FEDERAL COURT OF AUSTRALIA

J & A Vaughan Super Pty Ltd (Trustee) v Becton Property Group Limited (No 2) [2014] FCA 705

THE COURT ORDERS THAT:

1.    There be judgment under s 31A of the Federal Court Act 1976 (Cth) for the Third and Fourth Respondents with respect to the claims made in paragraphs 95 and 96 of the Applicant's Amended Statement of Claim dated 20 January 2014 and the relief sought with response to those claims in its Originating Application dated 22 November 2013.

2.    Paragraphs 80 to 94 and paragraph 97 of the Applicant's Amended Statement of Claim dated 20 January 2014 be struck out as against the Third and Fourth Respondent under rule 16.21 of the Federal Court Rules.

3.    Leave be refused to the Applicant to file its Proposed Further Amended Statement of Claim dated 3 March 2014 and the Applicant's interlocutory application dated 3 March 2014 be otherwise dismissed.

4.    The Applicant be permitted to apply for leave to file a proposed further amended statement of claim by 4pm on 11 July 2014.

5.    The Second Respondent's interlocutory application dated 7 March 2014 be adjourned sine die.

6.    The First Respondent's costs of appearing at the hearing on 31 March 2014 and 3 June 2014 for directions be reserved.

7.    The Applicant pay the costs of the third and fourth respondents:

(a)    thrown away;

(b)    of and incidental to their application for orders to strike out paragraphs of the amended statement of claim dated 20 January 2014 including the costs of the hearing held on 21 and 28 February and 31 March 2014; and

(c)    of and incidental to the application by Vaughan dated 3 March 2014 for leave to file a proposed further amended statement of claim including the cost of the hearing held on 21 and 28 February 2014 and on 31 March 2014.

8.    All other costs of the parties be reserved.

9.    The matter be listed for directions on 4 July 2014.

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

REASONS FOR JUDGMENT

1        On 4 June 2014 I decided, and published reasons in, applications between the parties for summary judgment, strike out and leave to re-plead: [2014] FCA 581. There is now to be decided competing claims about the payment of costs and the basis upon which any costs are to be awarded.

2        The third and fourth respondents (Mr Beck and Mr Taylor) were the main parties applying for the interlocutory orders decided on 4 June 2014 and resisting an application by the applicant (“Vaughan”) for leave to file a proposed further amended statement of claim. Mr Beck and Mr Taylor were largely, but not entirely, successful. They were successful in having direct claims against them abandoned by Vaughan and in seeking orders striking out paragraphs of the statement of claim, but did not succeed in their application for summary judgment (except in relation to the direct claims which Vaughan abandoned). They were also successful in resisting Vaughan’s application for leave to file a proposed further amended statement of claim but not in preventing Vaughan from having a final attempt to seek leave to file another pleading.

3        In these circumstances, it was submitted that Mr Beck’s and Mr Taylor’s costs to date should be paid by Vaughan “in their entirety”. It may be that the entirety of the costs incurred by them to date will ultimately be paid by Vaughan but it cannot confidently be said at this stage that the entirety of the costs they incurred were all necessarily wasted or unnecessarily incurred in meeting Vaughan’s claims as they may ultimately be formulated. The pleading was determined to be defective but Vaughan’s claim against them, if adequately pleaded, is likely to involve allegations about matters in respect of which costs have been incurred to date and which would neither have been incurred unnecessarily nor should be borne by Vaughan at this stage. Accordingly, such costs as Vaughan should be ordered to pay to Mr Beck and Mr Taylor at this stage are those thrown away and those costs of the hearings which took place on 21 and 28 February and 31 March 2014. They are also entitled to the costs of the direct claims which Vaughan abandoned.

4        It was contended on behalf of Mr Beck and Mr Taylor that they should be awarded costs on an indemnity basis in part by reason of the terms of an offer sent by letter by their solicitors on 20 December 2013. On that day their solicitors, Moray & Agnew, wrote to the solicitors for Vaughan inviting it to withdraw its claims against Mr Beck and Mr Taylor on the basis that allegations made as at that stage were defective and based upon factually incorrect material. The letter was directed in part to the direct claims which Vaughan abandoned but referred generally also to defects claimed in the pleadings. The defects in the pleadings were not, however, set out in anywhere like the detail or precision which subsequently emerged in the written and oral submissions on behalf of Mr Beck and Mr Taylor.

5        The Court has a wide power to award costs under s 43(2) of the Federal Court of Australia Act 1976 (Cth), including to award costs on an indemnity basis: see Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 230, 232-4; Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, 152. A party may be entitled to an award of costs on an indemnity basis where an offer has been made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333 where the party relying upon the offer can demonstrate that the rejection of the offer was unreasonable having regard to all of the circumstances of the case: Black v Lipovac (1998) 217 ALR 386 at [217]-[218]; see also Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 [23]-[29]. It was submitted for Mr Beck and Mr Taylor that the letter sent by their solicitors on 20 December 2013 attracted the principles set out in the Calderbank case and that Vaughan was “stubborn in refusing to accept that the claims it proposed to bring were baseless and not only refused to withdraw its first pleading but proceeded to prepare three further pleadings to which [Mr] Beck and [Mr] Taylor were required to respond”.

6        It is true that Vaughan was unsuccessful in the interlocutory applications but it does not follow from that that it acted unreasonably in seeking to maintain that its pleading was not defective or in seeking leave to file the proposed further amended statement of claim. Vaughan contended that it did have a claim against Mr Beck and Mr Taylor for accessorial liability and that it had adequately pleaded that claim. Vaughan succeeded in resisting summary judgment on its accessorial claims but failed to establish that its claims of accessorial liability were adequately pleaded rather than that it had no claim or that it should necessarily be precluded from making such claims. It is for Mr Beck and Mr Taylor to establish that Vaughan’s refusal to accept the offer was unreasonable (see Seven Network Ltd v News Ltd (2007) 244 ALR 374, 389) but that onus is not discharged merely by having succeeded in the applications. Vaughan failed in its attempts to resist the strike out applications because its claims were not pleaded adequately but the detailed contextual analysis of the pleading made by counsel for Mr Beck and Mr Taylor in written and oral submissions was not set out in the 20 December 2013 letter. That letter was confined to more general statements about the defects in the pleadings and focused its primary, and general, criticisms to the adequacy of the underlying evidence. It is not a case in which indemnity costs should be awarded.

7        Mr Beck and Mr Taylor also seek for their costs to be paid by Vaughan forthwith. An order of the taxation of costs immediately may be made in the exercise of the general power of the Court under r 1.35. A circumstance in which the Court may order immediate taxation is where there have been multiple attempts to plead a case causing delay in its progress to hearing and final orders: see Orrcon Operations Pty Ltd v Capital Steel & Pipe Pty Ltd (No 2) [2008] FCA 24 at [18]; Rafferty v Time 2000 West Pty Ltd (No 3) (2009) 257 ALR 503. In McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 Weinberg J said:

[16] In Harris v Cigna Insurance Australia Ltd (1995) ATPR 41-445 Kiefel J accepted that an order that certain costs be taxed and paid forthwith was justified in circumstances where there had been "long delay in close of pleadings by the pursuit of an ill-considered and perhaps unnecessary claim" (see 41,011).

[17] Branson J in Life Airbag referred specifically to the judgment of Kiefel J in Harris v Cigna Insurance Australia Ltd, and continued:

"Her Honour's approach appears to reflect a view, with which I am in agreement, that the demands of justice may well require a departure from the ordinary rule that costs are to be paid after the completion of proceedings, where a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in the handling of the proceeding with competence and diligence. In this case the applicants filed and served five different versions of a statement of claim over a period of nine months. The applicants' own counsel ultimately conceded that the first four versions were unsatisfactory and required to be redrawn, but not before the respondents incurred the costs of instructing counsel to attend at Court on strike out applications. Costs incurred in such circumstances are not costs which, in the ordinary course, a party should be expected to bear until a proceeding is concluded. They are costs in reality thrown away and in respect of which, in my view, the demands of justice may require a departure from the general practice envisaged by O 62 r 3."

[18] Mitanis v Pioneer Concrete (Vic) Pty Ltd & Ors (1998) ATPR 41,623 is a decision of this Court, also referred to by Branson J in Life Airbag, in which Goldberg J ordered costs to be taxed and paid forthwith where the effect of the interlocutory application before his Honour had been to remove "both factually and legally, one of the three causes of action ... from the area of dispute between the parties".

At [41] his Honour agreed with the observation which had been made by Lindgren J in Allstate Life Insurance Co v ANZ Banking Group Ltd (No 14) [1995] FCA 1463 that:

… the power to order that costs be paid forthwith should perhaps be used less sparingly than it has been in the past. That is particularly so in lengthy and complex cases where substantial costs have been thrown away as a result of ill-considered pleadings being drawn. Such costs should be capable of being recovered without the innocent party having to wait, possibly for years, for that to occur.

In this case Vaughan has made a number of attempts to plead its case of accessorial liability against Mr Beck and Mr Taylor and has caused some delay in the final disposition of the proceeding, but it is not conduct of a kind that warrants an order for the immediate taxation of costs. The various attempts to plead the case have been genuine, albeit unsuccessful, and the delay has not been great. Indeed, the attempts were made with some degree of promptness to fit within the time provided for the hearing of the interlocutory proceedings. Vaughan’s case of accessorial liability did not change in substance and did not cause significant additional inconvenience in dealing with the interlocutory proceedings which were, in essence, at all relevant times (excluding the challenge to the direct claims abandoned by Vaughan) whether the case of accessorial liability which Vaughan wished to plead had been pleaded adequately.

8        The second respondent (“Mr Macdonald”) also seeks his costs of and incidental to the interlocutory process of Vaughan filed 3 March 2014 including the costs of the hearing on 31 March 2014 to be taxed in default of agreement. Mr Macdonald also seeks orders that the determination of his application dated 7 March 2014 be adjourned sine die and that his costs of his application made 7 March 2014 be reserved. Vaughan submits, in contrast, that it is entitled to costs against Mr Macdonald in defending his application since no orders were indicated in the decision on 4 June 2014 in respect of Mr Macdonald’s application of 7 March 2014.

9        The appropriate course in respect of Mr Macdonald’s application and costs is to adjourn Mr Macdonald’s application dated 7 March 2014 sine die in view both of the decision, and the reasons given, on 4 June 2014 and the practical reality concerning the state of the pleadings. It is probable that Vaughan’s pleading against Mr Macdonald will alter substantially in Vaughan’s attempt to re-plead its case against Mr Beck and Mr Taylor as a result of the 4 June 2014 decision. It is not inevitable that that should be so, but the practical reality of the probability that Vaughan will seek leave to file a re-pleaded case against Mr Beck and Mr Taylor is likely to be that there will be some change also to its pleading against Mr Macdonald. The final disposition of Mr Macdonald’s application dated 7 March 2014 should await those developments. Any decision on Mr Macdonald’s costs on that application should therefore be reserved.

10        Mr Macdonald’s costs in respect of Vaughan’s interlocutory process filed 3 March 2014 for leave to file the proposed further amended statement of claim is in a different position but, on balance, should also be reserved at least until Vaughan has sought leave to re-plead its case against Mr Beck and Mr Taylor and, in that context, has considered whether to re-plead its case against Mr Macdonald. Mr Macdonald was substantially successful in resisting Vaughan’s application for leave to file a proposed further amended statement of claim but that success may be more apparent than real if Vaughan proceeds substantially on the existing pleading against Mr Macdonald. The difficulty about determining whether Mr Macdonald is entitled to any costs at this stage arises from the way in which the interlocutory proceedings came to be before the Court, and the justice of Mr Macdonald’s claim for costs may not sufficiently appear until it is possible to evaluate his position after any attempt by Vaughan to re-plead the case.

11        Accordingly, the orders will be that:

1.    There be judgment under s 31A of the Federal Court Act 1976 (Cth) for the Third and Fourth Respondents with respect to the claims made in paragraphs 95 and 96 of the Applicant's Amended Statement of Claim dated 20 January 2014 and the relief sought with response to those claims in its Originating Application dated 22 November 2013.

2.    Paragraphs 80 to 94 and paragraph 97 of the Applicant's Amended Statement of Claim dated 20 January 2014 be struck out as against the Third and Fourth Respondent under rule 16.21 of the Federal Court Rules.

3.    Leave be refused to the Applicant to file its Proposed Further Amended Statement of Claim dated 3 March 2014 and the Applicant's interlocutory application dated 3 March 2014 be otherwise dismissed.

4.    The Applicant be permitted to apply for leave to file a proposed further amended statement of claim by 4pm on 11 July 2014

5.    The Second Respondent's interlocutory application dated 7 March 2014 be adjourned sine die.

6.    The First Respondent's costs of appearing at the hearing on 31 March 2014 and 3 June 2014 for directions be reserved.

7.    The Applicant pay the costs of the third and fourth respondents:

(a)    thrown away;

(b)    of and incidental to their application for orders to strike out paragraphs of the amended statement of claim dated 20 January 2014 including the costs of the hearing held on 21 and 28 February and 31 March 2014; and

(c)    of and incidental to the application by Vaughan dated 3 March 2014 for leave to file a proposed further amended statement of claim including the cost of the hearing held on 21 and 28 February 2014 and on 31 March 2014.

8.    All other costs of the parties be reserved.

9.    The matter be listed for directions on 4 July 2014.

Associate:

Dated:    3 July 2014