FEDERAL COURT OF AUSTRALIA

Lucas Earthmovers Pty Limited v Anglogold Ashanti Australia Limited (No 2) [2019] FCA 1864

ORDERS

THE COURT ORDERS THAT:

1.    The Applicant recover from the First and Second Respondents 35% of its costs of the claims it pursued against the First and Second Respondents, with those costs to be assessed by a Registrar on a lump sum basis.

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

REASONS FOR JUDGMENT

WHITE J:

Introduction

1    When delivering judgment in these proceedings on 5 July 2019 (Lucas Earthmovers Pty Limited v Anglogold Ashanti Australia Limited [2019] FCA 1049) in which I found that the applicant (Lucas) was entitled to damages against the first and second respondents in the sum of $1,038,050.97 (the Principal Judgment), I said that I would hear from the parties with respect to interest and costs.

2    The parties reached agreement on the amount of pre-judgment interest to which Lucas was entitled pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) (the FCA Act). Accordingly, on 11 July 2019, I ordered that there be included in the judgment the amount of interest on which the parties had agreed, namely, $425,137.79, and entered judgment for Lucas against the first and second respondents in the sum of $1,463,188.76.

3    Therefore, this judgment concerns only the question of costs.

4    When Lucas commenced the proceedings, it claimed damages from three respondents. They were Anglogold Ashanti Australia Limited and Independence Group NL (to whom I refer collectively as “AGA”) and Knight Piésold Pty Ltd (Knight Piésold). In November 2017, Lucas settled its claim against Knight Piésold and Lucas’ claim against it was dismissed by consent.

5    The parties’ positions with respect to costs were divergent. Lucas contends for an order that AGA pay 70% of the costs it incurred in pursuing the claims against them but exclusive of the costs which it incurred in pursuing the claims against Knight Piésold.

6    AGA contends that Lucas should be ordered to pay them 50% of their costs, to be assessed on a lump sum basis.

Background to the claims

7    Lucas’ claims in the proceedings arose out of its entry into, and performance of, a contract for the construction of 223.5 km road to a remote mine site in Western Australia. It claimed that the in situ material used in the formation of the sub-base and wearing course layers of the road had proved unsuitable. This meant that Lucas had had to haul greater volumes of material and from greater distances than expected. Not only had this occasioned additional expense in the performance of that work, it had delayed Lucas in the performance of its contract. Lucas also sought to receive damages for other losses.

8    Lucas sued on three causes of action:

(i)    breach of contract;

(ii)    misleading or deceptive conduct; and

(iii)    negligence.

9    At the commencement of the trial, Lucas abandoned the claim in negligence although, on my understanding, it had remained a “live” claim until that time. Lucas had, for example, included issues arising from its claim in negligence in the Revised Joint Statement of Issues provided to the Court on 18 May 2018, just over two weeks before the commencement of the trial.

10    The damages which Lucas sought were in three broad categories:

(a)    a claim for time-related costs in respect of the additional time taken to complete the construction of the road. For this component of its claim, Lucas claimed $3,019,877.97 without allowance for profit, and $3,170,871.87 inclusive of an allowance for profit;

(b)    Consequential Claims totalling $1,959,487.70 comprised as follows:

    additional water transfer and haulage costs – $1,433,390.20;

    additional labour costs – $246,097.50;

    retained liquidated damages – $280,000.00; and

(c)    Other Variations Claims totalling $1,830,680.29 in respect of seven items of work which Lucas claimed should have been paid as variations.

11    Originally, Lucas had also claimed damages with respect to another 11 items in the “Other Variations Claims” category but the parties reached agreement with respect to those items shortly before the trial. It was not suggested these 11 “Other Variations Claims” should be taken into account on the question of costs.

12    The trial of the action occupied 14 days and involved a substantial amount of oral and documentary evidence. The Court heard evidence from 19 witnesses: 11 were called by Lucas and eight by AGA. AGA said, and Lucas did not dispute, that the parties discovered approximately 70,000 documents to each other. The trial bundle contained over 5,000 documents.

13    Lucas’ claim of misleading or deceptive conduct failed altogether, as did its breach of contract claim in respect of the time-related costs. Lucas succeeded with respect to two of the Consequential Claims, being the claim with respect to additional water haulage (in part) and the claim for payment of the retained liquidated damages. Lucas was awarded damages of $525,612.96 for additional water haulage costs, not the total of $1,433,390.20 which it had claimed. In respect of the Other Variations Claims, Lucas succeeded in two of the seven items, being the costs associated with the increase in the borrow pit footprint and the claim with respect to the hydrostatic filter mattress and concrete fill for the Ponton Creek bridge. Lucas was awarded $232,438.01 for these claims. Its five remaining Other Variations Claims were dismissed.

14    In summary, Lucas was awarded damages as follows:

15    The full details are set out in the Principal Judgment which should be read in conjunction with this Judgment.

Relevant principles

16    Both parties referred to many of the established principles guiding the exercise of the Court’s discretion with respect to costs under s 43 of the FCA Act. The Court has a wide discretion with respect to costs but its exercise is not without principle or proper practice. It must be exercised judicially: Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 at [3]. Ordinarily, in the absence of particular circumstances justifying some other order, costs will follow the event so that a successful litigant will receive its costs. In particular, a successful party may be awarded less than its costs, or costs may be apportioned, by reference to the number and nature of issues in the trial upon which it succeeded: Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53, (2015) 327 ALR 192 at [6]; Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61 at [297]-[298].

17    The judgment of Toohey J in Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748 at 48,136, is often cited as a convenient statement of the principles:

1.    Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order …

2.    Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed …

3.    A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law …

(Citations omitted)

18    In Hockey v Fairfax Media Publications Pty Ltd (No 2) [2015] FCA 750; (2015) 237 FCR 127, I referred to a number of the authorities since the decision of Toohey J concerning circumstances in which a successful party may be deprived of some or all of its costs by reason of its lack of success on issues which it pursued in the trial. It is not necessary to repeat what I then said (at [84]-[92]), beyond noting that courts are now more willing to apportion the costs awarded to a party which succeeds in only some of its claims. I noted, at [88], that the Court’s willingness in this respect:

[M]ay reflect the increasing factual and legal complexity of modern litigation and the multiplicity of factual and legal issues it entails, and the tendency of applicants to pursue multiple claims involving different factual enquiries in the one proceeding. It may also reflect an encouragement by the courts to applicants to exercise some discrimination in their selection of the claims they litigate. It is to be remembered that the inclusion of multiple causes of action in the one proceeding, even if based on a common substratum of fact, adds to the costs of the pleadings, interlocutory activity, preparation and presentation of the evidence at trial as well as of the trial itself. Nowadays, courts are particularly conscious of their role in attempting to control the cost of litigation.

19    The fact that an applicant has been only partially successful in the proceedings does not indicate necessarily that some reduction in the costs awarded to it is appropriate. The reasonableness or otherwise of the applicant’s pursuit of the claim or issue on which it failed is relevant, as are other factors such as the extent to which the evidence and submissions concerning the issues upon which the applicant failed overlap with those on which it succeeded, the extent to which the applicant’s case involved distinct and several issues, and the complexity of the case in general: Australian Competition and Consumer Commission v The Construction, Forestry, Mining and Energy Union (No 4) [2018] FCA 684 at [107]; Chevron Australia Holdings Pty Ltd v Commissioner of Taxation (No 5) [2015] FCA 1310 at [15]; Playgro Pty Ltd v Playgo Art & Craft Manufactory Ltd (No 2) [2016] FCA 478 at [33]; Valcorp Australia Pty Ltd v Angas Securities Ltd (No 2) [2012] FCAFC 52 at [7].

The Calderbank offer

20    AGA sought to rely on a Calderbank offer which it made by letter on 4 December 2017. On that day, AGA offered Lucas $500,000 inclusive of costs and interest in respect of all its Other Variations Claims, these being the claims contained in [98]-[119] inclusive of the Amended Statement of Claim.

21    AGA contended that the aggregate which it had paid in respect of the 11 Other Variations Claims settled before trial, together with the sum of $232,438.01 awarded to Lucas for the two Other Variations Claims on which it succeeded in the trial, was less than $500,000, with the effect being that Lucas had not bettered the offer. That being so, AGA submitted that it should be entitled to indemnity costs in respect of the Other Variations Claims. It accepted, however, that this was a matter which the Court should take into account, in a broad brush way, by an order relating to the overall costs.

22    I do not accept this submission of AGA. First, the Court was not provided with evidence of the amount AGA paid in respect of the 11 Other Variations Claims which were settled before the trial. The parties had agreed that that amount was confidential.

23    AGA submitted that the Court could order the production of the agreement between it and Lucas concerning the settlement of the 11 Other Variations Claims for the purpose of the Court informing itself of the amount it had paid in settlement of those claims. However, it did not contend that the Court should do so.

24    In my opinion, it would be inappropriate for the Court to make an order of the kind suggested by AGA, given that the making of such an order was opposed by Lucas. The Court should not readily make an order which has the effect of negating, at least in part, the parties’ express agreement with respect to confidentiality. That would amount to an interference with the parties’ contractual entitlements. That is especially so as it may be taken that the parties had agreed on the confidentiality condition with an awareness that this would preclude the document being produced on a costs argument in this Court.

25    Secondly, account would have to be taken of the costs incurred by Lucas before December 2017 in relation to the Other Variations Claims on which it succeeded. The Court is not in a position to identify those costs in assessing the adequacy of the Calderbank offer. It should not have to speculate about them.

26    This a recurrent difficulty with Calderbank offers which are expressed as being inclusive of costs. It is generally preferable for such offers to be expressed as being in addition to costs so that the question of whether the other party has bettered the offer can be determined in a relatively straightforward way.

27    The parties provided evidence of other offers which they had exchanged before the commencement of the trial but it was only AGA’s Calderbank offer of 4 December 2017 which was said to have any practical operation. Accordingly, the Court is to make its decision on costs without reference to filed or informal offers.

Lucas’ claim for a portion of its costs

28    The position advanced by Lucas was relatively straightforward. It contended that, having obtained a judgment, costs should follow the event but it accepted that there should be a ‘modest’ reduction of the costs to which it was entitled to reflect its lack of success on some claims.

29    Counsel for Lucas emphasised that, while Lucas had failed on its claim for time-related costs, it had succeeded on its two claims which were consequential upon the additional work which it had had to carry out in the construction of the road, this being its claim for additional water haulage and its recovery of the retained liquidated damages. Lucas submitted that the consequence was that there had been, to a material extent, a common substratum of fact, so that its lack of success on some issues should not count wholly against it.

30    I accept that there was a common substratum of fact to an extent, but the basis on which I found that Lucas was entitled to payment of the retained liquidated damages did not really turn on the assessment of the Additional Works claims.

AGA’s claim that it be paid a portion of its costs

31    In addition to its reliance on the Calderbank offer of 4 December 2017, AGA made the following submissions in support of its claim for an order requiring Lucas to pay it 50% of its costs:

(a)    it had been successful in the “real core” of the litigation;

(b)    on a broad assessment of the relative success of the parties, it had been more successful in the proceeding than Lucas; and

(c)    the costs associated with its successful defence of the majority of the claims is disproportionately greater than the costs associated with the claims on which Lucas has succeeded.

32    AGA submitted that having regard to the matters just identified, it should be entitled to recover at least 60% of its costs and Lucas should be entitled to recover no more than 10% of its costs. Netting these two results off meant that AGA should recover at least 50% of its costs.

Consideration

33    It is well accepted that an apportionment of the costs is very much a matter of impression and evaluation. Attempts at mathematical precision are not appropriate.

34    I refer in this respect to the analysis put forward by AGA’s solicitors which sought to identify the amount of evidence at trial which concerned Lucas’ misleading or deceptive conduct claim and which concerned the two consequential claims on which Lucas succeeded. The solicitors made these analyses by identifying the number of paragraphs and/or pages in the affidavits of the witnesses of both parties directed to these issues and by a survey of the transcript of the evidence at the trial. They calculated percentages of the total number of pages in the affidavits and in the transcript, as the case may be, directed to these issues.

35    In my opinion, exercises of this kind are to be deprecated. Apportionments of costs when an applicant has succeeded on some issues and failed on others are, as already mentioned, matters of impression and evaluation which do not lend themselves to the kind of analyses in which AGA’s solicitors engaged. I venture to repeat what I said in Hockey v Fairfax Media Publications on this topic, at [116]:

[A]nalyses of the kind carried out by the solicitor should not be encouraged: they constitute an undue expense; are of relatively little assistance in an exercise which is inherently evaluative in nature; and are liable to produce … a distorted impression.

36    In any event, one does not need to engage in the kind of analyses undertaken by AGA’s solicitors to appreciate that Lucas’ unsuccessful claim for time-related costs and its unsuccessful misleading or deceptive conduct claim were the principal parts of its claim and that the greater part of the trial was directed to them. The trial would have been very different and much more confined had Lucas not made those claims. There was some overlap between the evidence which Lucas presented on its time-related claim and the evidence which it presented for the misleading or deceptive conduct claim but most of the evidence which both parties presented concerning the negotiation of their contract would not have been necessary had Lucas not made the misleading or deceptive conduct claim.

37    Moreover, as already noted, Lucas failed on one of its Consequential Claims and on five of the seven Other Variations Claims which it pursued at the trial. I accept that there was some substratum of facts which was common to the claims on which Lucas did succeed and those on which it failed. It is neither practical nor useful to attempt close analysis of the overlap. It is sufficient to say that I consider that the overlap was relatively small.

38    More than half of the time at trial and, it is reasonable to infer, the parties’ preparation was occupied with issues on which Lucas did not succeed.

39    The costs to which Lucas is entitled should not include any costs of the claims which it pursued against Knight Piésold. Nor should they include any of the costs incurred in relation to its claim in negligence which was abandoned only shortly before the trial. It was not suggested, however, that the parties had incurred costs of any significant size in relation to Lucas’ claim in negligence.

40    Having regard to the matters referred to above, I do not accept AGA’s submission that it should have an award for costs in its favour. Lucas has recovered judgment for a substantial amount so that, prima facie, costs should follow the event. Nevertheless, the costs to which Lucas should be entitled should be substantially reduced to reflect its lack of success on the significant claims which it pursued in the trial and on which it failed. An appropriate result in my view is that Lucas recover 35% of the costs it incurred, on a party-party basis, in the pursuit of its claims against AGA.

41    AGA submitted that the costs should be awarded on a lump sum basis. I agree that this is desirable but the parties have not provided the Court with the material necessary for an assessment on that basis.

42    Accordingly, the order of the Court will be that Lucas recover from AGA 35% of its costs of the claims it pursued it against AGA with those costs to be assessed by a Registrar on a lump sum basis. In the absence of agreement, a Registrar is to give appropriate directions with respect to the assessment.

Associate:

Dated:    13 November 2019