FEDERAL COURT OF AUSTRALIA

Media Ocean Limited v Optus Mobile Pty Limited (No 9) [2010] FCA 1165

REASONS FOR JUDGMENT

1                     By a notice of motion filed on 3 September 2010 the applicants (Media Ocean) sought leave to amend their application (including by joinder of another party, albeit a party related to the existing respondent) and statement of claim.  The respondent (Optus) objected to the grant of leave.

2                     The application for leave to amend is brought under O 13 r 2(1) of the Federal Court Rules.  The application for joinder is brought under O 6 r 8(1)(a) or (b) of the Federal Court Rules. 

3                     Both applications are governed by s 37M of the Federal Court of Australia Act 1976 (Cth).  Section 37M is as follows:

(1)        The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:

(a)        according to law; and

(b)        as quickly, inexpensively and efficiently as possible.

(2)        Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:

(a)        the just determination of all proceedings before the Court;

(b)        the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c)        the efficient disposal of the Court's overall caseload;

(d)        the disposal of all proceedings in a timely manner;

(e)        the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

(3)        The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.

(4)        The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:

(a)        the Rules of Court made under this Act;

(b)        any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court.

4                     The parties identified the relevant principles to be applied, whilst correctly emphasising that each case turns on its own facts. 

5                     Hence, in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [102]-[103] the High Court said:

[102] The objectives stated in r 21 do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will.  Factors such as the nature and importance of the amendment to the party applying cannot be overlooked.  Whilst r 21 assumes some ill effects will flow from the fact of a delay, that will not prevent the parties dealing with its particular effects in their case in more detail.  It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case.  Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made.  There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates.  Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court's discretion.  Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment.

[103] The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in J L Holdings.  Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for.  The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it.  Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court's attention, so that they may be weighed against the effects of any delay and the objectives of the Rules.  There can be no doubt that an explanation was required in this case.

6                     In Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101 the Full Court of the Federal Court at [51] said:

Aon Risk is not a one size fits all case.  Whilst various factors are identified in the judgment as relevant to the exercise of discretion, the weight to be given to these factors, individually and in combination, and the outcome of that balancing process, may vary depending on the facts in the individual case.  As the plurality in Aon Risk observed at [75], statements made in cases concerning amendment of pleadings are best understood by reference to the circumstances of those cases, even if they are stated in terms of general application.

7                     At [67]-[68] their Honours continued:

[67] Importantly, to adapt the joint judgment in Aon Risk at [102] to reflect the relevant statutory provision in the present case, the objectives in s 37M of the Federal Court Act do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will.  Factors such as the nature and importance of the amendment to the party applying cannot be overlooked.

[68] There is nothing in Aon Risk or s 37M and s 37N of the Federal Court Act which would suggest that the consideration that it is desirable that the case be decided on its merits, so as to preserve public confidence in the administration of justice, is a consideration irrelevant to the exercise of his discretion.

8                     In Dye v Commonwealth Securities Limited (No 2) [2010] FCAFC 118 another Full Court repeated the observation in Cement Australia at [51] in respect of Aon.  On the facts in Dye the Full Court determined that although the trial judge correctly identified that the party seeking an amendment bears the onus of persuasion, the relevant factors must be weighed one against the other (at [23]). 

9                     There are a few inescapable facts in the present case. 

10                  First, the proposed amendments are substantial.  They involve significant new claims.  They will undoubtedly require further discovery, new evidence, a later hearing date and a longer hearing than otherwise would be the case (there being currently no hearing date fixed). 

11                  Second, the proposed amendments are brought late in the day when measured against the procedural history of this matter. 

12                  Third, the procedural history of the matter to date has been unfortunate to say the least – not only lengthy, complicated, difficult, and expensive, but also involving repeated breaches of court timetables, repeated applications for extensions of time, and the vacation of hearing dates on three earlier occasions.  I do not propose to repeat this history in these reasons but have been assisted by chronologies and submissions which identify the many twists, turns and delays to which this matter has been subjected.

13                  Fourth, the proposed amendments could have been raised at a much earlier time, indeed on one view (urged by Optus), at any time after 12 August 2009 when Media Ocean became aware of the conduct that (albeit belatedly) has prompted the making of the amendment application. 

14                  Fifth, Optus will be prejudiced by the amendments in a number of ways not all of which are compensable by an order that Media Ocean pay Optus’s costs thrown away by reason of the amendment.  Costs thrown away will not compensate Optus for the lost management time in having to re-do discovery, re-consider lay evidence, or re-consider expert evidence.  It will not compensate Optus for having its cross-claim against Vodafone delayed. 

15                  Sixth, I accept that these types of prejudice are real.  I also accept that they could have been avoided or largely ameliorated by Media Ocean having ensured its “litigation house” was in reasonable order and having acted with the degree of forethought and diligence which can reasonably be expected of represented litigants in a major commercial cause such as the present case. 

16                  In short, had Media Ocean ensured its “litigation house” was in reasonable order and acted with the expected reasonable forethought and diligence then this application could have been made at any time after 18 September 2009 (the date Optus filed and served an amended defence relying on its blocking conduct as an answer to the damages claim) and should have been made or at least fully foreshadowed on 5 November 2009 (the date on which Media Ocean applied for leave to rely on its third further amended application and statement of claim). 

17                  These circumstances mean that Optus’s objection to the application to amend was reasonable and appropriate.  Despite this and the weight of the matters referred to above, there are other factors which must be taken into account and which lead me to the view that, when all relevant factors are weighed together, the amendments should be allowed.  The other factors which need to be weighed in the balance are as follows.

18                  First, I do not accept that the litigation decisions which Media Ocean made (a term which includes Media Ocean’s lawyers who are its authorised agents for the purpose of the litigation) can reasonably be seen as forensic decisions for the purpose of either themselves gaining a tactical advantage or placing Optus at a tactical disadvantage.  The evidence does show that Media Ocean considered a legal response to Optus’s blocking as soon as the blocking commenced (on 12 August 2009).  It does show that Media Ocean made a commercial response to that blocking by sending out different numbers its customers could use.  The evidence, however, does not support the inference that Media Ocean decided not to pursue any legal action at that time.  In any event, even if I drew that inference it is difficult to accept that the circumstances of this case are such that Media Ocean should be treated as bound by its decision and forever precluded from litigating its claims based on the blocking.

19                  Similarly, it is clear that on 5 November 2009 Media Ocean failed to put Optus or the Court on notice of the prospect of any legal response to the blocking other than the amendments and additional evidence identified at that time.  It is also true that a party acting with reasonable forethought and diligence should have been in a position to give notice at that time.  Moreover, despite the apparently inchoate nature of the legal representatives’ thoughts about the issue at that time there can be little doubt (with the benefit of hindsight) that Media Ocean should have done so.  Further, the type of case contemplated in the foreshadowed reply on 13 November 2009 should have been made clear.  And again, in hindsight, Media Ocean’s persistence with the reply rather than an amended application and claim after 22 March 2010 (Optus’s objection to the reply) or, at the latest, 1 April 2010, may reasonably be described as ill advised and productive of delay and wasted costs.

20                  Despite this lengthy list of litigation choices which, in hindsight, may be seen as inappropriate having regard to the objectives in s 37M of the Federal Court of Australia Act, I am unable to characterise them as the type of forensic decisions made for a tactical reason (either advantage to themselves or disadvantage to another) by which a party should be bound.  Instead, the evidence of Media Ocean’s solicitor, Nathan Mattock, (which I accept) suggests different inferences provide a more likely explanation for Media Ocean’s dilatory conduct – namely:

(1)               Media Ocean did make a commercial response to Optus’s blocking in September 2009 and did not seek legal advice at that time about applying for an injunction, even though it considered doing so.

(2)               Media Ocean’s lawyers became aware of the relevance of the blocking to the damages claim on 18 September 2009.  Insofar as they thought about the issue, they considered it could be dealt with in reply.

(3)               The focus of Media Ocean lawyers in the period from 18 September to 5 November 2009 was not on the reply that might be required but other difficulties leading to the third amended application and claim.  This is unfortunate because dealing with issues in this sequential manner is conducive to wasted time and increased costs.  However, nothing in the evidence suggests a forensic or tactical decision in contrast to a focus on the immediate issues at hand at the expense of timely consideration of the overall litigation in the context, it must be said in fairness to Media Ocean, of complicated and evolving proceedings.  As Media Ocean submitted, the conduct in question occurred some five months after the proceedings were commenced and evolved over the next six months, being affected in the interim by the grant and dissolution of an interlocutory injunction (see Pivotel Satellite Pty Limited v Optus Mobile Pty Limited [2009] FCA 1601 and Pivotel Satellite Pty Limited v Optus Mobile Pty Limited [2010] FCA 121).

(4)               Nor can it be inferred that there was any deliberate withholding of information from Optus or the Court.  To the contrary, the evidence suggests the overly narrow focus which I have already identified.  The situation on 13 November 2009, when orders were made permitting Media Ocean to file a reply without any indication by Media Ocean of the nature or scope of the document ultimately filed, is explicable on the same basis.

(5)               By December 2009 the Pivotel proceeding had commenced (proceeding NSD 1468 of 2009).  While Optus correctly submitted that it should not pay the price in this proceeding of delay occasioned by Media Ocean’s focus on the Pivotel proceeding, the facts are that throughout the relevant period Pivotel and Media Ocean had common legal representation, there was a great deal of activity in the Pivotel proceeding in the period December 2009 to February 2010, the reply in this proceeding was substantially the same as parts of the amended pleading in the Pivotel proceeding, and there was a successful challenge to those parts of the pleading in the Pivotel proceeding (Pivotel Satellite Pty Limited v Optus Mobile Pty Limited [2010] FCA 516).  Mr Mattock’s description of the impact of the Pivotel proceeding on this proceeding reflects the reality of the circumstances existing between December 2009 and 27 May 2010 (the date of the judgment in Pivotel Satellite Pty Limited v Optus Mobile Pty Limited [2010] FCA 516).  This is not to say the explanation does other than reflect adversely on Media Ocean’s conduct of this proceeding.  Media Ocean repeatedly failed to comply with orders for the filing of the reply and, in so doing, gave no indication to Optus or the Court of the nature or scope of what was intended despite the obvious capacity of what was ultimately filed to undermine Optus’s and the Court’s reasonable expectation that the matter could soon be fixed for hearing.

21                  Second, and as indicated above, there is an explanation for the delay in the making of this application.  The explanation is not to the credit of Media Ocean because, in the circumstances of the filing of Optus’s amended defence on 18 September 2009, Media Ocean could and should have had an appreciation of all of the consequences of the blocking defence by the time of the Court appearance on 5 November 2009.  Media Ocean’s failure to do so has caused substantial delay and is likely to have caused costs to be wasted.  Nevertheless, I accept Media Ocean’s characterisation of the facts as disclosing errors of judgment rather than forensic decisions for tactical reasons.  Insofar as relevant, I do not accept the challenge to Mr Mattock’s credit on the basis that his firm’s time sheets do not record all work done on this matter.  Mr Mattock’s firm is conducting the litigation on a fixed fee basis.  He gave evidence that the time sheets are thus of limited use and incomplete.  I accept that evidence.  I also do not accept that the fact Mr Mattock, Media Ocean’s solicitor, explained the delay rather than Media Ocean itself is a valid reason for drawing any adverse inference about Media Ocean’s conduct.  Nor can Mr Mattock’s claims for privilege about certain matters lead to any adverse inference of the kind Optus submitted should be drawn.

22                  Third, the amendments are important to Media Ocean’s claim for damages.  The effect of the blocking defence would be to limit the period of damages.  The amendments enable Media Ocean to claim damages despite the fact of blocking (albeit on a complicated counterfactual hypothesis which will raise substantial questions of proof).  Despite the difficulties (legal and factual) which the amended claims may confront it was not put that the amendments were hopeless in the sense of doomed to fail.  Optus did submit that the amendments were incoherent and futile but on different grounds.  I deal with the alleged incoherency below.  As to futility, Optus’s point was that proving the claims would require far more evidence than Mr Mattock’s affidavit contemplated.  This is likely to be correct, as Media Ocean’s submissions in reply appear to concede.  I have assessed this application to amend on the basis that the amendments involve new and substantial claims that will require further discovery, evidence and the inevitable associated costs and lengthier (as well as later) hearing than otherwise would be the case.

23                  For these reasons the new claims (subject to the incoherence point) should thus be assumed to be at least arguable.  On this basis, Optus’s case is that Media Ocean (by reason of its conduct and the consequences for Optus) should be precluded from making the claims in this proceeding with the consequence that it would be an abuse of process giving rise to an Anshun estoppel (Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589) should Media Ocean attempt to make the claims in a separate proceeding.  The Anhun estoppel point was the subject of debate.  For present purposes it is sufficient to say this.  The claims Media Ocean makes by the amendments are significant to its damages case.  If Media Ocean could make the claims in a separate proceeding then the considerations in s 37M of the Federal Court of Australia Act would weigh against creating a situation leading to duplicity of proceedings.  If Media Ocean would be estopped from making the claims in a separate proceeding then it must be recognised that the effect of refusing the amendments would be to preclude Media Ocean from ever raising these apparently arguable claims for damages based on events which occurred within the last 12 months.  Either way, Anshun considerations give rise to a factor that weighs in the balance in favour of permitting the amendments.

24                  The incoherence points were not at the forefront of Optus’s submissions.  As to the appropriateness of the declarations and orders sought, it seems to me that this application is not a convenient vehicle for their resolution.  Those issues will be resolved as part of the hearing.  As to the pleading itself I agree with the point made by Optus in paragraph 74 of its submissions to the effect that paragraphs 40 to 60 of the amended statement of claim proceeds on a critical but unpleaded assumption of an obligation on Optus’s part to carry all calls made by its customers to Media Ocean numbers.  The nature and source of that obligation should be pleaded in order to disclose a cause of action.  Otherwise, the points Optus makes are insufficient to affect the balance in respect of the grant of leave.

25                  Media Ocean requested that it be heard in respect of the issue of the costs of its application to amend and consequences in terms of costs thrown away having regard to these reasons for judgment.  I indicated that I would hear the parties further on costs if they so wished.  Nevertheless, it is necessary that I record that, in the balance of competing factors, the issue of costs to compensate Optus at least in part for the consequences of Media Ocean’s dilatory conduct is a material factor.  That is to say, I consider Media Ocean could and should have made or at least clearly foreshadowed the nature and substance of this application at a much earlier stage in the proceeding (on 5 or 13 November 2009).  I accept that its failure to do so was not the result of a deliberate forensic decision intended to gain a tactical advantage or impose a tactical disadvantage on Optus.  However, Media Ocean both failed to assess at a reasonable time and in a reasonable manner the true consequences of Optus’s blocking defence for the case as a whole and made errors of judgment by dealing with issues sequentially and persisting in a misguided attempt to deal with substantial new causes of action through a reply rather than an amended application and claim.  Optus has and will suffer real prejudice by reason of Media Ocean’s conduct.  Some of that prejudice is compensable by Media Ocean agreeing or being ordered to pay Optus’s costs of this application and the costs thrown away by reason of the amendments.  But for the capacity to ameliorate some of Optus’s prejudice the factors in the balance on the grant of leave would be different as Optus would be left to suffer all of the prejudice caused by Media Ocean’s conduct and through no fault of Optus itself. 

26                  These considerations indicate that leave should not be granted other than in association with the making of an order for costs in Optus’s favour.  Given that there is power to make such an order it is sufficient for present purposes to record that, subject to this issue of costs and Media Ocean pleading the nature and source of the assumed obligation on Optus to carry all traffic from its customers to the Media Ocean numbers, I am persuaded that leave to the amendments should be granted.  Orders to facilitate this occurring will be made in consultation with the parties.  I am not persuaded that other conditions, as Optus sought, should be imposed on the grant of leave.  Earlier costs orders relate to the circumstances at the time these orders were made.  The grant of leave does not justify making costs under those orders taxable forthwith.  Optus does not require leave to file a motion for further security.  Optus will have the opportunity to consider a cross-claim and notify the parties of its position in that regard when appropriate. 

27                  One other issue requires resolution.  On 1 April 2010 Optus’s motion to strike out the reply was part heard.  In the events that have occurred, particularly the withdrawal of the proposed reply, Optus should have its costs of the notice of motion filed 22 March 2010 including such costs as incurred on and in connection with the hearing of that motion on 1 April 2010.  Orders will be made accordingly.

Associate:

Dated:         28 October 2010