FEDERAL COURT OF AUSTRALIA

Moody Kiddell & Partners Pty Ltd v Arkell [2013] FCA 1225

THE COURT ORDERS THAT:

1.    Paragraph 105 of the Second and Third Respondents’ Amended Defence filed on 4 February 2013 be struck out.

2.    The Second and Third Respondents pay the Applicant’s costs of and incidental to the Interlocutory Application filed on 2 August 2013 on an indemnity basis and such costs are payable forthwith.

3.    The indemnity costs orders made on 4 April 2013 and on 27 June 2013 are payable forthwith.

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

REASONS FOR JUDGMENT

1    On 22 October 2013, I delivered judgment in Moody Kiddell & Partners Pty Ltd v Arkell [2013] FCA 1066. Those reasons for judgment related to the applicant’s interlocutory application filed on 2 August 2013 seeking an order that the whole of the amended defence of the second and third respondents be struck out as an abuse of process of the Court.

2    The abuse of process, as I identified at [1] of my reasons for judgment, was said to arise from alleged conduct of the second and third respondents, being the deliberate destruction of documents relevant to the issues in dispute and which otherwise ought to have been discovered by those respondents. The second and third respondents defended the interlocutory application, in effect, on all grounds. That is, there was no concession, factual or otherwise, made by the second and third respondents to the effect that documents had been destroyed, deliberately or otherwise. It was also said that the relief should not be granted in the exercise of discretion in any event.

3    As set out in my reasons for judgment, on all factual issues I effectively found in favour of the applicant and I concluded that the conduct of the second respondent, Mr Brooke, did constitute an abuse of the process of the Court, enlivening the Court’s power to strike out the defence.

4    As raised in discussions with the parties during the closing oral submissions, I considered the nature of the relief that should be granted and determined that, having regard to the relevant principles, the touchstone for the exercise of the discretion was the existence of significant prejudice to the applicant in the conduct of its case, and therefore that one paragraph of the defence, para 105, should be struck out. Otherwise, I could not see any basis for striking out other parts of the defence because the destroyed documents were not apparently directly relevant to those other parts of the defence.

5    The issues before me today are, firstly, whether the second and third respondents should be ordered to pay the costs of the applicant on the interlocutory application and, if so, whether those costs should be payable on an indemnity basis, secondly, whether those costs should be payable forthwith and, thirdly, the varying of orders already made for indemnity costs against the second and third respondents on 4 April and 27 June 2013, being whether those costs also should be payable forthwith.

6    The issue of indemnity costs in relation to this interlocutory application gives rise to certain competing considerations. One issue which weighed on my mind is that the interlocutory application sought the striking out of the whole of the defence. The order that I am about to make will result in the striking out of one paragraph of the defence. Analysing this circumstance by reference to principle, however, it seems to me to be clear that, leaving aside any question of indemnity costs, in the ordinary course of this matter I would be satisfied that the applicant had succeeded in establishing that the second and third respondents committed an abuse of process of the Court and, accordingly, succeeded in obtaining relief consequential upon that abuse of process.

7    The fact that the relief was narrower than the applicant sought is a consequence of the relevant principles to which I referred in my reasons for judgment. It is true that the applicant did not itself propose a narrower form of relief. The question of relief, however, was always going to be an issue in respect of the resolution of the interlocutory application. More relevantly, it is clear in my mind that the question of relief involved only the most minor part of the overall hearing and resolution of the interlocutory application. While it was important in my reasons for judgment, it did not take any time of the parties in any real sense during the hearing.

8    This was because the focus of the hearing in respect of the interlocutory application was establishing whether or not the alleged abuse of process had occurred. As a result, as I have said, leaving aside indemnity costs, I have no real doubt that, in the ordinary course, the usual order as to costs would apply in this case, namely, costs follow the event. The event is the finding of the abuse of process and the framing of relief consequential upon that abuse of process. I would not entertain any suggestion, and nor has any been made, that the applicant’s costs should be apportioned in any way by, for example, a percentage reduction merely because the relief I am about to grant is more limited than that which the applicant sought. That is, I would be content to make the usual order for costs in favour of the applicant.

9    The next question then is one of indemnity costs. The hesitation which I have in relation to indemnity costs arises from the fact that the applicant was not wholly successful in respect of the relief sought. However, when I analyse this in the context of the usual order for costs and the particular circumstances of this case, I am unable to see any principled basis upon which I would deny the applicant an order for indemnity costs.

10     The fact is, as I have said, this entire sequence of events relating to discovery has been forced upon the applicant, no doubt at great expense and inconvenience to it, by continued delinquent behaviour of the second respondent, Mr Brooke. While it is the case that no costs order is made to punish, the purpose of all costs orders being compensatory, I cannot see any reason why the applicant should not be fully compensated for what it has had to do in order to get to the bottom of what has happened in relation to discovery by the second and third respondents. In these circumstances, despite my initial hesitation, I am satisfied that the principles which govern the exercise of the discretion as to costs do indicate that, in common with the earlier costs orders, the interlocutory application which was before me also gives rise to an appropriate exercise of discretion which would result in the applicant being fully compensated by an indemnity costs order.

11    Accordingly, I am going to order that the second and third respondents pay the applicant’s costs of and incidental to the interlocutory application on an indemnity basis.

12    The remaining issue is whether that costs order and the earlier two costs orders for indemnity costs should be payable forthwith. In my view, again, this is a case where there are special circumstances which indicate that the costs should be payable forthwith.

13    The case has not yet proceeded beyond the discovery stage, in effect, because of the conduct of the second respondent. The case is a long way out from hearing. All of the costs that have been incurred and are the subject of costs orders relate to the issue of discovery which, at least in one sense, is separate from the substantive issues in the proceedings. Given those circumstances and the fact that all of the costs which the applicant has incurred reflected in what will now be three costs orders are a result, and a direct result, of the second respondent’s delinquency, it is appropriate that there should be an order that the costs be payable forthwith.

14    The only countervailing consideration is the potential impact of that upon the second and third respondents. In reality, however, I have nothing more than submissions about that potential impact. I can anticipate that the costs will be not insignificant but I have no knowledge of the financial position of the second or third respondents. In any event, it seems to me on the state of the material which I do have before me, this is an appropriate case that the costs all be payable forthwith.

15    I make orders accordingly.

Associate:

Dated:    12 November 2013