FEDERAL COURT OF AUSTRALIA

ShoreForm (Qld) Pty Ltd v Millennium Coal Pty Ltd (No 5) [2015] FCA 805

THE COURT ORDERS THAT:

1.    The applicant pay the respondents’ costs, on a party and party basis up to 11.00 am on 12 November 2013 and thereafter on an indemnity basis, as agreed or assessed.

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

REASONS FOR JUDGMENT

1    On 23 June 2015 I made orders dismissing the application and reserving costs: ShoreForm (Qld) Pty Ltd v Millennium Coal Pty Ltd (No 4) [2015] FCA 605. I reserved costs in case either party wished to contend that costs should not follow the event.

2    As directed, the parties have now made written and oral submissions on costs and these reasons deal with that issue.

3    The respondents, by notice dated 13 July 2015 supported by written submissions dated 28 July 2015, sought orders that the applicant pay the respondents’ costs of the proceedings on an indemnity basis or, alternatively, on a party and party basis until 11.00 am on 12 November 2013 and on an indemnity basis from 11.00 am on 12 November 2013. The respondents also sought an order that costs be awarded in a lump sum, being one of the sums referred to in the affidavit of William Gordon Morrissey sworn 28 July 2015. The date 12 November 2013 was referable to an offer of compromise made by letter dated 8 November 2013. The respondents also read a further affidavit of William Gordon Morrissey sworn 5 August 2015.

4    The applicant, by notice dated 14 July 2015 supported by written submissions dated 31 July 2015, contended for orders that the applicant and respondents pay their own costs of the proceedings; or that the respondents be awarded part of their costs only; or that the respondents be awarded all of their costs on a party and party basis.

5    The applicant sought an order that the respondents should make their file and those of their legal advisors as at 11 August 2006, the date of a letter of advice from their solicitors, available to the applicant for the purpose of the argument on costs. I reject that application because I am not persuaded that the material is sufficiently relevant to the exercise of the Court’s discretion to make a costs order.

6    I assume, and I return to this at [20] below, that the applicant opposes the respondents’ application that costs be awarded in a lump sum.

7    The applicant submitted that the respondents, referred to by the applicant as the respondent, had acted improperly and had been obstructive in seven specified respects, as follows:

(a)    Failing to investigate the claim to ascertain its merits until a few weeks prior to the hearing.

(b)    Filing a Defence without any factual basis or evidence to support the defence. Denying all liability, notwithstanding that it had not investigated the claim. Alleging that its own agents were joint tortfeasors as a result when it had no evidence to support such allegations and when that allegation was clearly wrong.

(c)    Not providing an Amended List of Documents and Further Amended Lists until pressured by the Applicant (the Respondent initially produced 45 documents and then 200 in further discovery).

(d)    Objecting to the relevance of discovery sought by the Applicant and then seeking to tender documents included in those categories.

(e)    Failing/refusing to comply with six Court Orders over several years … to file its evidence.

(f)    Insisting on a High Court Judge (sic) to mediate (11 September 2013) just prior to the original hearing date (9 December 2013), without having served any evidence and not having anyone present from the Respondent with authority to settle at mediation.

(g)    Being late and obstructive with expert evidence. The Respondent’s expert produced an obstructive (and late) report and joint report which was withdrawn by the Respondent as it did not assist the Court.

8    In my opinion, these matters, whether taken individually or collectively, are not such as to mean that the respondents are not entitled to their costs or that they should be awarded only part of their costs. Paragraph (a) might have some force if the respondents had been unsuccessful in the main proceeding, but they were not. The matter in paragraph (b), in my opinion, is in the same category. It did not add to the length of the hearing or to unnecessary pre-trial steps. As to paragraph (c), I dealt with a dispute about discovery in Shoreform (Qld) Pty Ltd v Millenium Coal Pty Ltd [2013] FCA 645 and no separate issue was raised. This aspect is insufficiently connected to any costs question. As to paragraph (d), as developed at [41] of the applicant’s submissions on costs, I do not accept that the documents in the evidence of Mr Mortenson and Mr McDonald contributed in any significant way to the costs of the proceedings. Further, the additional document attached to Mr Mortenson’s affidavit came from his own records and, on the evidence, not from the records of the respondents: see ShoreForm (Qld) Pty Ltd v Millennium Coal Pty Ltd (No 2) [2014] FCA 326 at [6].

9    I do not accept therefore the applicant’s submission that the applicant thereby incurred significant costs that may well have been avoided if the respondents “had taken a reasonable approach to settlement, discovery and evidence”.

10    As to paragraph (e), there was non-compliance with directions and slippage in the timetable for the filing and serving of evidence but I am not satisfied that this added to the applicant’s costs so as to disentitle the respondents to a costs order. This conclusion includes the service of the evidence of Mr Vorias and Mr Mortenson in March 2014. I note that neither Mr Vorias nor Mr Mortenson had been recently in the employ of either of the respondents.

11    As to paragraph (f), the mediation issue, as developed at [23]-[28] of the applicant’s written submissions in relation to costs, under the heading “Respondent’s Refusal To Mediate Pre or Post Litigation”, there was in fact a mediation but I have no basis for assessing and should not attempt to assess the conduct of the parties in the mediation.

12    As to paragraph (g), it is correct to say that the respondents did not ultimately rely on the expert report and neither party relied on the joint report of the experts but that material went to quantum which, in light of my findings on liability, it was not necessary for me to deal with in dismissing the application. See ShoreForm (Qld) Pty Ltd v Millennium Coal Pty Ltd (No 4) [2015] FCA 605 at [204].

13    I reject the applicant’s submission that the respondents had “in fact in effect ambushed the Applicant”. No such complaint was made in the course of the trial and the matters referred to in the applicant’s written submissions on costs do not establish that contention.

14    I am satisfied that the respondents should have their costs.

15    However, I reject the respondents’ submission that the respondents should have the entirety of their costs on an indemnity basis. The respondents submitted that the claims made by the applicant had no real prospects of success and the applicant should have known it had no chance of success. In my opinion, that submission relies substantially on hindsight and not on an assessment of the position as apparent or as should have been apparent to the applicant either at the time of commencement of the proceedings or subsequently, prior to November 2013. I do not accept the respondents’ submission that the proceedings were such that the applicant, properly advised, should have known that its claim had no chance of success.

16    This brings me to the question of whether, in the circumstances, the November 2013 correspondence should have the consequence that the respondents’ costs be awarded on an indemnity basis from that time.

17    Rule 25.14 of the Federal Court Rules 2011 (Cth) is in the following terms:

25.14  Costs where offer not accepted

(1)    If an offer is made by a respondent and not accepted by an applicant, and the applicant obtains a judgment that is less favourable than the terms of the offer:

(a)    the applicant is not entitled to any costs after 11.00 am on the second business day after the offer was served; and

(b)    the respondent is entitled to an order that the applicant pay the respondent’s costs after that time on an indemnity basis.

(2)    If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant’s proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent’s costs:

(a)    before 11.00 am on the second business day after the offer was served — on a party and party basis; and

(b)    after the time mentioned in paragraph (a) — on an indemnity basis.

18    It seems to me that the relevant rule is r 25.14(2) since the applicant’s proceeding was dismissed. There remains a discretion, referable to r 1.35, that the Court may make an order that is inconsistent with the Rules, but the present question is whether, in the circumstances, the applicant unreasonably failed to accept the offer of $250,000, inclusive of costs, made in November 2013.

19    The applicant was given a reasonable time within which to respond and indeed did respond on 25 November 2013, rejecting the offer and making a counter-offer. The relevant circumstances at the time, November 2013, were that the pleadings were closed, the applicant’s evidence was filed and the documents central to the disposition of the proceedings on liability were available. In my opinion, the applicant had sufficient material to gauge the strength and weaknesses of its case with respect to liability. As I have indicated, an outline of evidence by Mr Vorias and an affidavit of Mr Mortenson were served later by the respondents but that material did not, in my view, impact on the reasonableness of the applicant’s failure to accept the offer in November 2013. The difficulties in the applicant’s case were or should have been apparent to the applicant in November 2013. At that date, the matter had recently been to mediation and the proceedings were originally fixed for hearing in the Court in December 2013. I also take into account the detailed letter of six pages dated 30 April 2013 sent by the solicitors for the respondents to the solicitors for the applicant setting out “the clear deficiencies” in the applicant’s case. I also note that a year earlier, on 18 September 2012, the applicant stated in solicitors’ correspondence that it was in a position to assess its position in respect of liability and quantum. In my opinion, the applicant did unreasonably fail to accept the offer made under cover of a letter dated 8 November 2013 and there is no reason why the Court should make an order inconsistent with r 25.14(2).

20    Lastly, despite the matters pressed by counsel for the respondents as to inconvenience, the expense of taxation and the minimal assets of the applicant, in my opinion this is not a proper case in which I should award costs in a lump sum under r 40.02(b): the basis of calculation of the lump sums suggested by the respondents, including the work done, is insufficiently exposed, taking into account the approach in Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123 that before making such an order the Court should be confident that the approach taken to estimate costs is logical, fair and reasonable, even making allowance for a broad-brush approach. I accept the applicant’s submission that it is not in a position to analyse the figures set out in Mr Morrissey’s affidavit sworn 28 July 2015.

21    The appropriate order is that the applicant pay the respondents’ costs, on a party and party basis up to 11.00 am on 12 November 2013 and thereafter on an indemnity basis, as agreed or assessed.

Associate:

Dated:    6 August 2015