FEDERAL COURT OF AUSTRALIA

Fernando v Commonwealth of Australia (No 6) [2013] FCA 1121

THE COURT ORDERS THAT:

1.    The respondents are to pay the applicant’s costs of the remitted hearing.

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

REASONS FOR JUDGMENT

1    On 21 July 2010, the Court awarded Mr Fernando $3,000 in general damages in respect of a wrongful imprisonment claim which he had brought against the Commonwealth of Australia and the former Acting Minister for Immigration and Multicultural and Indigenous Affairs (the respondents) in respect of his detention in immigration detention for 1,203 days. In awarding Mr Fernando $3,000 in general damages, I found that Mr Fernando had been unlawfully detained for one day (Fernando v Commonwealth (2010) 188 FCR 188). After having heard further submissions on aggravated and exemplary damages, the Court awarded exemplary damages of $25,000 against the Commonwealth on 24 December 2010 (Fernando (by his tutor Ley) v Commonwealth (No 4) (2010) 276 ALR 586).

2    On appeal, the Full Court set aside the orders of 21 July 2010 and 24 December 2010 and remitted the application to me to assess damages on the basis that Mr Fernando had been unlawfully detained for a period of 1,203 days (Commonwealth v Fernando (2012) 200 FCR 1).

3    After the parties had engaged in an unsuccessful attempt to mediate Mr Fernando’s application, there was a hearing in respect of the remitted question of damages on 29 and 30 January 2013.

4    Before the hearing, the respondents had foreshadowed to Mr Fernando that they would rely at the hearing upon two decisions of the United Kingdom Supreme Court, to contend that Mr Fernando was entitled to no more than nominal damages, rather than substantial damages, in respect of his unlawful detention for 1,203 days. In response Mr Fernando foreshadowed that any attempt by the respondents to advance that argument would be opposed on the basis that the Court would have to grant the respondents leave to reopen, and the circumstances did not warrant the granting of such leave.

5    At the hearing, as foreshadowed, the respondents sought to advance the nominal damages argument and Mr Fernando resisted the respondents being permitted to advance that argument on the grounds foreshadowed.

6    I found that the respondents should be permitted to reopen in order to advance their nominal damages argument and then accepted the nominal damages argument. The Court awarded Mr Fernando the sum of $1.00 nominal damages and $25,000 by way of exemplary damages (Fernando v Commonwealth of Australia (No 5) [2013] FCA 901 (Fernando (No 5)). In permitting the respondents to reopen, I observed at [84]:

It is, of course, the case that Mr Fernando’s expectation of being awarded substantial damages, arising from having succeeded in his cross-appeal, is substantially threatened by the Commonwealth’s proposed nominal damages argument. It is also the case that, as Mr Fernando contended, it would be most unusual if Mr Fernando, having won his cross-appeal, were to end up in a worse position, following remittal of the case. This is a powerful factor upon which I have placed considerable weight. However, in my view, this circumstance must be weighed against the Commonwealth’s argument that if the Court were to preclude the Commonwealth from advancing an argument which would otherwise succeed, Mr Fernando would be the beneficiary of a windfall. Mr Fernando’s prejudice in having conducted litigation on a basis which is undermined by subsequent legal developments, namely, the Supreme Court cases, may be met by an award of costs in favour of Mr Fernando.

7    At [99], I observed:

It follows that on the application of ordinary compensatory principles in tort, Mr Fernando did not suffer any loss by reason of his unlawful detention for 1,203 days, which warrants the award of substantial damages. It follows also that Mr Fernando is entitled, therefore, only to nominal damages of $1.00. Mr Fernando should, of course, have all of the costs of this proceeding. I am minded to award those costs on an indemnity basis, but I will hear from the parties on this point.

8    On 6 September 2013, when I delivered the judgment, I drew the parties’ attention to these paragraphs of the reasons for decision, and I invited submissions on the question of costs.

9    Each of the parties subsequently filed written submissions. The respondents’ submissions were accompanied by an affidavit from Mr Arran Gerrard, a solicitor with the Australian Government Solicitor. The content of his affidavit introduced a further element into the consideration of costs. This is because Mr Gerrard’s affidavit enclosed correspondence between the Australian Government Solicitor and the solicitors representing Mr Ley, the pro bono tutor for Mr Fernando. This showed that by a letter dated 13 November 2012, the respondents had made an offer to compromise the proceeding by paying to the applicant the sum of $500,000. The letter stated that this offer was in addition to the respondents’ offer which they had made on 31 October 2012 to pay $145,000 to the applicant in the full and final settlement of their obligation to pay the applicant’s legal costs at the first instance and on appeal.

10    The respondents’ November letter also advised that the offer was made in accordance with the Calderbank principles and that it was open for acceptance within 28 days.

11    By a letter dated 22 November 2012, Mr Ley, by his solicitors, accepted the offer of $145,000 in respect of the applicant’s legal costs, but rejected the respondents’ offer to pay $500,000 in full and final settlement of Mr Fernando’s claims.

12    Relying upon Mr Ley’s rejection of the offer, the respondents contended that the Court should order that the applicant pay the costs incurred by the respondents from 11.00 am on 15 November 2012, on an indemnity basis. The respondents contended that they were liable to pay the applicant’s costs incurred up to 11.00 am on 15 November 2012.

13    With the benefit of hindsight, it may perhaps be regarded as a matter of regret that Mr Ley did not accept the respondents’ offer. However, the question of whether the Court should order that the applicant is to pay indemnity costs is a discretionary question. A major consideration in the exercise of this discretion is whether it was unreasonable for Mr Ley to reject the respondents’ offer at the time that the offer was made.

14    The award of nominal damages rather than substantial damages in Mr Fernando’s favour came about by reason of the exercise of an indulgence by the Court in favour of the respondents in order to permit the respondents to advance the nominal damages argument.

15    At the time that the respondents’ offer was made, the matter stood as having been remitted to me by the Full Court with the expectation that the damages which I would award would be substantial damages in respect of a very long period of unlawful detention. The respondents had foreshadowed that they would seek to advance the nominal damages argument. Mr Ley, however, was entitled to take the view that the respondents’ approach was, in the circumstances, highly unusual and that there was a good prospect that the Court would not permit the respondents to advance that proposition. Not least of the considerations which would have weighed with Mr Ley, is that, having been successful on appeal, it would be unlikely that the applicant would end up in a worse position than at first instance by reason of subsequent legal developments. As I have said in the reasons for judgment in Fernando (No 5), the question as to whether it was appropriate to permit the respondents, in those circumstances, to advance their nominal damages argument, caused me considerable difficulty and is plainly controversial.

16    In those circumstances, it cannot be said that it was unreasonable for Mr Ley not to have anticipated that an award of nominal damages would be made. Accordingly, in my view, it was not unreasonable for Mr Ley to reject the Calderbank offer.

17    I am conscious, of course, that the amount of the respondents’ offer is considerably in excess of the amount of substantial damages that I said I would otherwise have awarded (Fernando (No 5) at [139]). However, in my view, the reasonableness or otherwise of the conduct of Mr Ley in rejecting the offer must be assessed by reference to the circumstances of the determination that the Court made, and not the determination which it might otherwise have made.

18    The respondents’ contention that Mr Ley should pay the costs of the respondents from 15 November 2012 on an indemnity basis is, therefore, rejected.

19    I might add that on 14 March 2013, after I had reserved judgment, following the remittal hearing in January 2013, the respondents repeated their offer which was again rejected. I make no comment about the possible effect of the rejection of that offer on subsequent proceedings.

20    The next question is whether in light of the indulgence granted by the Court to the respondents to permit them to reopen to advance the nominal damages argument, they should as a condition of that indulgence, be required to pay the costs of the proceedings. This was the view I expressed in the reasons for judgment. I also observed, however, that perhaps the costs should be awarded on an indemnity basis, and that I would hear from the parties on that question.

21    It is apparent from the nature of the submissions that my observations in relation to the awarding of indemnity costs, have been misconstrued by the parties as an invitation to address the question of whether the respondents conducted the proceedings in such an unreasonable a manner as to warrant the award of indemnity costs. It was not my intention to receive submissions on this issue. Rather, I had in mind that, because the proceeding, which had been commenced in 2007, had been determined in a manner adverse to Mr Fernando, by reason of subsequent legal developments, it might be appropriate that the applicant receive a full indemnity in respect of the time and resources wasted in conducting the litigation.

22    The applicant, however, has not in his written submissions contended that had the nominal damages argument been raised initially, the applicant would not have continued to litigate his claims. What is said is that the argument would have been determined at an earlier time. This contention does not persuade me, had the argument been raised earlier, that the litigation would have taken so significantly a different course as to justify ordering that the respondents pay costs of the whole proceeding on an indemnity basis.

23    Further, the evidence discloses that the parties have already reached a full and final settlement in respect of the costs of the initial hearing and the appeal. This is a further discretionary factor weighing against making an order for indemnity costs.

24     Accordingly, I will order that the respondents pay the costs of the remitted hearing.

Associate:

Dated:    30 October 2013