FEDERAL COURT OF AUSTRALIA

Shaw v MAB Corporation Pty Ltd (No 2) [2014] FCA 227

THE COURT ORDERS THAT:

1.    The applicant is to pay the respondents’ costs of and incidental to the application for an extension of time in which to seek leave to appeal, and the application for leave to appeal.

2.     The costs referred to in paragraph 1 of these orders, if not otherwise agreed, are to be assessed on a party-party basis.

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

REASONS FOR JUDGMENT

BACKGROUND

1        On 17 February 2014, I ordered that the applicant, Mr Shaw, be granted an extension of time to apply for leave to appeal from the orders of the learned primary judge dated 22 November 2013, giving summary judgment in favour of the respondents. I ordered that the application for leave to appeal be dismissed, and gave directions that the parties file and serve written submissions as to costs: Shaw v MAB Corporation Pty Ltd [2014] FCA 62. Both the applicant and respondents filed written submissions in compliance with those orders.

2        The respondents seek costs as the successful party in the proceeding, and apply to have their costs taxed on an indemnity basis, pursuant to r 40.02(a) of the Federal Court Rules 2011 (Cth). In support of this submission, the respondents point to the findings of the primary judge (which were found to be without error on the application for leave to appeal) that the proceedings constituted an abuse of the processes of this Court, as well as his decision to order the applicant to pay costs on an indemnity basis at first instance: Shaw v MAB Corporation Pty Ltd (No 2) [2014] FCA 88.

3        In relation to the leave to appeal application itself, the respondents submit:

it is of additional significance that the applicant sought leave to appeal so as to maintain the proceeding, even after having had the benefit of the reasons of Justice Jessup, which addressed in detail the variety of reasons why this proceeding was an abuse of process and should not continue.

4        Properly, the respondents concede in their submissions that the fact the applicant was unrepresented, both before the primary judge and before me on the application for leave to appeal, may weigh against an order for indemnity costs. The respondents contend that this proceeding is, nonetheless, a case where an order for indemnity costs is justified in the circumstances. They point to the “serious findings” of the primary judge of abuse of process at first instance, findings that were upheld on the application for leave to appeal.

5        In his written submissions, the applicant accepts that an order for costs in favour of the respondent is appropriate, but submits the costs should be taxed on a party-party basis. In support of this submission, Mr Shaw refers to 17 separate factors he submits tell against a conclusion that indemnity costs would be appropriate. In summary, they include: the small time delay in his filing the application for leave to appeal; the effect of s 24(1E)(a) of the Federal Court of Australia Act 1976 (Cth) (although he makes no submissions as to why this provision is relevant); the fact that the respondents had sought indemnity costs against him at first instance; the fact that the long litigation history of this matter in the Supreme Court of Victoria, upon which the abuse of process claim by the respondents was based, had involved only two of the 10 respondents involved in the Federal Court proceeding; that the matters raised in the proceeding involved unsettled law; and that the judgment of the primary judge disclosed what arguably were appealable errors, such that it was not unreasonable or a continuation of the abuse of process for the applicant to pursue an appeal. I have considered all the matters to which Mr Shaw’s submissions refer, although there is in my opinion no relevance in his reliance on the provisions of s 24(1E)(a) of the Federal Court of Australia Act.

APPLICABLE PRINCIPLES

6        Section 43 of the Federal Court of Australia Act confers a broad discretion on the Court in respect of orders as to costs. It is appropriate to revisit the applicable principles relevant to an order for indemnity costs. An order indemnifying the successful party for all of the costs incurred (save for those found to be unreasonable) may be justifiable where there is some “special or unusual feature in the case to justify the Court in departing from the ordinary practice” of ordering costs on a party-party basis: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 232-233.

7        In Colgate-Palmolive, Sheppard J gathered the relevant authorities which to that point had dealt with the kinds of circumstances in which indemnity costs might be ordered. They included the decision of Woodward J in Fountain Selected Meats (Sales Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401, where his Honour concluded it would be appropriate to consider an order for indemnity costs where

it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.

8        Recognising that the categories in which the discretion might be exercised cannot be closed, Sheppard J set out (at 233-234) a description of some of the circumstances in which the discretion to order indemnity costs had been exercised:

I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724(Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.

9        Despite the emphasis in many cases on conduct of the unsuccessful party which is open to criticism, indemnity costs are not punitive, but are compensatory. In Hamod v New South Wales (2002) 188 ALR 659; [2002] FCA 424, Gray J (with whom Carr and Goldberg JJ agreed) observed (at [20]):

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 some 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 the 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 for costs.

CONSIDERATION

10        Both the pursuit of a claim without any reasonable justification, and the pursuit of a claim in a manner that cannot reasonably be justified, are common themes in the authorities. The confidence with which Courts may reach these conclusions is likely to be affected by consideration of what can be expected from the legal representatives of an unsuccessful party. The matters to which the authorities refer contain norms of behaviour in litigation which can be expected from parties who are legally advised and represented. They may also proceed on unstated assumptions about norms which operate in terms of advice passing between lawyers and clients concerning the prospects of success of particular litigation, or the manner in which litigation should be conducted. This may, in part, explain the general reluctance of courts to make orders for indemnity costs against litigants in person, although, in an appropriate case, they will make such an order: see the observations of Kenny J in Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792 at [45].

11        Winn v Blueprint Instant Printing Pty Ltd (No 3) [2011] FCA 742 and Karam v Palmone Shoes Pty Ltd [2012] VSCA 97 are offered by the respondents as examples of where indemnity costs were ordered against self-represented litigants in circumstances where their conduct may be characterised as an abuse of process. Those cases illustrate the qualification identified by Kenny J in Wu: it cannot be said self-represented litigants enjoy any immunity from indemnity costs orders. However, it should be recognised that the considerations affecting the exercise of the costs discretion may be different, or differently weighted, where a litigant is self-represented.

12         As with any broad discretion, ultimately the costs discretion is exercised by reference to particular facts, and where necessary particular characterisations of those facts. This may include the Court’s view of what can reasonably be attributed to the unsuccessful party in terms of consciousness or knowledge that the norms expected of parties in litigation have been disregarded.

13        There may be circumstances in which it is appropriate to make an order for indemnity costs consequent upon summary judgment: see for example Gaffney v RSM Bird Cameron Partners (a Firm) (No 2) [2013] FCA 945 per Gilmour J. There are some similarities between the approach taken by Gilmour J in Gaffney, and the approach taken by the primary judge in Mr Shaw’s case.

14        However, the discretion as to costs falls to be exercised afresh in respect of the application for leave to appeal, and the application for an extension of time in which to seek leave. The manner in which the Court’s discretion as to costs is exercised on this application should not be taken as implying any criticism of the approach taken by the primary judge: it is a fresh exercise of discretion on a different factual basis. Having regard to the principles set out in the authorities, I consider the following factors are significant in the present case:

    Mr Shaw was granted an extension of time in which to seek leave to appeal. In that sense, he has had some limited success.

    Notwithstanding some minor delays in filing his submissions on the application for leave to appeal and on the question of costs, Mr Shaw was cooperative in the procedural steps involved in his application for leave to appeal.

    Mr Shaw appeared before me at the hearing and made competent submissions from his perspective on the relevant issues. Although his submissions could be pointed and forceful, he was generally respectful of both the Court and the respondents’ counsel. There was no wasting of time and resources in the way Mr Shaw conducted this application for leave to appeal.

    Unlike in the proceeding before the primary judge, Mr Shaw has made submissions as to why there should not be an order for indemnity costs against him. He did not leave the respondents’ submissions unanswered, and no acquiescence on his behalf could be inferred.

    Mr Shaw’s status as a self-represented litigant, acknowledged by the respondents as a factor to be considered, is relevant to the question of what the Court can expect him to have known, and understood, about the prospects of his application for leave to appeal. Although Mr Shaw has some experience in litigation, and is, as the respondents submit, familiar with court processes, this does not equate to the level of knowledge, experience and judgement the Court can attribute to a qualified legal practitioner advising a party.

     Some of the points Mr Shaw made — for example, about whether Anshun estoppel should be applied where the parties to the litigation are different — are issues which have required some reasoning in the authorities before concluded views have been reached. They are not fanciful points.

15        I do not accept the respondents’ submission, extracted at [3] above, that the decision of the applicant to commence an appeal in the circumstances of this case is a factor that should weigh in favour of an order for indemnity costs. This application for leave to appeal concerned a decision to dismiss summarily the applicant’s entire proceeding. Although it is characterised by law as an interlocutory decision, in effect it ends his proceeding in this Court without any opportunity for him to present or test evidence, and without a full hearing on the legal and factual merits of his claims. I do not see it as unreasonable in those circumstances that Mr Shaw should choose to exercise the entitlement given to him under the Federal Court of Australia Act to seek leave to appeal from that summary dismissal, so as to try to secure for himself a full trial of his claims. This is a matter to which I have given some weight in the exercise of the costs discretion.

16        Finally, Mr Shaw’s views of his prospects on the application for leave to appeal were inevitably clouded by his intense personal involvement in the issues at stake in the litigation. He has faced a bankruptcy proceeding brought by the respondents in the Federal Circuit Court, which is a direct consequence of the litigation in the Supreme Court and the successful costs and damages applications made by the respondents in that Court. Those damages and costs applications themselves form a considerable part of the subject matter of proceedings in this Court. I am not prepared to characterise Mr Shaw’s conduct in pursuing this leave application as so unreasonable as to justify an order ensuring the respondents can recover their legal costs on the rare basis of an indemnity order.

17        Accordingly, there will be an order for the assessment of the respondents’ costs in relation to the application for leave to appeal, if the need for assessment arises, on a party-party basis.

Associate:

Dated:    14 March 2014