FEDERAL COURT OF AUSTRALIA

Returned & Services League of Australia (Queensland Branch) Sarina Sub Branch Inc v Returned & Services League of Australia (Queensland Branch) (No 2) [2012] FCA 1138

THE COURT ORDERS THAT:

The applicant pays the costs of the respondents of and incidental to the interlocutory application filed by the respondents on 21 September 2012, such costs to be assessed if not otherwise agreed.

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

REASONS FOR JUDGMENT

1    On 21 September 2012 an interlocutory application was filed by the respondents to the substantive application (for convenience, I will continue to refer to the respondents to the substantive application as “the respondents”). Relevant background facts in respect of the substantive proceedings are explained in Returned & Services League of Australia (Queensland Branch) Sarina Sub Branch v Returned & Services League of Australia (Queensland Branch) [2012] FCA 1105.

2    In their interlocutory application the respondents sought, in summary, the following relief:

    Discontinuance of the applicant’s originating application as a representative proceeding, pursuant to s 33N(1)(b) and/or s 33N(1)(c) and/or s 33N(1)(d) of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”).

    Strike-out of the following material pursuant to r 1.32 and/or r 16.21 and/or r 16.42 of the Federal Court Rules 2011 (“Rules”) and/or s 37P of the Federal Court Act:

o    the entire originating application filed 20 August 2012 and statement of claim filed 20 August 2012; or

o    alternatively:

▪    from the originating application: para 2(b)(iv) and/or para 2(b)(v) under the heading “Questions Common to claims of group members”; and

▪    from the statement of claim:

o    the whole of para 4, or alternatively para 4 to the extent of the words “include or are likely to include but” and “not”;

o    the whole of paras 18(b) and/or 18(c) and/or 25 and/or 32 and/or 34 and/or 36 and/or 37 and/or 38 and/or 39 and/or 40 and/or 43; and/or

o    the whole of para 33 or alternatively sub-paragraphs 33(b) and/or 33(d) and/or 33(e).

    Alternatively to the partial strike-out of material from the originating application and the statement of claim – filing and service by the applicant of further and better particulars of the originating application and the statement of claim pursuant to r 16.45 of the Rules.

    Costs.

3    The interlocutory application was listed for hearing on 10 October 2012. After the hearing had commenced, however, I briefly adjourned Court to permit the parties the opportunity to engage in private discussions. On resumption of the hearing, Counsel indicated to me that the interlocutory application had been resolved, subject to the issue of costs.

4    I directed the parties to agree on a form of Consent Orders to be made by the Court in resolution of the interlocutory application. The orders which I have subsequently made from Chambers are in the following terms:

THE COURT ORDERS THAT:

1.    Subject to Order 2 hereof, leave be granted to the Applicant to file and serve an amended Originating Application and Statement of Claim on or before 4.00 pm on 9 November 2012.

2.    There be reserved for further argument that part of the Respondents’ interlocutory application filed 21 September 2012 relating to Part IVA of the Federal Court of Australia Act 1976 (Cth) in respect of any amended Originating Application and Statement of Claim that may be filed and served in accordance with Order 1 hereof.

3.    The Respondents make any request for further and better particulars by 4.00 pm on 23 November 2012.

4.    The Applicant reply to any request for further and better particulars by 4.00 pm on 14 December 2012.

5.    The Respondents file and serve any Defence on or before 4.00 pm on 8 February 2013.

6.    The proceedings be listed for further directions on a date to be fixed.

7.    The parties have liberty to apply on five (5) days’ notice.

5    It is clear from the terms of the Orders to which the parties have consented that:

    The applicant conceded that the originating application and the statement of claim required amendment (as claimed by the respondents in paragraphs 2 and 3 of the interlocutory application), although there was no apparent concession that the pleadings in their entirety be struck out.

    The applicant conceded that it should provide further and better particulars (as claimed by the respondents in paragraph 4 of the interlocutory application).

    While the prospect of the proceeding continuing as a representative proceeding under Pt IVA of the Federal Court Act has not been completely resolved, there appears to be a concession by the applicant that the proceeding not continue in that form, subject to the prospect of later argument.

6    In summary, the respondents contend that:

    they have been successful in respect of their interlocutory application because the applicant has conceded the claims made by the respondents in that application; and

    therefore, costs ought follow the event and they should be entitled to their costs of the interlocutory application as against the applicant.

7    The applicant, however, submits that the preferable course is for the Court to order either:

    the respondents should be liable for some part of the costs of the applicant; or

    each party ought bear its own costs.

8    The applicant relies on s 12 of the Civil Dispute Resolution Act 2011 (Cth) (“CDR Act”) which provides:

Exercising discretion to award costs

(1) In exercising a discretion to award costs in a civil proceeding in an eligible court, the court, Judge, Federal Magistrate or other person exercising the discretion may take account of:

(a) whether a person who was required to file a genuine steps statement under Part 2 in the proceedings filed such a statement; and

(b) whether such a person took genuine steps to resolve the dispute.

(2) In exercising a discretion to award costs in a civil proceeding in an eligible court, the court, Judge, Federal Magistrate or other person exercising the discretion may take account of any failure by a lawyer to comply with the duty imposed by section 9.

(3) If a lawyer is ordered to bear costs personally because of a failure to comply with section 9, the lawyer must not recover the costs from the lawyer’s client.

9    In doing so, the applicant claims, in summary, that:

    The respondents made no genuine attempts to resolve the dispute giving rise to the filing of their interlocutory application, and did not file a genuine steps statement in respect of that interlocutory application.

    Notwithstanding the repeated concessions made by the applicant, the respondents filed their interlocutory application in circumstances where the application was unnecessary.

    The respondents failed to engage in meaningful discussions with the applicant, including through their legal representatives, or to allow the applicant reasonable time to address outstanding issues which may have obviated the need for the interlocutory application to be filed.

    The respondents have consistently resisted the prospect of mediation with the applicant despite their organisational relationship.

    In this proceeding the applicant filed a genuine steps statement on 16 August 2012, and the respondents filed a genuine steps statement on 3 September 2012. However, the respondents have not filed a genuine steps statement in respect of their interlocutory application, which is a “civil proceeding” within the meaning of the CDR Act.

    As a result of their conduct, it is clear that the respondents have failed to comply with their obligations under the CDR Act. A relevant authority in this context is the decision of Reeves J in Superior IP International Pty Ltd v Ahearn Fox Patent and Trade Mark Attorneys [2012] FCA 282.

Consideration

10    The primary argument of the applicant in this case is that, in exercising its jurisdiction under s 43 of the Federal Court Act to award costs, the Court should take into account the failure of the respondents to either file a genuine steps statement or engage in a genuine attempt to resolve contentious issues before filing their interlocutory application on 21 September 2012. The applicant points in particular to s 11 of the CDR Act in support of this contention.

11    In my view, while the CDR Act clearly imposes obligations on the parties prior to the commencement of civil proceedings in either the Federal Court of Australia or the Federal Magistrates Court, I do not accept that the CDR Act (or s 37M and s 37N of the Federal Court Act) requires the filing of a genuine steps statement or a demonstration of a genuine attempt to resolve contentious issues by a party prior to the filing of any interlocutory application in the context of extant civil proceedings.

12    I form this view for the following reasons.

Relevant Legislation

13    Section 3 of the CDR Act provides that the object of the CDR Act is to ensure that, as far as possible, people take genuine steps to resolve disputes before certain civil proceedings are instituted. For the purposes of the CDR Act, “genuine steps to resolve a dispute” means that a person has taken steps which are a sincere and genuine attempt to resolve the dispute, having regard to the person’s circumstances and the nature and circumstances of the dispute (s 4(1A)). Section 4(1) of the CDR Act lists examples of steps which could be taken by a person as part of taking genuine steps to resolve a dispute, namely:

(a) notifying the other person of the issues that are, or may be, in dispute, and offering to discuss them, with a view to resolving the dispute;

(b) responding appropriately to any such notification;

(c) providing relevant information and documents to the other person to enable the other person to understand the issues involved and how the dispute might be resolved;

(d) considering whether the dispute could be resolved by a process facilitated by another person, including an alternative dispute resolution process;

(e) if such a process is agreed to:

(i) agreeing on a particular person to facilitate the process; and

(ii) attending the process;

(f) if such a process is conducted but does not result in resolution of the dispute--considering a different process;

(g) attempting to negotiate with the other person, with a view to resolving some or all the issues in dispute, or authorising a representative to do so.

14    Obligations to take genuine steps to resolve disputes before proceedings are instituted are found in Pt 2 of the CDR Act, and in particular in s 6 and s 7. Under s 6 of the CDR Act an applicant who institutes civil proceedings in an eligible court – which includes this Court – must file a genuine steps statement at the time of filing the application. The respondent to such proceedings must similarly file a genuine steps statement (s 7).

15    Section 11 allows the Court, in performing functions or exercising powers in relation to civil proceedings before it, to have regard to whether a person who was required to file a genuine steps statement under Part 2 in the proceedings filed such a statement, and whether such a person took genuine steps to resolve the dispute.

16    Part 4 of the CDR Act excludes certain types of proceedings from the obligations otherwise imposed on the parties.

17    In considering the CDR Act, regard may be had to the Explanatory Memorandum accompanying its introduction. In particular, I note the General Outline which provides as follows:

This Bill encourages the resolution of civil disputes outside of the courts and seeks to improve access to justice by focusing parties and their lawyers on the early resolution of disputes.

This Bill seeks to ensure that, as far as possible, parties take ‘genuine steps’ to resolve a civil dispute before proceedings are commenced in the Federal Court or the Federal Magistrates Court. When commencing proceedings in a court, parties are required to file a statement saying what steps they have taken to resolve their dispute or, if they have not taken any steps, the reasons why. The Bill gives examples of reasons why steps might not be taken, including urgency, or where the safety of a person or security of property is compromised. The court can take into account the failure to take steps when exercising its existing case management directions and costs powers.

The Bill does not require parties to take any particular specific step - the most appropriate steps to take depend on the circumstances of the particular dispute. The Bill is deliberately flexible in allowing parties to tailor the genuine steps they take to the circumstances of the dispute.

The genuine steps statements provide additional information for the court about attempts that have been made to resolve the dispute. Based on this information, the court can make orders and directions under its existing case management powers, and consider compliance with the requirement and the extent of any steps taken in awarding costs.

Lawyers are also under an obligation to advise their clients of the requirement and assist them to comply.

The Bill applies to all civil proceedings other than excluded matters under Part 4. Matters are excluded if the subject matter is inappropriate, for example a civil penalty proceeding and related matters, or if there are already specific mandatory pre-action steps that would make further steps inappropriate, such as under the Family Law Act 1975. Further, matters that have already been considered by a statutory tribunal are excluded, such as the Administrative Appeals Tribunal, Migration Review Tribunal or Veteran’s Review Board.

The Bill draws on recommendations of the National Alternative Dispute Resolution Advisory Council (NADRAC) in its report, The Resolve to Resolve - Embracing ADR to improve access to justice in the federal jurisdiction (November 2009).

The Bill complements the Access to Justice (Civil Litigation Reforms) Act 2009 which amended the Federal Court of Australia Act 1976 to impose an overarching purpose to facilitate the just resolution of disputes according to law, and as quickly, inexpensively and efficiently as possible. It also complements existing case management powers contained in Part 6 of the Federal Magistrates Act 1999.

The Bill is a further step to support a cultural change in civil dispute resolution away from adversarial litigation.

18    At the same time, s 37N of the Federal Court Act requires parties to a civil proceeding before the Court to conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the “overarching purpose”. The “overarching purpose” is defined by s 37M(1) of the Federal Court Act as facilitating the just resolution of disputes:

(a) according to law; and

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

19    In conclusion, and in relation to the CDR Act and s 37M and s 37N, the applicant directs my attention in particular to the definition of “proceeding” in s 4 of the Federal Court Act, namely meaning:

a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal.

20    It follows, in the submission of the applicant, that the CDR Act as well as s 37M and s 37N apply to “incidental proceedings” in the course of a proceeding.

General position

21    In my view the starting point in considering the applicant’s submission is that a person is entitled to commence legal proceedings to protect his or her legal position. As Deane J further observed in Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 241:

A party who has regularly invoked the jurisdiction of a competent court has a prima facie right to insist upon its exercise and to have his claim heard and determined. That prima facie right to the exercise of competent jurisdiction which has been regularly invoked can be displaced by statute but “the language of any such statute should be jealously watched by the Courts, and should not be extended beyond its least onerous meaning unless clear words are used to justify such extension”: per Scrutton J, In re The Vexatious Actions Act, 1896. In re Bernard Boaler…

(cf Brennan J at 239, and Humane Society International Inc v Kyodo Senpaku Kaisha Ltd (2006) 154 FCR 425 at 430).

22    Neither the CDR Act nor the Federal Court Act prevent the commencement of proceedings in this Court. However, the CDR Act in particular imposes additional requirements on litigants prior to the commencement of proceedings, in requiring the litigants to take genuine steps to resolve the relevant dispute and, inter alia, file a genuine steps statement. This is made clear by ss 3, 4, and 6 of the CDR Act. I am not satisfied that the CDR Act required the respondents in this case to file a genuine steps statement at the time of filing their interlocutory application.

The CDR Act

23    First, while the definition of “proceeding” in s 4 of the Federal Court Act is broad, s 6 of the CDR Act requires an applicant “who institutes civil proceedings in an eligible court” to file a genuine steps statement. In my view, this clearly refers to the applicant to the originating application. I form this view by reference to the word “institutes” in s 6. Even by reference, by way of illustration, only to cases decided in this Court, it is clear that the “institution of civil proceedings” has consistently meant the commencement of substantive proceedings. I note, for example, Knezevic v Markovic (1985) 5 FCR 219 at 219 (“and to put a person aggrieved by an act which is both a crime and a tort to his election to institute either civil or criminal proceedings”); Spalla v St George Motor Finance Ltd (2004) 209 ALR 703 at [27]; Re Goldspink Ex Parte: Deputy Commissioner of Taxation (unreported, Beaumont J, 11 June 1986) at [16]; Riley McKay Pty Limited v Bannerman (1977) 15 ALR 561 at 565 per Bowen CJ; Turner v Griggs [2005] FCA 1911 at [3]; Credit Corp Australia Pty Ltd v Atkins [1999] FCA 335; MacDonald v Australian Securities Commission (1993) 43 FCR 466 at [9]; Australian Competition and Consumer Commission v Pratt (2008) 250 ALR 661 at [10] and [51]; Ricegrowers Co-operative Mills Ltd v Bannerman (1981) 38 ALR 535 at 540.

Statutory Interpretation

24    Second, I am not satisfied that Parliament intended a genuine steps statement to be filed for every interlocutory application which might be filed in the course of a broader case. It is in the interests of the parties that they take steps to resolve interim disputes during the course of litigation, and indeed in the interests of case management in the Court to minimise any disputes which could otherwise be resolved. Intransigence of a party in the face of genuine and reasonable attempts by the other to address disputed issues can be, and always has been, taken into account by the Court in respect of an award of costs. However in my view to require the respondents to file a genuine steps statement before filing any interlocutory application after civil proceedings have been commenced and during the course of those proceedings:

    would potentially hold up the progress of already instituted litigation, and to that extent is contrary to principles of efficiency found in s 37M of the Federal Court Act; and

    would invariably result in increased costs for the parties.

25    I take this view particularly in light of the circumstances of this case, where the prospect of the respondents filing a strike-out application was ventilated in directions in Court on 3 September 2012, such that the applicant was then put on notice of the likelihood of an interlocutory application being made.

26    The Explanatory Memorandum to the CDR Act contemplates parties taking genuine steps to resolve a civil dispute before proceedings are commenced in the Court. I note further that the Rules, in dealing with genuine steps statements, contemplate that such statements be filed contemporaneously with the originating application or, in the case of a respondent, by the first return date fixed in the originating application: r 8.02(1) and r 5.03(1).

27    I consider that clearer language would be required in the CDR Act to require a genuine steps statement to be filed with any interlocutory application during the course of litigation, such as that filed by the respondents on 21 September 2012.

Order as to Costs

28    Section 43(1) of the Federal Court Act vests the Court with jurisdiction to award costs in all proceedings before the Court.

29    As I have already indicated, the applicant claims that that it made genuine attempts to resolve the dispute giving rise to the respondents’ interlocutory application, and that it has made some concessions. The applicant pointed to the extensive correspondence between the instructing solicitors for the parties between 7 September 2012 and 21 September 2012, where the applicant made it clear that it sought resolution of the dispute, to the point of indicating consent to a delay in the respondents filing their strike-out application. The applicant claims, however, that the respondents filed the strike-out application notwithstanding these discussions, and notwithstanding that a reasonable resolution of the matter would have been made had the respondents and their legal representatives acted responsibly.

30    The respondents contend however:

    The first the respondents learned of the intention of the applicant to abandon four of the five causes of action in its statement of claim was at 4.00 pm on 9 October 2012, the day before the hearing of the respondents’ interlocutory application.

    At that time the respondents also learned that the applicant agreed to replead the originating application and the statement of claim.

    The applicant has made serious allegations of fraud, secret commissions and unconscionable conduct.

    The respondents did not surprise the applicants with the strike-out application – directions were made in anticipation of such an application at the first return date when both Counsel were present, and the respondents had set out in detail their concerns with the applicant’s pleadings.

31    As I have already observed, communications between the parties to resolve interlocutory issues are to be encouraged. An unreasonable attitude by one party to engage in dialogue is to be discouraged as increasing costs in litigation, obstructing the progress of proceedings, and potentially clogging the Court lists. However in this case I am unable to see that the respondents acted unreasonably, intransigently or contrary to the principles set out in s 37M and s 37N of the Federal Court Act in filing the interlocutory strike-out application, as contended by the applicant. Mr Francey contrasted the attitude of the respondents with his description of the conciliatory behaviour of the applicant (transcript 10 October 2012 p 39 ll 31-36). However it is apparent from the consent position reached by the parties on 10 October 2012 that:

    there had been extensive correspondence between the legal representatives in relation to the issue of strike-out before 21 September 2012;

    only the day before the hearing the applicant had communicated a decision to the respondents to consent to replead as contemplated by the strike-out application; and

    notwithstanding the applicant’s claim that the parties had almost reached a position of consensus on 21 September 2012 when the respondent’s interlocutory application was filed, this was in fact not the case.

32    As I have also observed, the applicant made substantial concessions (including abandonment of a significant proportion of its case) to avoid a strike-out order by the Court and to allow the parties to reach a consent position. That is, of course, the decision of the applicant. But the course of events before the Court supports a finding that, in light of these events, the filing of the strike-out application by the respondents was validated.

33    I am not persuaded, on the facts before me, that the respondents have acted unreasonably in relation to either the filing of their interlocutory strike-out application, or in respect of events which took place either before or after the date of filing. On the facts before me, I am not persuaded that the respondents acted in such as way as to undermine the overarching purpose of the civil practice and procedure provisions as defined in s 37M of the Federal Court Act.

34    In my view, the appropriate order is that costs should follow the event, being, in substance, the success of the respondents in this matter.

Associate:

Dated:    18 October 2012