FEDERAL COURT OF AUSTRALIA

Turner v State of Victoria (Department of Human Services) (No 2) [2011] FCA 1160

THE COURT ORDERS THAT:

1.    Order 2 of the orders made by the Federal Magistrates Court on 3 December 2010 be set aside.

2.    The first and second respondents pay the appellant’s costs of the appeal and of the proceedings below on a party and party basis.

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

REASONS FOR JUDGMENT

introduction

1    On 10 May 2011, the Court granted the appellant leave to appeal and allowed the appeal against an order made by a Federal Magistrate dismissing proceeding MLG915/2010. The Court’s reasons for judgment were published as Turner v State of Victoria (Department of Human Services) [2011] FCA 459. The only questions that remain relate to who should pay the legal costs incurred in the proceeding below and on appeal.

2    Three issues arise in relation to the question of costs in this matter:

(i)    Whether the appellant should have his costs of the appeal or should an order be made that the costs be costs in the cause?

(ii)    If costs are to be ordered in favour of the appellant, whether indemnity costs should be ordered?; and

(iii)    Whether a costs certificate pursuant to s 6(1) of the Federal Proceedings (Costs) Act 1981 (Cth) should be issued in favour of the second respondent?

3    For the reasons that follow, I have determined that the successful appellant should have his costs of and incidental to the appeal and of and incidental to the proceedings before the Federal Magistrate on a party and party basis. I have also determined that no costs certificate be issued to the second respondent.

should the appellant have its costs of the appeal?

4    The first issue that arises is whether the Court should depart from the ordinary course in awarding the successful party its costs of the appeal. There has been no basis made out by the respondents for the appellant not to have a costs order made in his favour.

5    The Court’s jurisdiction in awarding costs is provided for by s 43 of the Federal Court of Australia Act 1976 (Cth). The Court has a wide discretion which must be exercised judicially. The appellant succeeded on the appeal and, irrespective of the ultimate outcome of the litigation, is entitled to his costs both of the appeal and of the proceedings below. There has been no basis made out by the respondents as to why the usual rule that costs follow the event should be displaced.

Should INDEMNITY costs be ordered

6    The appellant contends that the respondents should pay the appellant’s costs of and incidental to the appeal and the proceedings below on a full indemnity basis due to what he alleges are ‘exceptional circumstances’. The appellant has attached to his submissions various correspondence between the parties. By letter of 8 December 2010, the appellant’s solicitors wrote to the solicitors for the respondents explaining why in their view, the decision below was flawed. The letter proposed that the respondents consent for orders to be made on the appeal which would rectify the erroneous decision of the Federal Magistrate. That proposal was rejected by the respondents. It is this proposal which the appellant contends is the ‘exceptional circumstances’ which justified order for costs on an indemnity basis.

7    As I identified in Alexander v Australian Community Pharmacy Authority (No 3) [2010] FCA 506 at [18]-[19], the principles as to whether costs should be ordered on an indemnity basis or on a party and party basis are well established. They need not be elaborated upon here. It is the usual course that costs follow the event and the Court orders that the successful parties’ costs be paid by the unsuccessful party on a party and party basis which will necessarily fall short of a complete indemnity. As Black CJ stated in Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 152, the Court harbours “an absolute and unfettered jurisdiction in awarding costs” which must be exercised judicially. Where there is “some special or unusual feature in the case” the Court may exercise its discretion and award costs on a full indemnity basis, thus departing from the ordinary course: Venture Industries (No 2) at 152 (Black CJ).

8    The Federal Court Rules relevantly provide for offers of compromise and, unless the Court otherwise orders, where a respondent makes an offer of compromise which is not accepted and the respondent obtains a favourable, or more favourable, judgment than the terms of the offer, the Court may award indemnity costs formerly: O 23 r 11(6) and currently r 25.14(1). The common law also recognises circumstances in which it may be appropriate for the Court to depart from the usual course and award indemnity costs: Colgate Palmolive v  Cussons (1993) 46 FCR 225 at 233-234 (Sheppard J).

9    The proposal made by the appellant’s solicitors on 8 December 2010 was not an offer of compromise. The appellants did not offer to compromise any part of their claim or any other entitlement. All that occurred was that the appellant sought to persuade the respondents to concede that the appellant’s appeal should succeed. The rejection of that proposal does not demonstrate some ‘special or unusual feature’ that would justify the order of indemnity costs. It may well have been a sensible course for the respondents to have considered the appeal. But that of itself is not sufficient. It may always be said as the appellant says in this case that the losing party should have taken the ‘sensible course and concede it’. This was not a case where the respondents wilfully disregarded an established law or prolongated the case by reliance on groundless contentions: Colgate at 233 (Sheppard J).

10    The appellant also relies upon correspondence from the respondent’s solicitors in which the respondents indicated that they may seek costs personally against the appellant’s solicitors should the appellant proceed with the appeal. The appellant who characterises that conduct as the making of threats attempting to interfere with the duties of the appellant’s solicitors. That conduct is also relied upon to demonstrate special circumstances warranting the order of indemnity costs.

11    The communication from the solicitors for the respondents was based on a view that the appeal was hopeless and that as a result it would be open to the Court to order costs against the appellant’s solicitors personally. That view was clearly erroneous and it might be said that the communication of it was ill advised. However I do not regard the communication as constituting misconduct so as to establish a special circumstance warranting the awarding of costs on an indemnity basis.

should a costs certificate be ordered in favour of the second respondent

12    In the event that a costs order should issue, the second respondent seeks a certificate pursuant to section 6(1) of the Federal Proceedings (Costs) Act 1981(Cth). Section 6(1) provides that:

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

…

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

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

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

13    Section 3(fa) provides that a ‘Federal appeal’ includes an appeal to the Federal Court from a judgment of the Federal Magistrates Court. There is no question that this is such an appeal. I will proceed on the assumption that the appeal succeeded on a question of law as s  6(1) requires.

14    It is well established that the discretion conferred by s 6(1) is broad: Minister for Immigration and Citizenship v SZNVW (No 3) [2010] FCAFC 102 (Keane CJ, Emmett and Perram JJ); Minister for Immigration and Citizenship v Khadgi (No 2) [2010] FCAFC 152 at [5] (Stone, Foster and Nicholas JJ).

15    The second respondent contended that a certificate should be issued as the appeal succeeded because the Magistrate fell into error. However, the respondents led the Federal Magistrate into error and proceeded to defend an appeal in which they sought to justify the substance of the Federal Magistrate’s erroneous decision. That is not a basis for the exercise of the discretion to issue a costs certificate.

DISPOSITION

16    I will make orders setting aside the costs order made below and for the respondents to pay the appellant’s costs of and incidental to the proceeding below and of and incidental to the appeal on a party and party basis.

Associate:

Dated:    12 October 2011