FEDERAL COURT OF AUSTRALIA

Yarrabee Chicken Company Pty Ltd v Steggles Limited (No 3) [2011] FCA 993

THE COURT ORDERS THAT:

1.    Pursuant to Part 1 Rule 1.04(3) of the Federal Court Rules 2011, the Federal Court Rules as in force immediately before 1 August 2011 apply to the application for costs heard today.

2.    Save and except to the extent of any costs orders already made and order 5 below, the respondent pay the applicant’s costs of the proceeding as agreed or taxed.

3.    All costs in the proceeding be paid forthwith.

4.    The applicant have liberty to apply for a lump sum assessment of costs on seven days’ notice.

5.    The applicant pay 50% of the respondent’s costs of the hearing on 22 August 2011 as agreed or taxed, and is otherwise to pay its own costs of that hearing.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

background

1    Leaving aside a cross-claim on a separate and distinct issue, the only matter remaining for me to decide in this proceeding is the costs order or orders which should be made consequent upon the delivery of my two sets of principal reasons (Yarrabee Chicken Company Pty Ltd v Steggles Limited [2010] FCA 394, delivered 27 April 2010, and Yarrabee Chicken Company Pty Ltd v Steggles Limited (No 2) [2011] FCA 750, delivered 6 July 2011).

2    At the commencement of this morning’s costs hearing, three issues were identified by counsel for the applicant. The first was whether the applicant, Yarrabee Chicken Company Pty Ltd, should obtain the benefit of the usual order as to costs, including the costs of a hearing which had been scheduled for 10 and 11 November 2010 but which was vacated (the November 2010 hearing). Apparently there had been an indication in correspondence from the solicitor for the respondent, Steggles Limited (Steggles), to the applicant’s solicitor that there would be a dispute about the costs of that vacated hearing. The second issue was whether the applicant should obtain an order for indemnity costs on and from the date of an offer of compromise which the applicant made to Steggles on 30 November 2009. The third issue was whether the applicant should obtain an order for indemnity costs of the whole or any part of the proceeding by reason of what the applicant described as the unreasonable conduct of the case by Steggles.

discussion

Usual order as to costs

3    The first issue – the question of the usual order as to costs subject to the vacation of the November 2010 hearing – may be dealt with in short order. In the course of today’s hearing, Steggles’ counsel became aware that on 25 August 2010 I directed the parties (including their counsel and senior counsel) to meet and confer on or before 3 September 2010 with a view to agreeing a common basis for the calculation of any damages sustained by the Growers (as defined) by reason of both (a) the delivery of less than six batches per year of chicks to each Grower in 2009 and 2010 and, more relevantly, (b) any failure by Steggles to give preference to the Growers over other growers when allocating birds for processing at the Steggles plant in the 2009 calendar year. Having become aware of this direction, Steggles’ counsel accepted that it would be within my discretion not to exclude any costs associated with the vacated November 2010 hearing from the usual order as to costs which would ordinarily follow from my principal reasons and the orders I made consequential thereon (given that, in effect, the applicant has been wholly successful in its claims).

4    This concession by Steggles’ counsel is appropriate. Having regard to the orders I made on 25 August 2010, there is no possible basis upon which there could be any exclusion from the applicant’s entitlement to the usual order as to costs, including the costs of the vacated November 2010 hearing.

5    It follows that the real issues remaining to be resolved between the parties are those relating to the formal offer of compromise of 30 November 2009 and the allegations of unreasonable conduct upon which the applicant relied.

Indemnity costs: offer of compromise

6    I should record that there was no dispute between the parties as to the relevant principles. The applicant’s counsel referred to the decision of Kenny J in Lowe v Mack Trucks Australia Pty Limited (No 2) [2008] FCA 711 (Lowe v Mack Trucks), which provides a convenient summary of the relevant principles (at [5]-[8]). Those paragraphs read as follows, and I adopt the principles set out therein:

[5]    By virtue of s 43 of the Federal Court of Australia Act 1976 (Cth), the Court may make orders as to costs. The power, which is discretionary, must be exercised judicially: see Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234 per Black CJ and French J. Within this general discretion, it is accepted that costs ordinarily follow the event, with the result that a successful litigant receives costs in the absence of special circumstances justifying some other order: see Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234 per Black CJ and French J.

[6]    The usual rule is that costs are payable on a party and party basis, unless the circumstances of the case warrant a departure from the normal course: see Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 (“Colgate-Palmolive”) at 233 per Sheppard J and the Federal Court Rules (Cth), O 62. In that case, Sheppard J considered the circumstances in which indemnity costs might be awarded, referring, amongst other things, to “misconduct that causes loss of time to the Court and to other parties” although, as his Honour concluded, “[t]he question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis”: see Colgate-Palmolive at 233-234. The Full Court reconsidered the appropriateness of an indemnity costs award in Re Wilcox: Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 (“Re Wilcox”) at 152-153 per Black CJ and 156-158 per Cooper and Merkel JJ. In Re Wilcox, at 156-157, Cooper and Merkel JJ reiterated Sheppard J’s approach, saying:

In order to exercise the discretion [regarding costs] judicially the following principles have been accepted by the Court as applicable:

(a)    the Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court in departing from the usual course;

(b)     the circumstances which may warrant departure from the usual course     arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the court     in departing from the usual course;

(c)    whilst the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.

See also Abbott v Random House Australia Pty Ltd [1999] FCA 1540 at [5] per Beaumont, Miles and Drummond JJ, quoting the above passage with approval. Even more recently, the Full Court in Hamod v New South Wales (2002) 188 ALR 659 at 665 (per Gray J, with whom Carr and Goldberg JJ agreed) explained the basal principle for an award of indemnity costs in the following terms:

Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty.  Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.

[7]    A perusal of other cases decided in this Court, including in recent times, shows that these principles are regularly applied. In particular, the Court may award indemnity costs in respect of misconduct that causes loss of time to the Court and to other parties: see Tetijo Holdings Ltd v Keeprite Australia Pty Ltd [1991] FCA 187 per French J, referred to with approval in Colgate-Palmolive at 233 and Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (“Ugly Tribe”) at [7] per Harper J. In Xat Ky v Australvic Property Management Pty Ltd (No 2) [2007] FCA 1785, Middleton J awarded indemnity costs to prevent the plaintiffs being out of pocket where “there was a considerable loss of time, inconvenience to the parties and the Court, and a wilful disregard to established law in the attempts to re-open the case … and in the application for a restraining order”: see [12]-[13], [29].

[8]    The same principles with regard to indemnity costs are applied in other Australian courts. In Ugly Tribe, Harper J referred (at [7]) to the need for special circumstances to justify departure from the usual rule, instancing “[c]onduct which causes loss of time to the Court and to other parties” and “[t]he failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial”. As his Honour said, however, “[t]he categories of special circumstances are not closed”. As Mason P, with whom Meagher JA and Clarke A-JA agreed, said in Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616, “the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation” before departing from the usual party and party costs order.

7    The offer of compromise which is in evidence before me is an annexure to the affidavit of Patrick Kaluski sworn 11 June 2010. As noted, the offer of compromise was forwarded by the applicant’s solicitor to Steggles’ solicitor under cover of a letter dated 30 November 2009 expressed to be without prejudice save as to costs. The applicant’s counsel contended that this was a formal offer of compromise within the meaning of the applicable Federal Court Rules at the time the offer was made (O 23 rr 3 and 4).

8    In this regard, I note that the Federal Court Rules as then in force have been repealed by the Federal Court Rules 2011, which commenced on 1 August 2011 (see Part 1 Rules 1.02 and 1.03 of the Federal Court Rules 2011). Part 1 Rule 1.04(3) provides that the Court may order that the Federal Court Rules as in force immediately before 1 August 2011 apply, with or without modification, to a step mentioned in subrule (2). Subrule (2) refers to a step in a proceeding that was started before 1 August 2011 if the step is taken on or after 1 August 2011. This proceeding was started before 1 August 2011. After consultation with the parties, and without any demurral on their part from the course of action which I proposed, I made an order pursuant to Part 1 Rule 1.04(3) that the Federal Court Rules as in force immediately before 1 August 2011 apply to the costs application to be heard and determined by me today. In consequence, the previous version of the Federal Court Rules is applicable.

9    According to the applicant, as the offer of compromise was not accepted within the prescribed period of 14 days, O 23 r 11(4) of the Federal Court Rules is engaged. That rule provides as follows:

(4)    If:

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

(b)    the applicant obtains judgment on the claim to which the offer relates not less favourable than the terms of the offer;

then, unless the Court otherwise orders, the applicant is entitled to an order against the respondent for costs incurred in respect of the claim:

(c)    up to and including the day the offer was made – taxed on a party and party basis; and

(d)    after that day – taxed on an indemnity basis.

10    Accordingly, the applicant said there should be an order for indemnity costs in its favour unless the Court otherwise orders.

11    For its part, Steggles contended that there were a number of reasons to support a conclusion that the applicant had not obtained judgment on the claim to which the offer related not less favourable than the terms of the offer. It further contended (as I understood the submissions of Steggles’ counsel) that in any event the Court should otherwise order.

12    The first reason relied on by Steggles was that, at the date the offer of compromise was made (30 November 2009), the applicant’s claims in the proceeding were still evolving. This is demonstrated by the fact that substantial amendments were foreshadowed in correspondence forwarded on 29 November 2009 by the applicant’s solicitor to Steggles’ solicitor, which enclosed a copy of the applicant’s draft further amended application and draft further amended fast track statement. These were filed and served in accordance with leave which I had granted on 24 November 2009. The proposed amendments included the addition of what has become known as the Preference Claim (in para 33C of the further amended fast track statement) and substantial changes to the way in which the estoppel case against Steggles was particularised (in para 43A of the same document). The further amended fast track statement was filed on 2 December 2009 (that is, a few days after the service of the offer of compromise) pursuant to my orders. Steggles therefore noted that, as at the date the offer of compromise was made, there was no Preference Claim in existence. As such, the applicant’s success on the Preference Claim as set out in my judgment of 6 July 2011 could hardly be seen as a more favourable result to the applicant than that which would have resulted from acceptance of the offer of compromise, given the state of the pleadings at the time the offer was made.

13    The second reason identified by Steggles’ counsel concerned the details of the offer of compromise itself. Paragraph 3 of the offer set out the following as a term of the compromise of “the whole of the proceedings”:

Growers will be provided with a minimum stock density of 19.5 birds per square metre during the term of the Contract.

14    According to Steggles’ counsel the offer of compromise accordingly proposed, in effect, a variation of the contract between the Growers and Steggles which was outside any possible outcome of the case.

15    The third reason identified by Steggles’ counsel related to para 5 of the offer of compromise, which provided that a term of the offer was as follows:

From 1 January 2010 the batch rate adjustment mechanism will apply based on delivered batch rates in the previous 6 months (in accordance with Appendix B of the Contract) and the Standard Growing Fee for each 6 month period will be adjusted retrospectively.

16    According to Steggles’ counsel, I found (in my judgment of 27 April 2010) a requirement for an annual review, not a six-monthly review.

17    The fourth reason was that the offer contained other features unrelated to the proceeding which also, in substance, sought to vary the contract between Steggles and the Growers. In particular, my attention was drawn to paras 2 and 7 of the offer of compromise insofar as they dealt with mortality rates. Paragraph 2 provided for a standard Adjusted Farm Mortality Rate of 3.5% for all Growers for the period between 1 January 2009 and 31 December 2009, and para 7 provided for a standard Adjusted Farm Mortality Rate of 4% for all Growers from 1 January 2010 during the remainder of the term of the contract. The issue of farm mortality was not a part of the proceeding before me; accordingly, it was said by Steggles that I could not be satisfied that a not less favourable result has been achieved.

18    In summary it was Steggles’ position that, having regard to all these circumstances, it was not unreasonable for Steggles not to have accepted the applicant’s offer of compromise made on 30 November 2009.

19    Although I accept the applicant’s submission that early offers of compromise should be encouraged and that the rules providing for an entitlement to indemnity costs in the circumstances specified form part of the Court’s armoury to encourage early settlement, I have concluded that there is substance in Steggles’ submissions as to the particular offer of compromise in this case. In short, O 23 r 11(4) assumes that the Court determining the costs issue will be in a position to ascertain fairly readily whether the judgment on the claim to which the offer relates is not less favourable than the terms of the offer. Although it was put to me by the applicant’s counsel that the result in the judgments I delivered in this proceeding is obviously more favourable to the applicant than that proposed in the offer of compromise, I do not consider this to be clear from the material which has been presented to me. I accept that the offer of compromise was genuine in the sense that it was a real attempt to compromise this complex litigation. Indeed, the complexity of the offer itself discloses the genuineness of that attempt. However, the difficulties I have with the conclusion contended for by the applicant are as follows.

20    First, although the applicant’s counsel pointed me to the orders made on 30 August 2010 – in particular order 6, in which I declared that as a result of certain other matters Steggles was contractually obliged to provide each of the Growers with chicks at a stock density of 19.5 birds per square metre – it is not apparent to me that the effect of that declaration was the same as Steggles having accepted the offer of compromise. The declaration operated only “as a result of the matters declared in orders 1, 4 and/or 5 above”. In particular, it was consequential upon the estoppels declared by orders 4 and 5, being promissory estoppels operating against Steggles in favour of Marianne Peen and Malcolm Wood. The effect of those estoppels was, as I found, that the contract operated to require (in substance) equal treatment of the other Growers. This is not the same as the term of the offer of compromise set out in para 3 and reproduced above. If Steggles had accepted that offer of compromise, para 3 would itself have operated as a contract without regard to the position of Marianne Peen and Malcolm Wood so that, for the balance of the term, all Growers would have been provided with the specified minimum stock density.

21    The second difficulty relates to batch mortality rates. The applicant’s counsel submitted that the rates specified in paras 2 and 7 of the offer of compromise constituted average rates, so that Steggles could not be worse off than it ultimately was in light of the outcome of the proceeding. That may be the case, and may be capable of being demonstrated in relation to para 2 of the offer of compromise. However, para 7 operates from 1 January 2010 for the remainder of the term of the contract. The contract operates on the basis of actual mortality rates experienced by Growers in relation to any individual batch, whereas the effect of para 7 of the offer of compromise would have been to vary the contract to provide for a standardised mortality rate across all Growers. The effect this might have had on the Growers’ entitlements and Steggles’ liabilities for the balance of the term of the contract is unknown.

22    For these two reasons, I am not in a position to be satisfied that the applicant has obtained judgment on the claim to which the offer relates not less favourable than the terms of the offer. The applicant has certainly been successful on all of its claims in the proceeding, but the offer goes beyond those claims and the consequences had it been accepted are not apparent. Even if I were incorrect in this regard, I consider that the existence of the two factors outlined above would provide a proper basis on which to otherwise order under the exception to O 23 r 11(4).

23    As a general matter, although I accept the submission for the applicant that the offer was genuine and was intended to encourage an early compromise of this proceeding, I cannot be satisfied, in the circumstances to which I have referred, that Steggles’ conduct in not accepting the offer during the 14-day period for which it was open was unreasonable. As Steggles’ counsel indicated, at the time the offer was made there were substantial changes being made to the applicant’s case, including the addition of the Preference Claim and the formulation of the estoppel claim. While I ultimately accepted both claims I recognise that from Steggles’ point of view, as at 30 November 2009, the claims were relatively new and the case was certainly evolving. As such, I am unable to conclude that the purpose of an indemnity costs order, as reflected in the rules on which the applicant relied, would be furthered by the making of such an order based on the offer of compromise. In short, for the reasons given, I am not satisfied that the entitlement set out in the relevant rule is engaged, and I am otherwise satisfied that it is not appropriate for such a costs order to be made in all the circumstances of this case.

Indemnity costs: unreasonable conduct of proceeding

24    I turn then to the application for indemnity costs based on the applicant’s contention that Steggles has conducted itself in an unreasonable manner in this proceeding, such as to warrant the making of an indemnity costs order consistent with the principles set out in the extract from Lowe v Mack Trucks reproduced above. Six individual circumstances were relied upon by the applicant in support of this claim. The applicant also said that when those circumstances are considered cumulatively, they disclose a general course of conduct by Steggles in this litigation which was unreasonable.

25    The circumstances are as follows:

(1)    the vacation on 11 December 2009 of a hearing listed for 15-21 December 2009 (the December 2009 hearing);

(2)    the delay in the finalisation of the orders after I delivered my first principal judgment on 27 April 2010;

(3)    the raising and then abandonment of part of Steggles’ defence alleging a variation of the contract between Steggles and the Growers;

(4)    difficulties experienced by the applicant in extracting information from Steggles about bird sizes after the November 2010 hearing had been vacated, and notwithstanding the orders I made in order to facilitate the provision of such information;

(5)    Steggles’ failure to comply with the general order for verified discovery that I ultimately made; and

(6)    the vacation of the November 2010 hearing by reason of Steggles articulating its case in a different way from that originally articulated.

26    I will deal with each of the six matters individually before considering the applicant’s submissions regarding their cumulative effect.

Vacation of December 2009 hearing

27    Accordingly, I move now to the vacation of the December 2009 hearing. There is in evidence before me, annexed to the affidavit of Richard Henry Anicich of 23 August 2010, a transcript of the hearing on 11 December 2009 at which I vacated the hearing at the request of Steggles. What is apparent from that transcript is that one week before the hearing, pursuant to leave which I granted, the applicant amended its claim to include reference to a meeting with a Mr Ryan, a former employee of Steggles, and served an additional affidavit of a Mr Thompson deposing to a conversation he had with Mr Ryan.

28    According to Mr Sheldon of counsel, who appeared for Steggles at the hearing on 11 December 2009, Steggles was not then in a position to deal with Mr Thompson’s additional affidavit material because Mr Ryan was no longer an employee. Steggles was having considerable difficulty obtaining information from Mr Ryan, and wished to have the opportunity (in circumstances where it had only received Mr Thompson’s evidence a week before) to obtain further information from Mr Ryan before proceeding to the hearing. I acceded to Steggles’ request and vacated the December 2009 hearing dates.

29    As the applicant correctly observed, ultimately neither Steggles nor Mr Ryan denied that the meeting had occurred, and the contents of Mr Thompson’s affidavit generally accorded with the file note which Mr Ryan himself had made and which was part of the documents tendered at one or other of the hearings before me. The applicant’s case in essence is that it was unreasonable of Steggles not to have known the true position – that is, that there was no real issue about the meeting at all – at an earlier time, so as to preserve the December 2009 hearing dates.

30    I am not persuaded that Steggles’ conduct in relation to the vacation of the December 2009 hearing is of the requisite character to warrant any form of indemnity costs order. There is no doubt that it was unfortunate that the hearing was vacated, and that Steggles was not in a position to obtain instructions at an earlier time that might have preserved it. However, and as the transcript makes clear, I accepted Mr Sheldon’s explanation that as Mr Ryan was no longer an employee Steggles had simply not been able to obtain the required information, in circumstances where the applicant had been given the opportunity to make a relatively late amendment to its case and to file and serve further evidence. I saw it then – and still see it now – as a case in which there was no real option other than to vacate the hearing. As such, I consider that the usual order as to costs is sufficient compensation for the applicant on account of that vacation, subject only to my consideration of the cumulative issue (considered below).

Delay in finalising orders

31    The second issue raised by the applicant was the delay in the finalisation of orders after the principal judgment I delivered on 27 April 2010. Given the complexity of the potential orders, I directed the parties to confer and to notify me as to agreed or competing orders reflecting my reasons for judgment within 14 days. The correspondence between the parties thereafter shows a relatively extended period of dialogue regarding the substance of the orders which should be made. In the course of that correspondence there is only one matter which, in my view, might support a finding of unreasonable conduct. That is the correspondence from Steggles’ solicitor to the applicant’s solicitor of 16 June 2010, in which various issues were raised that not only did not reflect my reasons for judgment but appeared to deal with matters entirely outside the scope of the proceeding. The letter contained a claim that the applicant was in fact indebted to Steggles for a certain sum of money rather than any damages being payable by Steggles to the applicant. The claim resulted in nothing more than a response from the applicant’s solicitor on 22 June 2010. Ultimately, as both parties accept, an agreed form of orders giving effect to my reasons for judgment was finalised on 30 August 2010.

32    It may well be that those orders could have been finalised more rapidly and with less to-ing and fro-ing between the parties. In addition, I have no doubt that the correspondence from the solicitor for Steggles to the solicitor for the applicant on 16 June 2010 did nothing to bring about that resolution, other than perhaps causing unnecessary inflammation of the applicant in all of the circumstances. Those considerations of themselves, however, are by no means sufficient to suggest that there should be some form of indemnity costs order in respect of the proceeding as a whole. Nor am I satisfied that, in the overall context of the dealings between the parties between 27 April and 30 August 2010, Steggles’ conduct was unreasonable in the sense required to trigger the discretion to make an indemnity costs order.

Abandonment of defence

33    The third matter pointed to by the applicant was Steggles’ raising and dropping of its defence as it related to the alleged variation of the agreement between it and the Growers.

34     This matter may be dealt with in relatively short compass. It is true that Steggles raised a defence at one stage, early in the proceeding, that the contract between it and the Growers had been varied by reason of certain discussions with a Mr Ekert. It is also true that three affidavits forming part of the evidence that the applicant filed and served in response dealt with this issue, denying that Mr Ekert had any authority to vary the contract on behalf of the Growers. In the event, the consent orders I made on 28 July 2009 do not reflect any such variation of the contract, and that part of Steggles’ defence disappeared thereafter. By itself, this cannot be seen to constitute the type of conduct which would amount to special circumstances justifying an indemnity costs order.

Provision of bird size data

35    The fourth issue raised by the applicant is more factually complex. It relates to the bird size data requirements after the November 2010 hearing. I have been taken to numerous pieces of correspondence between the parties, in which the applicant was effectively seeking to obtain information about Steggles’ defence insofar as it related to the capacity of the Growers to receive chicks and to the longer growing cycles allegedly used by Steggles to rear larger birds for the market. I have also been taken to the orders I made on 30 November 2010 which were intended to elicit this information from Steggles in the most effective way possible and so to avoid unnecessary costs.

36    There can be little doubt that that the applicant went to substantial effort to obtain information over a relatively lengthy course of time, between December 2010 and 26 May 2011 (when the information was ultimately provided in the form subsequently ordered on 20 December 2011). Although it might be open on the face of that correspondence to have some concern about the way in which the information was originally provided, particularly having regard to the terms of the orders, I again cannot be satisfied on the evidence that Steggles’ conduct was unreasonable. My reasons, in short, are that Steggles provided extensive information in purported compliance with my orders. I infer from the correspondence that, as time went on and thoughts about the way in which the case should be run crystallised, more developed views were taken by both parties about the information which was relevant to the resolution of their competing claims, leading ultimately to the provision of information on 26 May 2011 under a covering email from Steggles’ solicitors providing revised spreadsheets. The email itself indicated that the information was not readily available to Steggles and that, in effect, Steggles had itself derived it from spreadsheets previously provided to the applicant. On balance, I am not satisfied that this conduct shows any unreasonable position on Steggles’ behalf in relation to the litigation.

Compliance with order for verified discovery

37    The next issue is that of discovery. Again, this issue may be dealt with briefly. As counsel for Steggles submitted, it ultimately – at least insofar is it constitutes a separate issue to the provision of bird size data considered immediately above – relates to the fact that, during one of the hearings in this matter, Steggles sought to tender a document consisting of a number of sheets of information to which the applicant took objection. I rejected the tender on the basis that the document had not been discovered in circumstances where it should have been, and that it was too late for the applicant to be expected to deal with the information it contained. I am unable to see how, taken in isolation, this fact could have led the applicant to incur any unnecessary costs. Accordingly, considered by itself, this aspect of the inadequacy of Steggles’ discovery does not justify an indemnity costs order.

Vacation of November 2010 hearing

38    The sixth and final issue on which the applicant relied, leaving aside the cumulative consideration of all of the issues, was the vacation of the November 2010 hearing. This was said to have involved unreasonable conduct on the part of Steggles such that all costs incurred on and from that day by the applicant were unreasonably incurred in the sense that, but for Steggles raising the issue of proof of capacity (on which Steggles ultimately failed), the proceeding would have finished on 10 November 2010.

39    It seems to me that this submission cannot be sustained. It is true that I had ordered counsel on both sides to meet in order to identify the real issues between them in relation to, amongst other things, the calculation of damages arising from any failure by Steggles to give preference to the Growers over other growers. This was order 3(b) of the orders I made on 25 August 2010. When the matter came on for hearing on 10 November 2010 it was obvious that, despite that direction, Steggles had not articulated to the applicant the way in which it sought to put its case on capacity, namely that the applicant had not proved that on any day Steggles allocated chicks to any particular Grower, that Grower had capacity to accept additional chicks. Understandably, the applicant said it had not appreciated that Steggles sought to put its case in this way. The applicant then considered its forensic position and took the view that it needed to attempt to meet this new way of articulating Steggles’ defence, with the consequence that the hearing was vacated and a new round of significant correspondence between the applicant and Steggles ensued (regarding bird size data – the fourth issue dealt with above).

40    It is not the case that Steggles’ conduct on and leading up to 10 November 2010 had the consequence that all costs on and from that day were unreasonably incurred. The proper analysis is that Steggles gave late notice of an issue about how it put its defence. The applicant made a forensic decision that it wished to have the opportunity to adduce evidence to meet the issue in the way in which it had been articulated, despite the applicant’s principal position that Steggles was simply wrong about the contract requiring proof of capacity in that way. On the basis of that forensic decision, I acceded to the request by the applicant to vacate the hearing date to enable it to put on further evidence.

41    Furthermore, the only way in which the hearing could have ended on 10 November 2010 is if I had taken the view that Steggles should be precluded altogether from articulating any defence based on proof of capacity. Once it was accepted, as I did, that Steggles should be able to articulate such a defence, it was then a forensic decision for the applicant whether, irrespective of its principal answer to that defence (namely that the contractual damages claim did not require such proof), it wished to have the opportunity to adduce evidence to meet the defence. At worst, it seems to me that Steggles might have been exposed to an indemnity costs order for the vacation of the November 2010 hearing and the additional costs incurred consequential thereon, rather than for the balance of the proceeding. Even though that is not the way the applicant put its case for indemnity costs, it did refer to the breadth of my discretion and I have therefore considered that question (recognising that I have not heard from Steggles’ counsel). The reason I did not need to hear from Steggles’ counsel is that, ultimately, I do not consider that an indemnity costs order is warranted even on this more limited basis. The issue of capacity was on the table before the November 2010 hearing. What happened on that day was that Steggles’ counsel articulated the case in a way which had not been anticipated by the applicant, and which my direction of 25 August 2010 (which had been intended to flush out all relevant issues) did not bring out. As such, on balance, I do not consider that anything other than the usual order as to costs is warranted.

Cumulative course of conduct

42    There remains the question whether, when the above factors are considered cumulatively, it has been shown that Steggles engaged in an unreasonable course of conduct in the way it conducted this litigation. I am not able to reach that view, despite the instances in respect of which I have accepted that the conduct of the litigation has been vexing to the applicant (namely, the correspondence sent by Steggles on 16 June 2010 suggesting that the applicant may owe Steggles money for an alleged oversupply of birds, the difficulty faced by the applicant in obtaining bird size data, and the additional documents Steggles sought to tender during the hearing which should have been discovered earlier). The whole of the course of the proceeding, in respect of which my memory has been refreshed today through the various materials and transcripts, does not suggest to me that anything other than the usual order as to costs is warranted.

Costs of today’s hearing

43    A question was also raised as to the order that should be made in respect of the costs of today’s hearing. I am persuaded that at least some part of the hearing was due solely to applicant’s claim for an indemnity costs order and that, pursuant to the ordinary compensatory principle, Steggles should be compensated to that extent.

Enforcement of costs order

44    The final issue is that, as there is still a cross-claim on foot in this proceeding, the applicant would not usually (in accordance with the Federal Court Rules) be able to enforce its costs order forthwith. The applicant accordingly sought an order that its costs be taxed and payable forthwith on the basis that the cross-claim was essentially an accident, raising as it does an entirely separate issue.

45    For its part, Steggles noted the existence of its application for leave to appeal (insofar as leave might be required due to the existence of the cross-claim – an issue I leave to others), and said that because the appeal was part of the relevant existing landscape it was for the applicant to persuade me that something other than the usual position (that costs are taxed and payable after the completion of the proceeding as a whole) is appropriate.

46    I consider – and there was no dispute about this – that the cross-claim truly raises an issue which is separate and discrete from all the matters that have constituted the proceeding thus far. In these circumstances, the applicant should be entitled to an order in its favour which is not dependent upon the resolution of the cross-claim. While I accept that I can consider the existence of the application for leave to appeal as part of the landscape, the interaction between that application and any costs order is not something with which I can deal today. I am also cognisant of the fact that Steggles could, if so minded, make an application for a stay of my orders insofar as not already enforced (including any costs order), and that on such an application the whole of the relevant circumstances could be considered. For that reason I am satisfied that I should make an order that costs may be taxed and payable forthwith.

Associate:

Dated:    22 August 2011