FEDERAL COURT OF AUSTRALIA
DATE OF ORDER:
THE COURT ORDERS THAT:
2. The applicant pay the respondent’s costs of the proceeding, to be assessed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1 The applicant, Dalian Huarui Heavy Industry International Co Ltd (DHHI), has applied for leave to discontinue this proceeding on the basis that there be no order as to the costs of the proceeding.
2 There is no dispute concerning the granting of leave to discontinue, and I will give that leave, but there is a dispute between DHHI and Duro Felguera Australia Pty Ltd ACN 164 834 753, the respondent, concerning costs.
3 Duro contends that DHHI, having brought Duro into the litigation, should pay its costs following discontinuance.
4 Thus, the sole question of substance dealt with in this judgment is whether or not costs should be ordered against DHHI upon its discontinuance of the proceeding.
5 Duro submits that it is for DHHI to demonstrate a good reason for departing from the general or usual rule that the discontinuing party is liable for the costs of the other party to the proceeding.
6 In that regard, the parties accept that R 26.12(7) of the Federal Court Rules 2011 (Cth) is relevant in that it provides:
Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued.
7 The Rule creates a presumption that the discontinuing party will pay the costs of the other side, unless for a good reason shown, the Court orders otherwise. See, for example, WA Property Holdings Pty Ltd v Colliers International (WA) Pty Ltd  FCA 1089 at  (Gilmour J).
8 DHHI commenced the proceeding by way of an originating application dated 9 December 2016, seeking a freezing or asset preservation order against Duro. DHHI also sought ancillary orders that Duro provide certain specified information and documents about its financial affairs to DHHI.
9 According to DHHI’s draft penal notice (issued to Duro but not filed with the Court), DHHI proposed to seek orders to prevent Duro from removing from Australia or in any way disposing of, dealing with or diminishing the value of any of its assets in Australia.
10 Duro observes that at the time of the commencement of this proceeding:
(1) DHHI had already obtained an asset preservation order from a court in the People’s Republic of China (PRC); and
(2) DHHI intended to apply for similar orders from an international arbitral tribunal upon its constitution, namely, “interim preservation orders over the proceeds of the demand on the Performance Guarantee not being taken outside ... Western Australia”.
11 Duro notes that DHHI says that it commenced this proceeding to fill a perceived “gap” during which “the arbitral tribunal (for whatever reason) cannot attend to urgent interim relief in an appropriate time”. Duro says that, in reality, that “gap” only opened because DHHI voluntarily relinquished its asset preservation order in the PRC court. Commencing this proceeding was an unnecessary intermediate step taken by DHHI between the proceedings before the PRC court and the arbitral tribunal. DHHI, it says, could and ought to have left the PRC court’s order in place until the tribunal had been constituted, and saved Duro the trouble and expense of this proceeding.
12 Duro contends that the order obtained from the PRC court served the same purposes as the substantive relief sought by DHHI in this application. This application had no utility while the PRC court’s order remained in effect. It is therefore inexplicable, it contends, that DHHI voluntarily terminated the order it obtained from the PRC court on about 14 December 2016.
13 Duro says that prior to and after commencing this proceeding, Duro attempted to initiate conferral with DHHI by means other than written communication. Duro noted to DHHI that the “duelling correspondence” was not serving to narrow the parties’ respective issues.
14 Duro says that on 16 December 2016, the money under the performance guarantee was paid to Duro. However, on 19 December 2016, DHHI wrote to this Court asking it to make orders to adjourn the originating process and interlocutory application indefinitely. Duro consented to DHHI’s proposal.
15 Duro draws attention to DHHI’s allegation in  of its Statement of Facts filed in support of its application to the arbitral tribunal for provisional relief, that its decision to write to the Court to stay the proceeding was due to the constitution of the tribunal, which DHHI alleges occurred on 20 December 2016 (that is, the day after DHHI wrote to this Court). However, Duro says, it was clear from at least 8 December 2016, when Sir Vivian Ramsey QC confirmed his appointment as chairman, that the tribunal was to be constituted in short order. Nothing substantive had occurred with respect to the appointment of the tribunal in the interim.
16 On 20 December 2016, this Court notified the parties that DHHI’s interlocutory application had been adjourned until 7 July 2017. Duro says DHHI did not object to an eight month adjournment and, until making this application for leave to discontinue, had not taken any further steps in this proceeding.
17 Duro says that by letters dated 23 and 29 November 2016 and 2 and 5 December 2016, Squire Patton Boggs (SPB) on behalf of DHHI requested Duro to provide information about its financial position, including “what the asset position (and expected receivables) of [Duro] is at present”; records of an intercompany loan between Duro and Duro Felguera SA (DFSA); records of payments to DFSA; Duro’s balance sheet and draft accounting records; and documents showing Duro’s assets.
18 It says that SPB did not attempt to justify the basis for its requests, other than to say that they were precursors to a possible application for interim asset preservation orders under Art 17J of the UNCITRAL Model Law on International Commercial Arbitration 1985, neither did SPB articulate why its client was supposedly entitled to such orders.
19 Duro submits that the information requested comprises confidential and sensitive financial and other information to which DHHI had no legal right of access. Duro acted reasonably in refusing to provide such information, in contrast to DHHI’s inappropriate and unreasonable conduct in making such requests. On the face of it, DHHI was not entitled to interim orders as requested, given that:
(1) at the time of making those demands, payment of the proceeds of the security to Duro was prevented by the preservation order obtained by DHHI in the PRC court, and Duro had no knowledge that DHHI would take steps to lift that order. Therefore, DHHI’s demands appeared to Duro to lack any practical purpose;
(2) those circumstances and DHHI’s commencement of court and arbitral proceedings against Duro provided reasonable grounds for Duro to suspect that DHHI might use such information for a collateral purpose; and
(3) DHHI had expressly agreed not to seek to enjoin or restrain Duro from using money received under security provided under the supply contract.
20 Duro notes DHHI also requested Duro to provide certain undertakings, including to maintain assets of a specified value in, and not take certain steps to transfer assets out of, Australia. Duro submits it was entitled to deal with the proceeds of the security pending the resolution of the dispute as it saw fit, and accordingly Duro declined DHHI’s request.
21 Duro submits that contrary to DHHI’s assertion, none of the relief claimed in this proceeding was so urgent that it could not wait to be dealt with by the arbitral tribunal when it was constituted.
22 Duro submits that on 9 December 2016, when DHHI commenced this proceeding, it was clear that the arbitral tribunal would be constituted and competent to determine any application for interim or conservatory measures within a matter of days:
(1) the two party appointed arbitrators had been nominated (on 24 October and 11 November 2016);
(2) the parties had jointly nominated the presiding arbitrator (on 7 December 2016); and
(3) the presiding arbitrator had confirmed that he was willing and able to accept the appointment (8 December 2016).
23 It says that as at 9 December 2016, DHHI could not reasonably have thought that it might still take “some weeks” to constitute the tribunal.
24 Duro contends that nothing substantive happened between then and 20 December 2016, when DHHI says the tribunal was constituted.
25 Duro observes that on 9 December 2016, when DHHI filed the originating application in this matter, DHHI alleged that the tribunal had not been constituted. Duro submits this statement must be reconsidered given the matters above. The application was not made on any basis of urgency.
26 In short, Duro submits DHHI had no urgent need for relief from this Court that could not have awaited the constitution of the tribunal. DHHI’s primary contention as to urgency appears to be that any delay in making a preservation or freezing order would allow Duro to dissipate the proceeds of the security, which ought to be rejected.
27 Duro submits that any risk of asset dissipation could only arise upon DHHI withdrawing its preservation order before the PRC court, and the Bank of China paying Duro the proceeds of the security. The timing of those events was within DHHI’s control and therefore was not a rationale for DHHI to commence this proceeding.
28 Duro says that DHHI, quite properly, did not seek for its application to the Court to be set down urgently.
29 Duro observes that it was not until over a month after this proceeding was commenced, on 19 January 2017, that DHHI made an application to the tribunal for provisional relief, seeking (among other things):
... a freezing or asset preservation order preventing the Respondent until further order from removing assets out of Australia and from disposing of, dealing with or diminishing the value of any of its assets and money held in Australia up to the unencumbered equivalent value of the Secured Sum ...
30 Duro draws attention to what the tribunal noted in dismissing DHHI’s application:
The background to this application shows that Huarui had sought provisional relief elsewhere which, for whatever reason, it had decided to discontinue. Whilst Tribunal accepts that time is needed to prepare the Application, the length of time taken by Huarui indicates that this is not a case where there are compelling reasons for urgent relief.
31 Duro submits that in circumstances where:
(1) the relief sought from this Court would have no utility whatsoever, but for DHHI inexplicably abandoning the preservation order it obtained from the PRC court;
(2) DHHI always intended to seek substantially the same relief from the arbitral tribunal; and
(3) awaiting the constitution of the tribunal before making its application would have resulted in neither material delay nor other prejudice to DHHI, as is obvious from DHHI’s decision to make a delayed rather than “immediate” application to the tribunal,
this application could never have had any utility, and was futile from the outset.
32 While generally the Court ought not make a prediction as to the outcome of the case, Duro also submits that this is a case where the Court can “feel confident” that Duro “was almost certain to have succeeded if the matter had been fully tried”, based on Court’s lack of jurisdiction.
33 Duro submits this Court lacks jurisdiction to make ancillary orders to facilitate the taking of evidence in support of arbitral proceedings seated outside Australia: see Samsung C&T Corporation, in the matter of Samsung C&T Corporation  FCA 1169. It follows that DHHI’s claims for such ancillary orders would necessarily fail.
34 Duro says that by seeking such orders as a precursor to its claim for interim measures, DHHI in effect admits that it lacked a sufficient evidentiary basis upon which to seek interim measures. Duro therefore says that the Court’s lack of jurisdiction to grant the ancillary orders sought by DHHI is fatal to the application as a whole.
35 Thus, Duro submits that is a factor that ought way heavily against any departure from the usual rule that the party discontinuing an action pays the other party’s costs.
36 DHHI submits that it, in fact, acted reasonably in bringing the proceeding and acted reasonably after the proceeding was brought and should not be penalised now by way of a costs order for discontinuing the proceeding.
37 It says that the proceeding lost its utility soon after it was commenced, something it had foreshadowed to Duro beforehand was possible, in the event that it was obliged to bring the proceeding.
38 DHHI says the proceeding was brought, at the time it was, because:
(1) although the underlying dispute between DHHI and Duro had been referred to arbitration by three arbitrators, the third arbitrator had not been formally appointed, and hence the arbitral tribunal could not exercise any interim powers;
(2) there had been a previous occasion where the appointment of an identified and agreed third arbitrator appeared likely to occur, only for that not to take place;
(3) Duro had failed, despite extensive conferral initiated and engaged in by DHHI, over approximately two weeks, to provide any information or undertakings reasonably requested by DHHI to avoid the need to bring proceedings;
(4) the provision of such information or undertakings may have allowed such application for interim relief to be brought instead before the arbitral tribunal in an orderly fashion, when that tribunal was constituted, or not brought at all; and
(5) in particular, Duro:
(a) failed, despite request, to provide any (reasonably requested) information as to its financial circumstances;
(b) failed to provide this information in circumstances where there were legitimate misgivings about Duro’s financial position and assets within the jurisdiction;
(c) failed to confirm its intentions concerning its assets within or to be within Western Australia generally including (but not limited to) a major potential identifiable asset that was prone to dissipation outside the jurisdiction - being the proceeds from a performance guarantee with the Bank of China that Duro had called upon (security); and
(d) failed to provide, despite reasonable request, any comfort or undertakings to DHHI as to the dissipation of its assets outside the jurisdiction - even at least until the arbitral tribunal had been constituted and an application could be brought therein.
39 DHHI claims that Duro could have avoided the need for the proceeding by providing either the information requested, or the assurances or comfort sought, but instead refused to provide any such assistance in circumstances where:
(1) DHHI was (reasonably and legitimately) concerned about the dissipation of assets including, but not limited to, the proceeds of the call upon the security;
(2) there was a degree of urgency as far as DHHI was concerned as it could not run the risk of a dissipation of assets and in particular the security without having the capacity to apply to, at short notice, an arbitral or judicial body to restrain such dissipation of assets outside the jurisdiction;
(3) there was no arbitral tribunal formally convened at the time that the application had to be brought; and
(4) there was, unlike some arbitral regimes which provide for an interim single arbitrator to exercise an emergency power to make interim orders, no such provision in the arbitral regime in this case.
40 DHHI says it made it clear at all times that its application was brought in this Court under the provisions of the International Arbitration Act 1974 (Cth) (IAA) because the information and undertakings requested had not been provided and also because the tribunal had not been convened and could not entertain any application for interim orders.
41 Once the arbitral tribunal was convened, DHHI says, it made it clear that the proceeding could be adjourned, did not press ahead with the proceeding, and instead would apply in the arbitral proceeding for interim orders (which it in fact did).
42 DHHI submits that in fact the provisions of the IAA are designed and apt for precisely this type of situation.
43 That is, to fill a gap where the arbitral tribunal (for whatever reason) cannot attend to urgent interim relief in an appropriate time.
44 DHHI says it was prudent for it to have the proceeding lodged and before this Court so that it could more easily have the matter listed before the Court for an urgent application, if need be.
45 DHHI says that the application having outlived its usefulness (as had in fact been foreshadowed and made clear by DHHI may be the case) it should be discontinued and DHHI should not suffer any costs penalty in all the above circumstances.
46 Indeed, DHHI claims, it is making a significant concession in not seeking its costs of the action.
47 DHHI addresses the factual dealings between the parties in more detail. It says it initiated conferral with Duro by letter dated 23 November 2016 wherein SPB wrote to Duro’s solicitors, Jones Day (JD), setting out DHHI’s concerns regarding the proceeds of the security not being retained in the jurisdiction of Australia, and requesting urgent confirmation that Duro would not seek to move any proceeds of the security that it might obtain outside Australia until DHHI was provided with the opportunity to restrain the same, whether in the arbitration or before an Australian court.
48 Crucially, in that letter, DHHI says:
(a) it was made clear that the ability to bring an application for interim relief in the arbitration was currently hampered “because the arbitral tribunal has not yet been convened in full”;
(b) DHHI referred to the right to bring an application in an Australian court under the provision of the UNCITRAL Arbitration Rules and the Model Law;
(c) the undertaking as to not dissipating assets outside Australia was subject to Duro’s “regular and ordinary business activities or current commitments”; and
(d) the undertaking sought, in respect of the moneys from the security, and implicitly as to dissipation of assets generally, was “until our client [DHHI] has had an opportunity to being an application to restrain the same, whether under the Arbitration (when properly convened) or to an Australian Court”.
49 It says that:
Duro did not respond to that letter so, on 29 November 2016, SPB again wrote to JD stating DHHI’s concerns about Duro’s lack of confirmation that it would not remove from Australia any proceeds of the security, and asking Duro to clarify its position with respect to its requested confirmations.
Under the terms of the security it would be paid in to the Perth branch of Duro’s bank, HSBC.
Duro had called upon the security on 7 April 2016. In proceedings commenced by DHHI in the PRC court on 19 April 2016, an order for asset preservation in the nature of injunctive relief had been obtained, restraining the release of the funds to Duro.
However, following on from negotiations between the parties, arising from actions taken by Duro, there was a prospect at the time that the funds would be released to Duro. Hence, DHHI’s correspondence.
On 30 November 2016, JD responded to SPB’s letters of 23 and 29 November 2016 but did not respond substantively to any aspect of the letters and declined to provide DHHI with confirmation of the matters requested.
On 2 December 2016, SPB wrote to JD rejecting Duro’s asserted basis for not responding substantively and simply declining to provide the requested assurances without further information. That letter asked for an urgent response by 5 December 2016 as to whether Duro would be prepared to reconsider its position.
That letter also (see  of the letter) set out the general matters that DHHI relied upon to justify its enquiries and any foreshadowed application. This included that Duro’s operations in Australia (upon the Roy Hill Project) had concluded and there was no disincentive to the repatriation of funds and assets outside the jurisdiction.
On 5 December 2016, JD wrote to SPB advising it would not be in a position to respond to its 2 December 2016 letter by noon that day, though would endeavour to respond that day.
On 5 December 2016, SPB wrote to JD making an urgent request for discovery relating to matters about Duro’s assets and financial position, as relevant to the question of whether a freezing order should be made. No further correspondence was received from the Duro’s solicitor on 5 December 2016.
On 6 December 2016, JD wrote to SPB saying it was taking instructions upon SPB’s letters of 2 and 5 December 2016, and would respond to both in the same response.
No response to SPB’s letters of 2 and 5 December 2016 was received from JD on 6 December 2016.
By letter dated 7 December 2016, JD wrote to SPB asserting, inter alia, that no basis had been set out by DHHI to justify the freezing orders or discovery in aid, that these requests were an impermissible attempt to deny Duro then benefit of the security, and that the undertakings sought were a severe sanction on Duro’s business activities.
Later on 7 December 2016, SPB’s Mr Cureton spoke with JD’s Mr Riethmuller and explained the basis for the proceeding, including that discovery was sought in order to determine also whether a freezing order should be made.
SPB also wrote to JD on 7 December 2016, rejecting its assertions.
In a letter dated 8 December 2016, DHHI provided Duro with express detail (such as it could without further information known to Duro) of the grounds which DHHI apprehended may justify a freezing order, and which would be included as evidence in any application including:
(a) From publically available information, principally the 2015 financial report, that Duro had one ordinary share issued for one dollar, beneficially owned by DFSA.
(b) Duro had made a loss after tax of $1.28 million at the end of the 2015 calendar year, as compared to a profit of $4.08 million after tax at the end of the 2014 calendar year.
(c) There was an intercompany loan given by Duro to DFSA on 31 March 2015 which was scheduled to be repaid with interest by 31 March 2016.
(d) As at 31 December 2015, Duro had outstanding trade and other payables of $59.83 million.
(e) It was expected that Duro would need to have paid down the trades and other payables in 2016 upon the substantial completion of the Roy Hill Project, reducing its cash balance.
(f) As at 31 December 2015, Duro had cash receivables of $20.47 million, though it was expected that Duro would have been paid some of these cash receivables in 2016 upon the substantial completion of the Roy Hill Project, increasing its cash balance.
(g) In addition, the 2015 financial report and balance sheet further identified that Duro made provision for $64.15 million in performance bonds or guarantees issued by AIG Australia and CGU Insurance in favour of Samsung and $82.4 million in further performance bonds or guarantees pursuant to the construction agreements entered into by Duro and Samsung as the principal contractor of the Roy Hill Project.
(h) The $64.15 million in performance bonds were called upon by Samsung. Samsung’s entitlement to be paid its demand upon the performance bonds was determined by a decision of the Supreme Court of Western Australia in a decision of Le Miere J dated 16 December 2015. Similarly, with respect to the disclosed $82.4 million in further performance bonds or guarantees, on 18 February 2016 Samsung made demand of two performance bonds each of $38,143,767.20 (together $76.29 million). On 15 April 2016, the Supreme Court of Western Australia in a further decision of Le Miere J found that these amounts were also to be paid.
(i) Unless Duro had entered into substantial new contracts other than on the Roy Hill Project in 2016, the performance bond/guarantee provisioning in the 2015 balance sheet discloses that nearly all of the performance bonds and guarantees issued by Duro related to the Samsung contracts on the Roy Hill Project. The provision of the performance bonds discloses that only the potential amount of $6.11 million of the performance bonds/guarantees had not been demanded and may, potentially, relate to other contracts on different projects.
(j) The net effect of the calls made on Duro’s performance bonds by Samsung would be a potential or accrued liability of Duro to AIG Australia, CGU Insurance and any other bond issuers in the sum of $140.44 million.
(k) Additionally, from press reports and further decisions of the Supreme Court of Western Australia, DHHI was informed that Duro has been pursuing payment claims against Samsung and Duro had sought to enforce a number of adjudication applications in the Supreme Court of Western Australia, that had given judgment for enforcement of approximately $12 million of the total of $57.8 million claimed in adjudications.
(l) Property searches in Western Australia disclose that Duro does not own any real property in Western Australia.
50 DHHI contends that a number of these grounds and issues had been raised with Duro by SPB’s letter dated 2 December 2016 described above.
51 Further, it argues, it is clear that it is legitimate to seek discovery of information relating to assets relevant to the freezing order or prospective freezing order and to determine whether the freezing order should be made.
52 Also, the undertaking and assurances that DHHI was seeking were only up to a reasonable amount (being to the value of the security) and expressly carved out transactions that had already been agreed and also regular day to day business transactions.
53 Despite this, DHHI observes, Duro had still refused to provide the requested undertakings and information.
54 SPB and JD continued to trade correspondence over 8 and 9 December 2016. However, such correspondence did not result in any further information or undertakings being offered or provided. Indeed, JD’s correspondence was mostly criticising SPB’s correspondence and fencing with SPB without providing any of the requested material or assurances. Further, JD’s complaints that inadequate conferral had taken place were, in the circumstances described above, unfounded.
55 At the time the proceeding was brought, on 9 December 2016, the third member of the arbitral tribunal had been agreed – but not yet appointed.
56 Indeed, formal appointment did not occur until 20 December 2016.
57 There had been a previous episode of a third arbitrator being agreed (Mr Pryles) and seemingly soon to be appointed, which did not occur.
58 After the proceeding had been filed, DHHI says, it continued to confer with Duro, through its solicitors and in the course of which:
(1) tried to reach a sensible accommodation to resolve the proceeding by the provision of information or undertakings;
(2) made it clear that it did not wish to unnecessarily proceed with the proceeding if the matter could be brought before the arbitral tribunal; and
(3) agreed that, once the arbitral tribunal had been constituted on or about 20 December 2016, that the directions hearing on 22 December 2016 should be vacated and adjourned.
59 DHHI rejects Duro’s assertions, in JD’s letters of 8 and 9 December 2016 (and in its response to DHHI’s Genuine Steps Certificate dated 19 December 2016) and says they are, in respect to the bringing of the proceeding, disingenuous.
60 DHHI says it did, in fact, subsequently bring an interim application in the arbitration proceedings.
61 Notably, DHHI observes, Duro did not provide to DHHI any information about its financial circumstances as requested by Duro until that application had been brought before the tribunal and such further information was only provided in the course of the arbitral proceedings (but were only put as assertion and not on affidavit).
62 DHHI moved for subsequent directions hearings in this Court to be adjourned and foreshadowed its intention to discontinue the proceeding on 6 July 2017.
63 In short, DHHI submits that it brought the proceeding reasonably and reasonably maintained it after the arbitral tribunal was constituted and:
as foreshadowed by DHHI, it brought an application before the arbitral tribunal as soon as was reasonably practicable;
indicated at an early stage the intention not to proceed in this Court;
brought this proceeding in circumstances that were apt given why the power for the Court to determine interim applications is granted under the IAA;
had to bring this proceedings due to the unreasonable conduct of Duro; and
the proceeding no longer had any utility.
64 DHHI submits that it ought to be granted leave to discontinue the proceeding upon the basis that there be no orders as to costs and any costs orders made be vacated.
65 I have set out the detailed submissions of the parties which include a blow-by-blow account of the commercial circumstances and correspondence that flew between the parties’ solicitors so that the ruling on costs I now make can be appropriately understood.
66 I am not satisfied that the presumptive rule, that the discontinuing party should pay the costs of the other party, has been displaced on the facts and contentions presented to me.
67 It is not necessary for me to decide the jurisdictional question advanced on behalf of Duro, concerning the jurisdiction or power of this Court to make the types of orders, including the ancillary orders, that DHHI initially sought.
68 It is sufficient for me to observe that DHHI took the calculated step, having allowed the dissolution of the PRC court order that protected it, to commence this proceeding to fill a perceived “gap” in its protection regime pending a similar application to the arbitral body. It is understandable that it might have thought it appropriate to take this step. It has to be said, however, that on the facts the constitution of the arbitral tribunal was, at all material times, imminent.
69 In my view, the strategic decision taken by DHHI, while explicable, was always one that, if it were not to be proceeded with, would likely result in DHHI having to meet any associated costs thrown away as a result of Duro being joined as a party to the proceeding.
70 While DHHI submits that it made it clear that, in effect, the proceeding was to be a holding action, that is not a factor on its own that justifies this Court displacing the presumptive costs rule on leave being granted to discontinue the proceeding.
71 Rather, if there is any dispute about quantum of costs incurred by Duro, having regard to how little work was required on its part in relation to the conduct of its joinder in the proceeding, that is an issue that can be resolved at an assessment of costs.
72 For these reasons, I would make the following orders:
(1) The applicant have leave to discontinue the proceeding.
(2) The applicant pay the respondent’s costs of the proceeding, to be assessed if not agreed.