FEDERAL COURT OF AUSTRALIA

Visscher v Teekay Shipping (Australia) Pty Limited (No 2) [2011] FCA 278

THE COURT ORDERS THAT:

1.    The respondent’s notice of motion filed 3 February 2011 be dismissed with costs.

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 Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    On 4 January 2011 I delivered judgment dismissing the application under s 31A of the Federal Court of Australia Act 1976 (Cth) on the ground that it enjoyed no reasonable prospects of success. I also ordered the applicant to pay the respondent’s costs. See Visscher v Teekay Shipping (Australia) Pty Ltd [2011] FCA 1. At the time I pronounced judgment no application was made for a special costs order. Nor did the respondent’s counsel at the hearing indicate that it wished to be heard further on costs if it were successful. On 3 February 2011 the respondent moved the Court for orders (in effect) varying the previous costs order so that costs would be paid on a party and party basis from 2 March 2007 until (as the motion was later amended) 11 am on 4 December 2009 and thereafter on an indemnity basis.

2    The foundation for the claim for indemnity costs is outlined in an affidavit of Nico Burmeister, the solicitor with the carriage of the matter for the respondent. Mr Burmeister deposed to the fact that on 3 December 2009 the respondent’s solicitors served on the applicant an offer of compromise. The offer was made under O 23 r 2 of the Federal Court Rules. It was an offer to dismiss the application with no order as to costs, colloquially described as a “walk away offer”. It was left open for 14 days.

3    The applicant resists the claim.

Jurisdiction

4    The applicant’s first ground of opposition is that the Court has no jurisdiction to hear the motion. He put three submissions. They were (without alteration):

(a)    The costs motion, made pursuant to Order 19, offends Order 19 rule 1(1).

(b)    Consequential to hearing and determining the matter to which the notice of motion purports to pertain, the proceeding has been completely and finally determined and it has passed into judgement.

(c)    There are no “residual proceedings” to which the Court may attend.

5    Order 19 rule 1(1) provides that any interlocutory or other application in any proceeding already commenced in accordance with the Rules shall be made by motion. I do not see how the respondent’s motion offends the rule.

6    The other points may be disposed of briefly. Contrary to the applicant’s submissions the Court does have jurisdiction to vary the previous costs order. Order 35 r 7(1) of the Rules permits the Court to vary (or set aside) a judgment or order before it has been entered. It is not clear to me that my judgment or order has been entered but, in the case of an interlocutory order, O 35 r 7(2)(c) permits the Court to do so even after the order has been entered. Section 24(1D)(b) of the Act provides that a decision granting or refusing summary judgment made under s 31A is an interlocutory judgment. It follows that the orders made in the principal judgment were interlocutory. What the respondent seeks is a variation of the costs order made on 4 January 2011. Whether the jurisdiction should be exercised is another matter.

Background

7    Before I turn to consider the merits of the claim, it is necessary to say something about the nature of the case. The applicant is a merchant seaman, who was employed by the respondent and served on two of the respondent’s ships, including the Broadwater. He fell into dispute with the respondent over wages he said he was owed from two tours of duty on the Broadwater. As I explained in my earlier judgment, the central allegations in the proceeding were that he was not paid what he maintained were his full entitlements upon being discharged from the vessel on two occasions in 2004 and that, as a result of the operation of s 78 of the Navigation Act 1912 (Cth), he is entitled to be paid those wages at double their rate from the time of discharge. Section 78, however, also afforded a statutory defence. It enabled the respondent to avoid the harsh consequences of the section if the delay was due, amongst other things, to a reasonable dispute as to liability for the wages or to any other cause not attributable to its wrongful act or default. This defence was pleaded by the respondent and was the basis for the motion for summary dismissal.

8    In short, the respondent’s argument was that, on the applicant’s own evidence, it had a defence which was bound to prevail and, for that reason, the application had no reasonable prospects of success.

9    The application was filed on 2 March 2007. The respondent filed a notice of appearance on 16 March 2007, attended directions hearings at various times during 2007 and 2009 but otherwise took no step in the proceeding until 5 February 2010 when it filed its defence. It is tolerably clear that the reason for the respondent’s inaction lies with the progress of other proceedings between the parties in which the applicant had sought reinstatement from the Australian Industrial Relations Commission. His contention in those proceedings was that he had been constructively dismissed from the respondent’s employment when he was told that he would have to sail as a Second Mate although he had earlier been promoted to Chief Officer and the respondent had purported to revoke his promotion. The applicant was unsuccessful before the Commission both at first instance and on appeal but managed to have the decisions of the Commission quashed in the High Court which, on 2 September 2009, remitted the matter to the Commission to be heard and determined according to law: Visscher v The Honourable President Justice Giudice (2009) 239 CLR 361. The offer of compromise was served about three months after the High Court’s judgment but before a defence was filed.

Order 23 r 11(6)

10    Order 23 r 11(6) provides that:

If:

(a)    an offer is made by a respondent and not accepted by the applicant; and

(b)    the respondent obtains an order or judgment on the claim to which the offer relates as favourable to the respondent, or more favourable to the respondent, than the terms of the offer;

then, unless the Court otherwise orders:

(c)    the respondent is entitled to an order that the applicant pay the respondent’s costs in respect of the claim incurred up to 11 am on the day after the day the offer was made, taxed on a party and party basis; and

(d)    the respondent is entitled to an order that the applicant pay the respondent’s costs in respect of the claim incurred after that time, taxed on an indemnity basis.

11    The relevant principles were discussed by the Full Court in Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 (“Futuretronics”) and IFTC Broking Services Ltd v Commissioner of Taxation (2010) 268 ALR 1 (“IFTC Broking Services”). In IFTC Broking Services the Full Court said at [9]:

It may be accepted that the prima facie position established by O 23 r 11(6) can be departed from. So much is clear from the statement of exception in the rule which the appellants seek to invoke (unless the court otherwise orders). The cases say more than this, however. The cases establish that:

(1)    If O 23 r 11(6) is engaged it is for the applicant to satisfy the court that the prima facie position established by that rule should be departed from: Futuretronics at [12].

(2)    Unlike a case in which a Calderbank offer (named after the decision in Calderbank v Calderbank [1975] 3 All ER 333; [1976] Fam 93) is made, the fact that an unsuccessful litigant acted reasonably in rejecting an offer of compromise “is not of itself a sufficient reason to displace the operation of the rule”: Futuretronics at [12].

(3)    It is true that doubts have been expressed about a need to show “compelling and exceptional circumstances” to justify otherwise ordering: see Port Kembla Coal Terminal at [17]. Nevertheless, properly understood, the rule creates a presumption in favour of indemnity costs which the unsuccessful party must rebut. A court may depart from the presumptive position but only “for proper reasons which, in general, only arise in an exceptional case”: Port Kembla Coal Terminal at [17] cited with approval in Futuretronics at [10].

(4)    The requirement for “proper reasons” for any departure from the prima facie position of indemnity costs reflects the purpose of the rule. As explained by Mason P in Morgan v Johnson (1998) 44 NSWLR 578 at 581F–2E (Morgan) the rule is intended to encourage the compromise of litigation (such compromise being in both the private and the public interest) and to oblige parties “to give serious thought to the risk involved in non-acceptance” on the basis that “litigation is inescapably chancy”: Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 725. For these reasons “the ordinary provision is expected to apply in the ordinary case” (referring to New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 at 102–3).

12    Thus, it is for the applicant to show why the respondent cannot rely on O 23 r 11(6). The question of jurisdiction aside, the applicant submits:

(a)    He sought leave to appeal on 11 January 2011.

(b)    He will move the Court for a stay in accordance with the operation of O 20 r 3(2).

(c)    The costs motion is incompetent insofar as it encompasses a period pre-dating any entitlement to costs.

(d)    The principal judgment dealt with the strike-out motion. The orders the respondent sought were granted and, of the two orders, the costs order is for the costs of that motion “in regard to that part of it dealing with s 31A”.

(e)    It was not imprudent or unreasonable for the applicant not to have accepted the offer of compromise because:

i.    The offer was made before the respondent filed any pleading;

ii.    The offer “is devoid of any reference suggesting no reasonable prospect of successfully prosecuting the proceeding”;

iii.    The offer is not a genuine offer of compromise and can be characterised as “derisory”.

(f)    There are “exceptional and compelling circumstances displacing the respondent’s prima facie position”.

(g)    The motion for indemnity costs is “frivolous and vexatious” and it is the applicant who should recover indemnity costs on the motion.

13    I shall deal with each of these matters in the order in which they appear above.

14    First, the fact that the applicant has sought leave to appeal is immaterial to the motion as is his foreshadowed application for a stay (about which no submissions were made at the hearing of the motion). The applicant submitted that it was, in effect, improper, for the notice of motion to have been filed while his application for leave to appeal was pending. He argued that it was in breach of the requirement for confidentiality in O 23 r 8(2). I reject the submission. Order 23 r 8(2) provides:

If an offer has not been accepted, no communication with respect to the offer is to be made to the Court at the trial or hearing until after all questions of liability and the relief to be granted have been determined.

15    The plain purpose of the rule is to quarantine the decision-maker from the communication in case it might affect his or her decision. It is not engaged here. The respondent’s notice of motion was not filed until after I had pronounced judgment. Secondly, the motion is not incompetent for the reasons I gave earlier.

16    Thirdly, it is incorrect to characterise my earlier judgment as a judgment relating to costs of a motion. Although I now see that there may have been some ambiguity in the form of the orders, the reasons for judgment are crystal clear. I dismissed the application (not the motion for summary judgment) and ordered the applicant (not the applicant on the notice of motion) to pay the respondent’s costs.

17    Fourthly, whilst the basis for the dismissal of the application was the strength of the defence and at the time it was made the defence had not been filed, as the Full Court made clear in Futuretronics and IFTC Broking Services, where the respondent makes an offer of compromise in accordance with the rules, the fact that the applicant may have acted reasonably in rejecting the offer is not of itself sufficient to deny the successful party the benefit of the rule.

18    The offer may have been “derisory” but that does not mean that it was not genuine. In Leichhardt Municipal Council v Green [2004] NSWCA 341 (“Leichhardt Municipal Council v Green”) the NSW Court of Appeal observed (at [23]) that “it is clear that an offer with no real element of compromise in it, which is designed merely to trigger the costs sanctions, will not be treated as a genuine offer of compromise”. Still, as the respondent pointed out, there is no rule that a “walk away” offer can never amount to a genuine offer of compromise: Leichhardt Municipal Council v Green at [32]; Brookfield Multiplex Limited v International Litigation Funding Partners Pty Ltd (No. 4) [2009] FCA 803 at [13] and [14]; Clark v Commissioner of Taxation [2010] FCA 415 at [90]; Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No. 6) [2010] FCA 381 (“Granitgard v Termicide Pest Control (No 6)”) at [22]-[23]. It all depends on the circumstances. In my view, it could not be said that the offer made in this case was one with no real element of compromise, designed merely to trigger the costs sanctions.

19    The relevant circumstances are these. The applicant filed his application together with his statement of claim on 2 March 2009. The following agreed chronology of events in which the respondent participated demonstrates that before the offer was made it would have incurred some costs which could not be described as negligible:

20    In addition, at the time of the offer all the relevant evidence – that is to say, the evidence which established, in my view, that the applicant had no reasonable prospects of success – was known to the applicant.

21    I am of the view that the offer was a genuine offer of compromise. As I have already observed, at the time the offer was made the respondent had incurred some costs, which it was prepared to forego. Perhaps more importantly, however, as the respondent submitted, the offer presented the applicant with a valuable opportunity to have proceedings (that have been adjudged to have no reasonable prospects of success) dismissed with no costs consequences.

22    As Logan J held in Granitgard v Termicide Pest Control (No. 6) said:

Order 23 r 11(6) forms part of a regime the aim of which is to encourage compromise with the attendant benefits for the parties in terms of agreed certainty of outcome, as opposed to the risks of litigation and for the nation, in terms of allowing limited judicial resources to be deployed in the resolution of the truly intractable controversies. It does this by encouraging a respondent to make a realistic offer of compromise and encouraging an applicant who receives such an offer to accept it lest, if the respondent obtains a more favourable judgment, the applicant become liable to a greater amount of costs as a result of the respondent having a prima facie entitlement to taxation on an indemnity basis. One way of viewing cases which have termed an offer “not genuine” is to regard them as examples of cases where the offer could be seen not to advance the underlying purpose of an order such as O 23.

23    I turn now to consider whether the applicant has established a proper reason for ordering that the respondent should not have indemnity costs for the period sought.

24    In his written submissions the applicant argued that there are “exceptional and compelling circumstances displacing the respondent’s prima facie position…” including but not limited to:

a)    The respondent's breach of s 76(1) of the Navigation Act 1912 (Cth).

(In oral submissions the applicant explained that the respondent “does not come with clean hands” because it “has not provided a full and true account of my wages” and was seeking to take advantage of that fact.)

b)    In breach of a fundamental term of the Articles of Agreement(s), for at least two discrete contracts of employment, the respondent's non-payment of wages and/or entitlements to the applicant in the sum of about $3,047.55:

i)    The non-payments go to the heart of the applicant's further amended statement of claim filed in these proceedings.

c)    The processes of the Court whereby it erred in not according to the applicant his claims in accordance with the law.

d)    The processes of the Court whereby it erred to the extent of not enforcing those statutory rights of the applicant, a seafarer, as conferred by the relevant provisions of the Navigation Act 1912 (Cth) and the Admiralty Act 1988 (Cth), for the recovery of his wages and/or entitlements.

e)    The applicant relies on:

i)    his affidavit dated 14 March 2011 (the affidavit is filed in this matter).

ii)    his affidavit dated 11 January 2011, supporting his application for leave to appeal (the affidavit is attached to this Outline of Submission).

25    None of these matters has any bearing on the issues for determination on this motion. They do not provide a reason for depriving the respondent of its prima facie entitlement.

26    I have reflected on whether there might be any other reason for so doing. The notice of motion for summary dismissal was brought at a relatively late stage of the proceeding. It was successful, not because of the weakness of the applicant’s case but because of the strength of the respondent’s defence. The mere fact that the defence was available did not defeat the applicant’s case. The defence had to be pleaded before the respondent could rely on it. Until the defence was served on the applicant, which I infer was on or around the time it was filed, there is no evidence to indicate that the respondent conveyed to the applicant an intention to raise it. The Rules do, however, permit an offer of compromise to be made at any time before the pronouncement of judgment and do not require that proceedings should have reached any particular stage of development before an offer with costs consequences can be made. There is no reason in principle, therefore, that such an offer could not be made before the defence is served or even foreshadowed and “every reason for encouraging offers of compromise to be made as early as the circumstances reasonably permit”. See Port Kembla Coal Terminal v Bravurus Maritime Inc (No. 2) (2004) 212 ALR 281 at [22]. Whilst I have some sympathy for an unrepresented litigant who is met with such an offer in such circumstances, the applicant was not unrepresented at the relevant time. The evidence presented on this motion shows that he had a solicitor acting for him when the application and statement of claim were filed (the statement of claim shows that it was settled by counsel), right up until two weeks before the hearing began in August last year, when he commenced to act for himself.

27    In all the circumstances, I am not persuaded that there is a proper reason to depart from the prima facie position that the respondent should have its costs on an indemnity basis as sought.

28    This is not, however, the end of the matter. To make the orders the respondent seeks, I have to vary the order I made on 4 January 2011. The exercise of the power is discretionary. Its operation is exceptional, not de rigeur. Delay may militate against its exercise. The motion was not filed until a month after the order was made and after the applicant had filed his application for leave to appeal. Ordinarily a party wishing to be heard on the question of costs will indicate as much at the time of submissions or when judgment is pronounced. The respondent is represented by a large law firm, was represented at the hearing by senior and junior counsel, had a lawyer take the judgment, and should have known of the practice. No evidence was offered to explain the delay. From the bar table counsel for the respondent submitted that it was not readily apparent from the orders that the respondent had succeeded in its motion for summary dismissal.

29    In hindsight, as I said earlier, I accept there may have been some ambiguity in the orders, but a quick perusal of the reasons, which were published at the time the orders were pronounced, would have dispelled any uncertainty. Counsel stated that the judgment was delivered during the vacation, but this Court has no vacation period. On the other hand, the delay did occur during a period in which the profession customarily enjoys a vacation and the motion was filed in the first week of what is commonly referred to as “the Law Term”. Counsel also argued that it was necessary to consider whether to put on the motion. I accept that, but the time for such consideration was in advance of the outcome, not later, at the respondent’s leisure.

30    In Aktas v Westpac Banking Corporation Ltd and Another (No. 2) (2010) 273 ALR 118 the High Court refused an application by Westpac to amend orders as to costs also made about a month after judgment was delivered. In that case the majority (French CJ, Gummow and Hayne JJ) accepted that the Court had the power to recall the orders it had made but held that it should not. They stressed (at [6]) that the jurisdiction to vary a judgment is one to be exercised with great caution having regard to the importance of the public interest in the finality of litigation. They observed (at [7]) that Westpac had had ample opportunity to foreshadow that, if the appeal succeeded, it wished to be heard in support of an application for a special costs order. So, too, here. On balance, having regard to the considerations I have mentioned, I decline to exercise my discretion in the respondent’s favour. The motion is therefore dismissed.

31    The applicant should have his costs. Still, absent any statutory provision, a litigant in person is not entitled to recover costs as compensation for loss of time or other disadvantage or inconvenience: Cachia v Hanes (1994) 179 CLR 403 (“Cachia”). In George v Fletcher (Trustee) (No 2) [2010] FCAFC 71 (“George”) the Full Court held that the power to award costs conferred by s 43 of the Federal Court of Australia Act does not extend to awarding a litigant, who is not a legal practitioner, any amount for the time spent preparing the case or presenting it in court. But, as the Full Court also observed in George (at [17]), there is nothing in Cachia that would preclude a claim for out-of-pocket expenses, such as filing fees or the costs of copying the appeal books. Recently, Preston CJ in the NSW Land and Environment Court also held that a litigant in person, who is successful in the proceeding, is entitled to be reimbursed for his or her out-of-pocket expenses incurred in and for the purposes of litigating it: Cachia v The Hills Shire Council [2010] NSWLEC 136 at [30].

32    There is, however, no proper basis for the applicant’s submission that the respondent’s motion was frivolous or vexatious so as to justify his claim for indemnity costs, assuming that the term has any scope for a successful self-represented litigant.

Associate:

Dated:    1 April 2011