FEDERAL COURT OF AUSTRALIA

Trio Brothers Trading Pty Ltd v Road Runner Company Pty Ltd (No 2) [2015] FCA 610

THE COURT ORDERS THAT:

The respondents pay the costs of Trio Brothers Trading Pty Ltd (ACN 079 259 279) of and incidental to the interlocutory application filed on 18 November 2014 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    In Trio Brothers Trading Pty Ltd v Road Runner Company Pty Ltd [2015] FCA 374 I ordered that the relief sought by the respondents for summary dismissal of the substantive proceedings be refused, and that the substantive proceedings be transferred to the Victorian District Registry of this Court. I made these orders in circumstances where, inter alia:

    I was satisfied that the facts underlying the respondents’ existing application in the Supreme Court of Victoria (“Victorian application”) coincided with the facts in these proceedings, however there were good reasons to conclude that the substantive proceedings of the applicant (“Trio Bros”) in this Court did not constitute an abuse of the Court’s process.

    I noted that the respondents were based in Melbourne and initially sought to issue proceedings in the Federal Court or the Federal Circuit Court in Melbourne rather than the Supreme Court of Victoria; the solicitors and Counsel for all parties were based in Melbourne; most witnesses were based in Victoria; and the substantive proceedings concerned conduct of the respondents in Victoria.

    At the hearing Counsel for both parties indicated that their clients would most likely accept an order that the substantive proceedings be transferred to the Victorian District Registry with the prospect that the Victorian application would also be transferred to this Court.

2    I made no order for costs in respect of the interlocutory proceedings before me in circumstances where no formal submissions in respect of costs had been made. The parties have subsequently made formal submissions as to costs on the basis that I would make a decision on the papers. I now turn to those submissions.

Submissions of the parties

3    In respect of the costs of the interlocutory application before me Trio Bros submitted, in summary, as follows:

    The respondents were wholly unsuccessful in respect of their interlocutory application. There are no recognised exceptions or special circumstances which would warrant a departure from the usual order that costs follow the event. The allegations of the respondents were serious and the relief sought was final in nature, requiring Trio Bros to incur significant costs in defending the allegations. At no time prior to the hearing did the respondents seek the transfer of the substantive proceedings to the Victorian District Registry. The respondents’ proceedings were discrete. There is no reason why the applicants should not be compensated for its costs incurred by order now rather than a reservation of costs or an order that costs be in the cause. This is particularly so now that the matter has been transferred.

    It would be unfair to the applicant to deprive it of its costs in relation to the interlocutory application irrespective of the final outcome at trial.

    After the applicant had filed its answering evidence and submissions, the applicant’s solicitor wrote to the respondents’ solicitor on 12 March 2015 setting out why the interlocutory application was bound to fail and offering to resolve the matter on the basis of withdrawal by the respondents of their interlocutory application and payment by the respondents of an amount calculated to be less than the party-party costs incurred by the applicant to that date. This offer was – unreasonably – rejected by the respondents.

4    The respondents submitted that the costs of their – ultimately unsuccessful – interlocutory application should be costs in the proceedings. This was because, in summary:

    Although I was not prepared to find in favour of the respondents on their interlocutory application, the hurdle faced by the respondents was high. The substantive proceedings have now been transferred to the Victorian District Registry. It is appropriate that the costs of the application for summary judgment should also await the outcome of the substantive proceedings and thereby be costs in the proceedings.

    The respondents preferred to have the substantive proceedings heard in Melbourne, an approach ultimately endorsed by the Court.

    The fair and just result would be for the trial judge who ultimately hears the proceeding to determine the costs of the interlocutory application.

Consideration

5    Pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth) the Court has a wide discretion in respect of costs orders. The parties in this case do not dispute the general proposition that costs follow the event, and indeed this is the approach that Trio Bros urges on the Court. Trio Bros also seeks an order that its costs be paid on an indemnity basis after 12 March 2015.

6    I have carefully considered the respondents’ submissions that costs should be in the proceedings. This approach has a superficial attraction, however I am satisfied that costs should follow the event as submitted by Trio Bros. I am not, however, satisfied that costs should be paid on an indemnity basis after 12 March 2015.

7    I have formed these views for the following reasons.

8    First, while the respondents faced a high hurdle in respect of matters to be established by them in support of their interlocutory application, the fact is that they were unsuccessful. In this context, difficulties faced by a litigant filing an interlocutory application in pursuing that application are properly matters for the litigant to consider in deciding whether or not to pursue it, rather than relevant considerations for the Court in determining where costs should lie when the interlocutory application is ultimately unsuccessful.

9    Second, while the factual substrata to the substantive proceedings in this Court and the Victorian application are the same, it was clear that the two proceedings involved different causes of action requiring different evidence and findings by the Court on different issues. While I do not consider that, as a result, it could be said that the respondents’ interlocutory application was inevitably doomed to fail, nonetheless these were proper factors for the respondents to take into account in determining whether to proceed with their interlocutory claims.

10    Third, in circumstances where the respondents had already commenced the Victorian application and indicated that their venue of preference was the Federal Court or the Federal Circuit Court rather than the State courts, it is surprising to me that, rather than seek summary dismissal of the substantive proceedings, the respondents did not formally seek what I consider to be the obvious order of transferral of the substantive proceedings to the Victorian Registry. Certainly at the hearing before me the respondents indicated that they would view the combining of the two separate proceedings in one proceeding before the Federal Court as a positive development (transcript p 62 ll 18-21).

11    Fourth, I agree with the submission of Trio Bros that costs in respect of the interlocutory application is a discrete matter, which can be reasonably and properly resolved at this point. From a case management perspective, I consider it appropriate that I deal with the question of costs rather than referring it for determination to the new trial Judge.

12    However, I do not consider that, as at 12 March 2015, it was unreasonable for the respondents to reject the settlement offer of Trio Bros in respect of the interlocutory application. While the interlocutory application was dismissed, in circumstances where there was a commonality in the factual substratum of both applications I am not satisfied that the interlocutory application had no prospect of success such that an order for indemnity costs is warranted. Certainly extensive submissions were made by both parties in respect of substantive factual issues at the interlocutory hearing, which itself required a Court day. Further, notwithstanding that Trio Bros is based in Brisbane, as is clear from my judgment I was satisfied that the proceedings ought properly be transferred to Victoria.

13    The proper order is that the respondents pay the applicant’s costs of and incidental to the interlocutory application filed on 18 November 2014 on a party-party basis.

Associate:

Dated:    19 June 2015