Federal Court of Australia

CCGF Holdings Pty Ltd v Coegi Group Pty Ltd (No 2) [2020] FCA 1596

ORDERS

THE COURT ORDERS THAT:

1.    The default judgment granted against the fifth respondent on 19 July 2019 be set aside.

2.    The fifth respondent pay the applicant’s costs thrown away by the setting aside of the default judgment on an indemnity basis.

3.    The fifth respondent pay the applicant’s costs of the application to set aside the default judgment on a party-and-party basis.

4.    The applicant have leave to tax the costs awarded under Order 3 immediately.

5.    The fifth defendant file and serve a defence by 4.30 pm on 25 November 2020.

6.    The applicant file and serve any reply by 4.30 pm on 9 December 2020.

7.    When Orders 5 and 6 have been complied with, the parties are to notify the Court, and the matter will be listed for a case management hearing on a date to be fixed.

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

REASONS FOR JUDGMENT

RANGIAH J:

1    The proceeding before the Court is an application brought by the fifth respondent, Linda Anne Gordon, for orders that a default judgment granted on 19 July 2019 be set aside as against her.

2    On 1 October 2020, I published reasons for judgment (CCGF Holdings Pty Ltd v Coegi Group Pty Ltd [2020] FCA 1402) in which I indicated that I was satisfied that Ms Gordon had established a prima facie defence of sufficient merit to warrant setting aside the judgment and permitting the matter to proceed to trial, subject to determination of costs. I considered the question of costs to be relevant to whether the judgment should be set aside. However, as the parties had indicated during the hearing that they wished to be heard as to costs, I decided that they should be given that opportunity before finally determining whether the judgment should be set aside.

3    I ordered that the parties exchange submissions concerning costs. I ordered that the questions of costs and the final disposition of Ms Gordon’s application be decided on the papers.

4    Ms Gordon submits that she should not be required to pay the costs of the application to set aside the default judgment. On 6 January 2020, Ms Gordon’s solicitors wrote to the solicitors for the applicant, CCGF Holdings Pty Ltd, offering to resolve her application on the basis that the applicant agree to the default judgment being set aside with each party bearing their own costs. On 3 February 2020, the applicant’s solicitors rejected that offer. On 6 May 2020, Ms Gordon’s solicitors repeated the offer, but it was not accepted.

5    Ms Gordon submits that the applicant failed to accurately assess its risks and unreasonably refused to accept her offers. She submits that, therefore, she should not be ordered to pay the applicant’s costs of the application to set aside the default judgment, or, alternatively, that the costs of the application should be costs in the proceeding. However, she accepts that she should pay the applicant’s costs thrown away by the setting aside of the default judgment.

6    Ms Gordon also submits that any order for costs should be made on a party-and-party basis and be payable in the ordinary course (that is, at the conclusion of the proceeding). She points out that the Court has accepted that she has a prima facie defence, and also submits that the applicant did not engage productively in discussions to resolve the matter and that should be taken into account.

7    The applicant submits that Ms Gordon should pay the costs of the application, as well as the costs thrown away. The applicant also submits that such costs should be ordered on an indemnity basis, and should be permitted to be taxed forthwith.

8    In Dai v Zhu [2013] NSWCA 412 at [83], it was held that, “ultimately it is necessary to consider whether it is in the interests of justice to allow the party seeking to set aside a default judgment to be permitted to defend the proceedings on the merits”.

9    In Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, the High Court had regard to a provision the equivalent of s 37M(1) of the Federal Court of Australia Act 1976 (Cth). The plurality held at [102] that the provision, “makes it plain that the extent and the effect of…costs are to be regarded as important considerations in the exercise of the court’s discretion”.

10    In my opinion, the issue of where costs should fall is relevant to, and cannot be divorced from, the question of whether the interests of justice require that a default judgment be set aside.

11    In the present case, the discretion to set aside the default judgment comes to be exercised in circumstances where I rejected as implausible Ms Gordon’s evidence that she did not know of the existence of the proceedings, and found that she has not provided a reasonable explanation for failing to defend the proceedings. Further, Ms Gordon’s offers were made on the basis that each party would bear its own costs, whereas she now accepts that she should pay the applicant’s costs thrown away by the setting aside of the default judgment. In view of these matters, I do not accept Ms Gordon’s submission that the applicant acted unreasonably in refusing to consent to the default judgment being set aside.

12    The applicant having acted reasonably in resisting the application, the starting point is that, as the party seeking an indulgence, Ms Gordon should pay the costs of the application and the costs thrown away by reason of the setting aside of the default judgment: see Re Zagoridis; Ex parte Q’Plas Group Pty Ltd (1990) 27 FCR 108 at 114; J & M McNamee Holdings Pty Ltd v Mungerie Vale Pty Ltd trading as Greenwood Group Realtors [2019] NSWCA 283 at [97]; Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 at [73]. While that position is subject to the interests of justice, there is no reason to depart from it in the present case. An award of costs will go some way towards curing the detriment suffered by the applicant as a result of Ms Gordon’s conduct in applying to have the judgment set aside, having unreasonably failed to defend the proceedings.

13    Rule 40.13 of the Federal Court Rules 2011 (Cth) (the Rules) provides that, if an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. The policy considerations which underpin that rule include avoidance of multiple costs proceedings and the fact that subsequent events in the litigation may generate costs orders in the opposite direction: see Vasyli v AOL International [1996] FCA 804; Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136 at [37].

14    However, the Court has a discretion to permit the costs of an interlocutory application to be taxed immediately. The power to make such an order springs from r 1.34, which permits the Court to dispense with compliance with any of the Rules, or r 1.35, which permits the Court to make an order inconsistent with the Rules: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 5) [2018] FCA 19 at [5].

15    It has been said that the discretion should be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule: Thunderdome Racetiming & Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312. Another way of putting this is to say that the party who seeks an order that the costs of an interlocutory application be payable forthwith bears the onus of demonstrating a good reason why the general rule should be departed from: The Owners – Strata Plan No 87231 v 3A Composites GmbH (No 2) [2020] FCA 333 at [33].

16    In Setka v Hon Abbott MP (No 2) [2013] VSCA 376, it was held at [27]:

The discretion to order that the default position not apply is confined only by the principle that the discretion must be exercised judicially. But it has been held, depending upon the circumstances of the particular matter, that the default position may be upset where — (1) there is prospect of considerable delay in completion of the proceeding; (2) the issue the subject of the interlocutory order was discrete from what will finally require determinations; (3) the party against whom the substantive order was made was guilty of unsatisfactory conduct — described variously as ‘unreasonable’ or ‘reprehensible’, or as involving a want of ‘competence and diligence’.

17    Indemnity costs may be awarded where there is some special or unusual feature in the case justifying a departure from the ordinary rule that standard costs be paid: see, for example, Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [5]; Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 152; Pinnacle Runway Pty Ltd v Triangl Limited (No 3) [2020] FCA 1379 at [39].

18    In the present case, Ms Gordon engaged in unsatisfactory or unreasonable conduct. Her failure to defend the proceedings, despite being aware of their existence, makes it appropriate to depart from the usual position that costs should be paid on a party-and-party basis and should not be permitted to be taxed until the conclusion of the proceeding. That conduct has unfairly caused the applicant to incur costs that it would not otherwise have incurred.

19    There are two aspects of costs to be considered. The first is the applicant’s costs thrown away by the setting aside of the default judgment. The second is the applicant’s costs of the application to set aside the default judgment.

20    I consider that to ameliorate the prejudice suffered by the applicant, Ms Gordon should be ordered to pay the applicant’s costs thrown away as a result of the setting aside of the default judgment on an indemnity basis. However, precisely what costs may be thrown away cannot be determined at this stage. Therefore, in respect of these costs, I do not propose to depart from the usual position that costs be taxed at the conclusion of the proceeding.

21    The position is different in respect of the costs of the application to set aside the default judgment. Although Ms Gordon acted unreasonably in failing to defend the proceeding, she has not acted unreasonably in making the application to set aside the default judgment. There is insufficient reason to depart from the usual position that she should pay the costs of the application on a party-and-party basis. However, the costs of the application are able to be determined discreetly, and I consider that the interests of justice require that they should be permitted to be taxed immediately. The costs of the application ultimately flow from Ms Gordon’s unreasonable conduct, and allowing the applicant to recover its costs of the application immediately will go some way towards ameliorating the applicant’s detriment.

22    Having regard to the orders for costs that I propose to make, I consider that the default judgment should be set aside. I will order that Ms Gordon pay the applicant’s costs thrown away by the setting aside of the default judgment on an indemnity basis. I will order that Ms Gordon pay the applicant’s costs of the application to set aside the default judgment on a party-and-party basis, and will give leave to the applicant to tax those costs immediately.

Associate:    

Dated:    4 November 2020

SCHEDULE OF PARTIES