonable from the outset.

·          After judgment had been reserved the applicant sought to raise, for the first time, previously undisclosed bases of liability. This conduct is compensable by an award of costs against the applicant. However it did not unduly prolong the litigation nor cause the parties to incur liability for solicitor and client costs “far beyond what they could reasonably have expected to incur in the litigation of genuine issues” (cf Holland J in Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354 at 358, Chaina [2008] NSWCA 353 at [106]).

·          The submissions by the applicant with respect to potential contempt proceedings against Mr Rhys Thomas were, in the final analysis, unsupportable, but not egregious.

15                        I consider that the appropriate order is that the applicant pay costs incurred by Mr Rhys Thomas on a party-party basis.

Associate:

Dated:         27 October 2009