FEDERAL COURT OF AUSTRALIA

Gaffney v RSM Bird Cameron Partners (a Firm) (No 2) [2013] FCA 945

THE COURT ORDERS THAT:

1.    The applicant pay the respondents’ costs on an indemnity basis, to be paid forthwith, of the costs of those parts of the proceedings dismissed, the application for summary judgment and the costs of this application for a special costs order.

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

REASONS FOR JUDGMENT

Introduction

1    On 5 July 2013, the Court ordered, under s 31A of the Federal Court of Australia Act 1976 (Cth) (the FCA Act), that the applicant’s claims, pleaded under paras [17]-[21], [22]-[35] and [36]-[38] of the Consolidated and Amended Statement of Claim (CASOC), be dismissed and that the applicant pay the respondents’ costs of the interlocutory application dated 2 November 2012: Gaffney v RSM Bird Cameron (a Firm) [2013] FCA 661 (the Judgment).

2    The respondents seek special costs orders that the costs awarded against the applicant in relation to both the main application, the interlocutory application dated 2 November 2012 and this present application, be assessed on an indemnity basis and paid forthwith and that the applicant’s application be stayed until the applicant has paid these costs.

3    The respondents read the affidavits of Colin Touyz sworn 12 and 25 July 2013 respectively. The applicant read two affidavits sworn by her on 19 and 23 July 2013 respectively.

4    The applicant concedes that the respondents are, in principle, entitled to costs of those causes of action on which they succeeded and the costs of the application for summary judgement subject to submissions about the extent to which the respondents ought to be allowed to recover its costs. The applicant does not concede the respondents are entitled to costs on an indemnity basis. If orders on that basis are made, the applicant seeks directions allowing her counsel to inspect the papers on which the claim for costs are made subject to any reasonable undertakings to preserve confidentiality.

5    The application for an order to stay the remaining cause of action is opposed.

Costs - general principles

6    In the exercise of the Court’s discretion to order costs under s 43 the FCA Act, costs ordinarily follow the event and the successful litigant will receive its costs, unless special circumstances justify some other order.

7    The ordinary practice of this Court is that the unsuccessful party, usually, will be required to pay the costs of the successful party on a party and party basis, and that practice is not departed from unless the justice of the particular case so requires or some special or unusual feature arises.

8    Although s 43 of the FCA Act confers a broad discretion with respect to costs, generally, an award of costs is not taxed and paid until the completion of the proceeding.

Indemnity Costs

9    A party entitled to costs may apply to the Court for an order that costs awarded in their favour be paid other than as between party and party.

10    To warrant a departure from the ordinary rule that costs be paid on a party and party basis, there should be some special or unusual feature in the case. The question must always be whether the particular facts and circumstances of the case warrant the making of an order for payment of costs other than on a party and party basis: InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 at [11].

11    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 a 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: De Alwis v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 77; Latoudis v Casey (1990) 170 CLR 534.

12    Indemnity costs are appropriate in circumstances such as where allegations were made which ought never to have been made, and is ordinarily enlivened where an action is commenced when proper advice would indicate that the proceeding has no prospect of success. In such cases of ulterior motive or wilful disregard for the known facts, the established law is presumed: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; Christofidellis v Zdrilic [2000] FCA 679 at [24] citing John S Hayes & Associates Pty Limited v Kimberly-Clark Australia Pty Limited (1994) 52 FCR 201.

13    In Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Limited) (No 2) [2007] FCA 179 at [5]-[6], features that justified the finding that it was unreasonable for an applicant to have subjected respondents to the expenditure of costs, and the making of an order for indemnity costs were that: the claims were untenable and had no prospect of success; the pleaded causes of action were offensive and embarrassing, the nature of which was to put the parties to considerable expense and effort both to penetrate what was being said for the purposes of divining what may have been alleged against them and adequately to respond to the pleading; and the pleading made allegations of impropriety without anything to indicate there was any reasonable prospect of success in relation to making out those allegations. See also, Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 225-233; J-Corp Ply Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch (No 2) (1993) 46 IR 301 at 303.

Forthwith costs order

14    The authorities identify three classes of cases in which the Courts might order costs payable forthwith. One of those classes concerns where the decision on the application determines a separately identifiable matter or may be viewed as the completion of a discrete aspect of the matter: Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319 at [127]; Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 at 4–5; Australian Agricultural Co Ltd v AMP Life Ltd [2003] FCA 1134. Such was the case here in relation to the s 31A application.

Relevant circumstances

15    As to the causes of action which were dismissed, all that was required in order for the s 31A application to be successful was a finding that the relevant causes of action had no reasonable prospect of success. However, I found, in effect, that they were hopeless. That conclusion was not influenced by any facts intervening after the application was instituted.

16    As I found in the Judgment at [104], “[t]he respondents established more than a prima facie case for summary judgment on the evidence filed by them”. Later, in relation to what was described in the Judgment as the partnership claim, at [108], I stated:

[108]    The evidence overwhelmingly supports a conclusion that there was no failure by the partnership to exercise candour in its dealings with the applicant. The position is the very opposite. The evidence discloses that a transparent, caring and open process was extended to the applicant. The lack of candour was on the applicant’s part, but despite it, the partnership continued its efforts to achieve an outcome that would have seen the applicant remain within the partnership as a salaried partner who would be encouraged to work her way back to becoming a full equity partner. It was she who, for her own reasons, rejected this. It was she who wanted there to be a parting of their ways.

17    None of the evidence supported the applicant’s discrimination claims or any element within those claims. This is reflected in some detail in the Judgment at [132], [140], [150]-[152], [156], [157], [161]-[166].

18    It is my opinion that those causes of action were commenced and continued in circumstances where the applicant, properly advised, should have known that there was no chance of success.

19    These circumstances would of themselves justify an indemnity costs order but there are additional considerations which further underpin that justification.

20    As the respondents’ affidavits disclose, the applicant added to the length of the proceedings by the number of iterations, both formal and informal, of her statement of claim, and the process of conferral upon each one, as well as the extent to which discovery of documents was demanded by the applicant of the respondents, including an unsuccessful application to compel further discovery and spurious threats to bring on other such applications.

21    Moreover, the applicant made allegations of a serious nature against professional colleagues, which she was never able to properly particularise and which I found were groundless. These included allegations that they had not acted bona fide; were lacking in candour; and discriminated against her on the grounds of a disability, which they are alleged to have imputed to her, and her sex. In the summary judgment application, the applicant did not lead any evidence in support of these or other allegations in the face of detailed and extensive evidence adduced on behalf of the respondents refuting such allegations. I found that the partners and directors of the respondents acted properly throughout.

22    The applicant made allegations, through senior counsel at the hearing, that she had been bullied by the partners and directors of the respondents. Those allegations were never pleaded or particularised. No evidence as to this was tendered. Indeed, as I found, the allegations were at odds even with the applicant’s own notes of meetings at which the bullying was alleged to have taken place, and the uncontradicted evidence of Mr Hutchinson, adduced on behalf of the respondents.

23    Despite receiving the respondents’ affidavits and submissions which spelt out in detail the respondents’ case and demonstrated the futility of the applicant’s case, the applicant persisted in opposing the application without adducing any evidence to contest the respondents’ version of events.

24    Finally, as to some of the limited evidence adduced by her through her solicitor, I found that she had been less than forthright.

25    The applicant submits that the bill of costs will be difficult to tax given the overlap between the claims, the defence of the claims and the cross-claim (yet to be tried) and issues relating to apportionment. I do not accept this submission. The cross-claim can be dealt with separately. The supposed overlap between the counterclaim and [20.9] of the defence is not in fact an overlap.

26    The applicant submits that even if the bases justifying an indemnity costs order were made out, nonetheless, such an order ought not to be made if the scale can adequately compensate the lawyers: Flotilla Nominees Pty Ltd v Western Australian Land Authority (2003) 28 WAR 95 at [11]. I cannot say whether that would be the case and no material was put by the applicant to suggest it would.

27    The applicant also relied upon what was said in EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59 at 71-72, that in cases where indemnity costs are awarded there is a reversing of the onus of persuasion. For example, the applicant contends that this onus of persuasion is difficult to discharge where access to the basis of the bill is denied to the paying party, hence the application by her for an order for the production of documents relevant to a taxation of costs. Should there be a need for the applicant to have access to particular documents for the purposes of a taxation, then the taxing officer may make appropriate orders to meet this need. I do not propose to make such orders in a vacuum.

28    Further, the applicant submits that even if an indemnity order is made then the Court may consider that costs should be apportioned between the parties. I do not agree.

29    The applicant submits that any reference to findings in the Judgment is limited by the fact that the action was never tried and that the findings to which reference is made were based on limited evidence. This submission is without substance. The applicant, as I made clear in the Judgment, made a deliberate and considered decision not to put on her own affidavit(s). It is too late now to be referring, at large, to evidence never tendered.

30    Nothing said by Callinan J in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406 alters the conclusions to which I have come.

31    The respondents submit that what remains of the proceeding is a small claim that the second respondent breached the applicant’s contract of employment with it by summarily terminating it and that it is clear from the CASOC and the amended defence, in the light of the findings made by the Court in the summary judgment application, that the claim has very little prospect of success and, even if it did succeed, that the damages would be insubstantial. I do not propose to make any findings in those respects.

32    Nonetheless, as I mentioned, the applicant concedes that the respondents are entitled to the costs incurred by them in the main application in relation to the causes of action which have been dismissed. I am satisfied, for these reasons, that the applicant should pay the respondents’ costs, on an indemnity basis.

33    I will order that the costs in relation to both those causes of action in the main application, the interlocutory application dated 2 November 2012, and this present application be taxable and paid forthwith. I will not stay the applicant’s main application until such costs have been paid. It is premature to make such an order. If, after taxation, the applicant fails to pay those costs, the position may be different.

34    Accordingly, there will be orders that the applicant pay the respondents’ costs on an indemnity basis, to be paid forthwith, in respect of the causes of action dismissed, the interlocutory application for summary judgment and this present special costs application.

Associate:

Dated:    18 September 2013