Federal Court of Australia

Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd (No 2) [2020] FCA 1542

ORDERS

THE COURT ORDERS THAT:

1.    There be no order as to costs.

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

REASONS FOR JUDGMENT

WIGNEY J:

1    The Australian Competition and Consumer Commission (ACCC) has commenced proceedings against NSW Ports Operations Hold Co Pty Limited and two of its subsidiaries (collectively, the NSW Ports parties). In brief compass, the ACCC alleges that the NSW Ports parties contravened s 45 of the Competition and Consumer Act 2010 (Cth) by entering into agreements with the State of New South Wales in 2013 which contained provisions which had the purpose, or would have or be likely to have the effect, of substantially lessening competition in the market for the supply of port services for container cargo in New South Wales.

2    A few months after the proceedings were commenced, the NSW Ports parties served a subpoena to produce documents on Port of Newcastle Investments Pty Limited and two related companies (collectively, the Port of Newcastle parties). While the Port of Newcastle parties produced some documents in answer to that subpoena, claims of legal professional privilege were made in respect of a number of other documents which would otherwise need to be produced. The ACCC also claimed legal professional privilege in respect of a small subset of the documents the subject of the Port of Newcastle parties’ privilege claims, as well as a small number of other documents.

3    The NSW Ports parties subsequently filed a cross-claim against the Port of Newcastle parties and the State. They also filed an interlocutory application which, in effect, challenged the claims of legal professional privilege made by the Port of Newcastle parties and the ACCC. That application was the subject of orders made by this Court on 27 August 2020: Australian Competition and Consumer Commission v NSW Ports Operations Hold Co Pty Ltd [2020] FCA 1232 (Privilege Judgment).

4    The challenges to the privilege claims were not easily resolved. The Port of Newcastle parties pressed privilege claims in respect of 112 documents. The ACCC pressed privilege claims in respect of 12 documents, nine of which were also covered by the Port of Newcastle parties’ claims. The privilege claims in respect of 94 of 112 documents related to only parts of the documents. The balance of the claims related to the documents in their entirety. The parties’ submissions addressed the privilege claims by reference to groups or categories of documents.

5    The Port of Newcastle parties and the ACCC supported, or endeavoured to support, their respective privilege claims by affidavit evidence that was, for the most part, admissible hearsay evidence based on what the solicitor affirming the affidavit had been told by others; so-called “information and belief” evidence. Put simply, the deponent of the affidavit had no direct knowledge of the purpose of the relevant documents and communications or the circumstances in which they were made. Indeed, in respect of the affidavit tendered by the Port of Newcastle parties, it was not even entirely clear that the person who was said to have given the solicitor information about the relevant documents and communications had direct knowledge of those matters. There were other manifest difficulties with the affidavit evidence relied on by the Port of Newcastle parties; though, it is unnecessary for present purposes to consider them in any detail.

6    As for the affidavit tendered by the ACCC, the Court made the following additional observations: first, the solicitor was not involved in the matter when the Australian Government Solicitor (AGS) was first retained by the ACCC in these proceedings, having only become part of that AGS “team” in “fairly recent time”; second, the solicitor’s evidence about the nature or purpose of many of the documents and communications was expressed in general or generic terms; third, the solicitor’s evidence addressed the relevant documents and communications by grouping them into five categories, rather than individually; fourth, it was somewhat difficult to understand why the ACCC had bothered to claim privilege over three documents in respect of a single sentence given that that sentence disclosed little more than what was disclosed in the solicitor’s affidavit about it; and fifth, the solicitor was not cross-examined by the NSW Ports parties – though, as adverted to, it is not difficult to understand why that was the case: see Privilege Judgment at [64]-[67] and [263]-[286].

7    It was perhaps not surprising in those circumstances that the NSW Ports parties challenged the nature and sufficiency of the “information and belief” evidence relied on by both the Port of Newcastle parties and the ACCC. It was perhaps equally unsurprising that, in light of the parties’ reliance on that evidence, it was ultimately necessary for the Court to inspect each and every document and communication over which privilege had been claimed.

8    The documents over which privilege had been claimed by the Port of Newcastle parties were grouped into nine categories. Following an inspection of all of the documents, for all but two of the relevant categories (subject to a small number of exceptions), none of the documents or communications were the subject of legal professional privilege. In simple terms, the number of documents that were the subject of legal professional privilege were far outweighed by the number of documents that were not.

9    The documents over which privilege had been claimed by the ACCC were the subject of a separate, tenth category. As adverted to, all but one of the ACCC’s privilege claims involved a claim of privilege in relation to parts of documents which the Port of Newcastle parties were otherwise required to produce in answer to the NSW Ports parties’ subpoena. All of the ACCC’s claims for litigation privilege were upheld.

10    The parties were ordered to confer and provide the Court with draft orders and submissions (if orders could not be agreed) which gave effect to the findings that had been made in the Privilege Judgment and dealt with the costs of the interlocutory application.

11    On 11 September 2020, the Court was provided with proposed short minutes of orders as between the NSW Ports parties and Port of Newcastle parties but was informed that there remained disagreement between the NSW Ports parties and the ACCC in relation to costs. The Court made an order giving effect to those proposed orders on 14 September 2020. In simple terms, the order required the Port of Newcastle parties to produce the relevant documents directly and electronically to the NSW Ports parties as specified in the annexures to the order, and that the Port of Newcastle parties pay the NSW Ports parties’ costs of, and incidental to, the interlocutory application, as agreed or assessed.

12    As adverted to, the only remaining issue concerns costs as between the NSW Ports parties and the ACCC.

13    The ACCC submitted that the “ordinary rule” is that costs should follow the event, with the purpose of such a costs order not to punish the unsuccessful party but to compensate the successful party: see Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [303].

14    The ACCC contended that there was no reason to depart from this ordinary rule given that: the ACCC was forced to defend the interlocutory application if it wished to maintain its claims; the ACCC was “wholly successful” in defending its claims, with each of the ACCC’s privilege claims having been upheld; and the ACCC had put the NSW Ports parties on notice that it would be seeking costs if it was successful in the application.

15    The NSW Ports parties, by contrast, submitted that the Court should not make any order as to costs. Their reasons in support of that submission were, in brief: the ACCC only asserted its privilege claims some time after the NSW Ports parties served its interlocutory application, being “only a matter of weeks” before the scheduled hearing; prior to the hearing, the NSW Ports parties conceded almost half of the claims pressed by the ACCC; and, most significantly, the ACCC had only supported its privilege claims with “conclusionary descriptions” that did not amount to “adequate evidentiary justification”.

16    It is trite to note that there exists an “important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour” – hence the expression “usual order as to costs”: Oshlack v Richmond River Council (1998) 193 CLR 72 at [67]. The principle, however, is qualified – “subject to certain limited exceptions” – and does not amount to an “absolute rule”: Apotex at [303]. Those exceptions ordinarily focus on “the conduct of the successful party”: Oshlack at [69], citing Anglo-Cyprian Trade Agencies Ltd v Paphod Wine Industries Ltd [1951] 1 All ER 873 at 874. The High Court in Northern Territory v Sangare (2019) 265 CLR 164 summarised a court’s discretion to make an order as to costs in the following terms (at [24]-[25]):

It is well established that the power to award costs is a discretionary power, but that it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation. While the width of the discretion “cannot be narrowed by a legal rule devised by the court to control its exercise”, the formulation of principles according to which the discretion should be exercised does not “constitute a fetter upon the discretion not intended by the legislature”. Rather, the formulation of principles to guide the exercise of the discretion avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power.

A guiding principle by reference to which the discretion is to be exercised – indeed, “one of the most, if not the most, important” principle – is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. …

(Footnotes omitted.)

17    The question, therefore, is whether there are facts connected with the application – namely, conduct on the part of the ACCC – that justify disentitling the ACCC as to their costs.

18    This is not the appropriate occasion for a treatise on the scope of conduct that may disentitle a successful party as to the usual order as to costs. It suffices to note the following for present purposes: first, “disentitling conduct does not necessarily need to amount to misconduct”: Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [53]; second, there is no “exhaustive listing” of what constitutes disentitling conduct: Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; 288 ALR 385 at [98], quoted with approval in Commissioner of Taxation v AusNet Transmission Group Pty Ltd (No 2) [2015] FCAFC 124 at [12]-[14]; third, and relevant to this proceeding, courts have not sought to “differentiate the sort of circumstances in which an overall successful party should not receive costs (with the effect that each side bears its own costs) from the circumstances in which the overall successful party should pay the costs of the loser”: Tomanovic at [98].

19    It is true that each of the claims for litigation privilege made by the ACCC were ultimately upheld: see Privilege Judgment at [287]. It is unnecessary for present purposes to rehearse the reasons why the Court was so satisfied: see Privilege Judgment at [263]-[286].

20    It is also true, however, that the evidence adduced by the ACCC in support of its privilege claims was “information and belief” evidence from a solicitor who had not been involved in the relevant litigation. That fact is relevant for the purposes of any potential order as to costs for the following two reasons.

21    First, the ACCC’s evidence in support of its privilege claims was ultimately of little assistance to both the NSW Ports parties and the Court. The Court accepted, in this regard, that the evidence of the ACCC was slightly more focused and specific than the evidence adduced by the Port of Newcastle parties: see Privilege Judgment at [289]. That, however, was not a high bar. Indeed, the ACCC appeared to have made a “deliberate decision not to adduce evidence from either one of its own officers, or an AGS lawyer, who had been involved in the litigation and had some direct knowledge concerning the relevant communications”: Privilege Judgment at [288]. That decision meant the NSW Ports parties were effectively unable to challenge or test the evidence concerning the purpose for which the document or communication was created. It would, in those circumstances, not be unfair to describe the ACCC’s evidence as lacking in probative value.

22    At the risk of repetition, it is important to emphasise that in the context of a serious challenge to a claim of legal professional privilege, the party seeking to maintain their claim for privilege should give (perhaps serious) consideration to calling evidence from the person who was responsible for the relevant document or communication. This is not to suggest that evidence by solicitors on “information and belief” should never be adduced in support of privilege claims. Rather, the preceding simply acknowledges that the “best direct evidence” in this context “will be that given by the person whose purposes in question”, whereas evidence based on “information and belief” will almost always warrant careful scrutiny by the Court: see Privilege Judgment at [254]-[257]. Additionally, even where it may be appropriate to rely on “information and belief” evidence, that evidence should plainly extend beyond the use of generic verbal formulae to describe the nature of the communication and the basis of the privilege claim.

23    The High Court in Sangare observed (at [25]) that one possible exception to the ordinary rule is where the “[defendant’s] conduct induced the plaintiff to believe that he or she had a good cause of action”. While it cannot be said that the ACCC induced the NSW Ports parties to believe that their challenges to the ACCC’s privilege claims would be successful, the deficiencies within the ACCC’s evidence understandably encouraged the NSW Ports parties to believe that the ACCC’s privilege claims may lack a relevant or proper basis or justification. Indeed, the Court accepted that there was “some merit in [the NSW Ports parties’] criticism” regarding the adequacy of the ACCC’s evidence: Privilege Judgment at [288].

24    Second, the consequence of the ACCC’s reliance on the solicitor’s “information and belief” evidence was that its privilege claim was challenged, not unreasonably, by the NSW Ports parties and that ultimately the Court was required to inspect each and every document in order to test the cogency of the ACCC’s privilege claims. That was particularly so given the generality of much of the evidence. As was explained in detail in the Privilege Judgment, the difficulty with “information and belief” evidence in this context is that “[i]n many cases the result will be that the court will almost invariably be required to inspect the documents to scrutinise the privilege claim”: see Privilege Judgment at [255]. That was what occurred in this proceeding. The Court was effectively required to analyse each of the 12 documents claimed to be privileged by the ACCC. While some of those documents were relatively short email chains, others were board papers of the Port of Newcastle parties and minutes of a board meeting. The latter were, regrettably, not novellas or light reading – and, while they were not as voluminous as Leo Tolstoy’s War and Peace, the undeniable fact is that the Court was required to expend not insignificant time and resources inspecting and carefully examining each of those documents.

25    It is well established that one of the exceptions to the ordinary rule is “whether the successful party effectively invited the litigation”: Moseley v AB (No 2) [2017] NSWSC 1812 at [73], citing Tomanovic at [97]-[98]. While it cannot be said that the ACCC invited this proceeding, it would not be unfair to describe the evidence adduced by the ACCC in support of its privilege claims as effectively inviting the NSW Ports parties to challenge the claim and ultimately inviting the Court to inspect and scrutinise each and every document. The deliberate decision by the ACCC not to call evidence from the person who was responsible for the relevant communication, or a solicitor who had some direct knowledge of the relevant communication, together with the overall generality of the “information and belief” evidence, made this outcome practically inevitable.

26    In all the circumstances, I am not persuaded that this is an appropriate occasion where the ordinary rule should be followed. While the ACCC was ultimately successful in upholding its claims of legal professional privilege, regard must be also be had to the ACCC’s conduct in these proceedings – namely, its decision to support its privilege claims by way of overly general “information and belief” evidence. It was not unreasonable, in all the circumstances, for the NSW Ports parties’ to maintain their challenges to the ACCC’s privilege claims. The privilege claims were ultimately upheld largely as a result of the Court’s inspection of each and every document the subject of those claims. That course could have been avoided, as adverted to, if the ACCC had called sufficiently specific evidence from the person who was responsible for the communication or document the subject of the privilege claim.

27    It is, in all the circumstances, appropriate that there be no order as to costs as between the NSW Ports parties and the ACCC.

Associate:

Dated:    23 October 2020

SCHEDULE OF PARTIES