Federal Court of Australia

Martin v Norton Rose Fulbright Australia (No 12) [2020] FCA 1795

ORDERS

THE COURT ORDERS THAT:

1.    The Applicant be awarded his costs of this proceeding, including the costs of any interlocutory applications for which costs were reserved, on an indemnity basis, as agreed or in default of agreement as assessed.

2.    Order 2 of the orders made on 6 January 2020 be set aside, and in lieu thereof it be ordered that there be no order as to costs in respect of that interlocutory application.

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

REASONS FOR JUDGMENT

KERR J:

1    These reasons address the Applicant’s (Mr Martin’s) application for costs in proceeding SAD49/2017: a case heard concurrently with proceeding NSD1610/2016 as was the subject of the Court’s determination in Martin v Norton Rose Fulbright Australia (No 11) [2020] FCA 1641 (Martin No 11). My reasons assume familiarity with the Court’s reasons in Martin No 11, and should be read with them.

2    Having been successful in obtaining judgment, the Applicant has applied for costs in proceeding SAD49/2017 to be awarded in his favour on an indemnity basis.

3    There are three preliminary matters to which I should give attention.

4    First, insofar as Mr Martin conducted most - but not all - of the proceedings in SAD49/2017 self-represented the law is now well settled that he is not entitled to recover costs on the basis that he can charge for the value of his time as a legal practitioner in acting for himself. His entitlement in respect of any costs incurred when self-represented is confined to any disbursements he properly incurred. Any order that I make is to be construed as so confined.

5    Second, in the course of the trial of these proceedings on the Respondent’s behalf Mr Potts SC pressed an oral application that Mr Martin be subject to an adverse costs order in respect of the first three days of that trial. The asserted basis for that application was that Mr Martin had unsuccessfully advanced three clearly unsustainable interlocutory applications as had caused the Respondent unreasonably to incur costs. The Respondent’s written submissions later developed that submission. Otherwise however they sought leave to respond to any costs issue after the Court had delivered reasons.

6    In those regards, in delivering judgment in Martin No 11 the Court observed:

428    NRFA submits it should be awarded costs of the first three days of the trial as were occupied by various unsuccessful interlocutory applications in respect of its costs thrown away. It otherwise reserves its position, as follows:

NRFA notes that the submissions address only the first 3 days of the hearing. NRFA would otherwise seek to be heard on costs following the outcome of the substantive proceedings.

429    Noting that circumstance, it occurs to the Court that it is not inconceivable that both questions might be thought to intersect. I will permit NRFA to file and serve any further written submissions upon which it might seek to rely in relation to the costs of proceeding SAD49/2017, limited to 4 pages, within 14 days of the publication of the Court’s reasons. I would ask NRFA to address in its submissions whether in the circumstances of my findings it still presses for its costs in relation to Mr Martin’s failed interlocutory applications. Assuming that those submissions remain pressed, NRFA need not repeat the submissions it has already filed. I would grant Mr Martin leave to file and serve any responsive submissions similarly limited in length, within 28 days of the publication of the Court’s reasons. Unless either party applies to advance oral submissions and the Court is persuaded of that necessity, the Court will determine the question of costs in proceeding SAD49/2017 on the papers.

7    In the Respondent’s submissions on costs as later filed, the question as to whether it was still pressing its application in respect of Mr Martin’s three failed interlocutory applications was addressed at C.4 in the following terms:

For the reasons set out in its submissions titled “Costs of the First 3 Days of the Hearing” filed on 17 April 2020, the Respondent previously sought its costs in respect of the first three days of the trial. The Respondent no longer seeks these costs. However, the Respondent submits that given these interlocutory applications were prolonged and ultimately unsuccessful, they further demonstrate that an award of indemnity costs in favour of the Applicant would not be appropriate.

Mr Martin filed no written submissions, and relied on his oral submissions made in Court which I have earlier taken into account in awarding indemnity costs to him in respect of proceeding NSD1610/2016.

8    Having regard to the Respondent’s written submissions I therefore proceed on the basis that Norton Rose Fulbright Australia now disclaims any entitlement to costs in those regards, and accepts subject to its submissions as referred to at [11]-[16] that the costs of the trial as a whole (including with respect to those interlocutory applications) are to be awarded to the Applicant. I note however in that regard that as the Applicant was then self-represented, his entitlement to costs in those respects is not of any economic consequence. I also proceed on the understanding that the Respondent in its written submissions eschews any entitlement to an award of costs in its favour in respect of the instances it identifies at C.2, which all relate to the conduct of the Applicant and might in other circumstances have warranted costs being ordered in its favour in respect of some aspects of the proceedings notwithstanding the Applicant’s ultimate success. As I apprehend the Respondent’s position, it has rather referred to those instances only as factors which on its submission are proper and relevant considerations for the Court to take into account in determining whether or not costs should be awarded against the Respondent on an indemnity basis. I will return to that question, in that context, in due course.

9    Third, the Respondent makes no submission that s 570 of the Fair Work Act 2009 (Cth) (as provides a general disentitlement to costs in instances in which it applies) has relevance or operation in respect of these proceedings. To the extent that that question cannot be merely conceded and requires judicial attention, I agree that the action did not have a relevant connection to a matter referred to in s 570 as would engage that provision. In the event that I am wrong however I proceed on the basis that the conduct of the Respondent in filing a defence in which it denied that Mr Cross, one of its equity partners and its agent when earlier representing it, had made false and misleading representations to Mr Martin’s then solicitor Mr Harmer in circumstances where the Respondent had been in possession of documentary materials as were capable of objectively demonstrating that to be unsustainable proposition was a relevantly unreasonable act. It was in respect of an issue so central to the claims advanced by Mr Martin in proceeding SAD49/2017 as to be sufficient to bring the whole of that proceeding within the exception provided for in s 570(2)(b) of that Act. In that regard, it is well established that the filing of a defence containing denials for which there is no foundation in fact or law is generally considered an unreasonable act within the meaning of that provision: see Fair Work Ombudsman v Grouped Property Services (No 3) [2017] FCA 810 per Katzmann J at [49]; Whelan v Cigarette & Gift Warehouse [2019] FCA 2064 per Collier J at [91]; Independent Education Union of Australia v Australian International Academy of Education Inc [2016] FCA 686 per Jessup J at [45].

10    Having regard to those initial observations, I proceed on the basis that what I am required to decide is not whether the Applicant should be awarded costs but whether costs should be awarded to him on the usual party-party basis or on an indemnity basis.

11    Before turning to the relevant costs principles which the Respondent submits govern that question, I should first dispose of a discrete point that the Respondent raises regarding certain offers of settlement that it made which the Applicant did not accept.

12    In those regards, it is appropriate to set out the Respondent’s submissions at C.3 in full:

15    By way of background, the Respondent notes that:

•    the Applicant and the Respondent were also party to Proceeding SAD40/2019 (Appeal Proceedings) in which the Applicant sought to appeal the interlocutory decision of Charlesworth J in the Proceedings;

•    on 18 December 2019, the various applications made by the Applicant in the Appeal Proceedings were refused and costs were awarded in favour of the Respondent;

•    the Respondent sought lump sum costs orders: (1) it had incurred costs and disbursements of $337,010.33 in the Appeal Proceedings but (2) sought the reduced sum of $224,673.52 from the Applicant;

•    on 29 June 2020, Registrar Parkyn ordered that the Applicant pay $141,376.37 to the Respondent for its costs and disbursements in the Appeal Proceedings (Lump Sum Costs Order Amount); and

•    on 7 July 2020, the Respondent’s solicitors sent a letter to the Applicant seeking payment of the $141,376.37 within 28 days. The Applicant has not made this payment and has not responded to this letter.

16    On 20 December 2019, the Respondent made an offer of settlement in respect of the Proceedings, the Appeal Proceedings and NSD1610/2016 on the following terms:

•    the Respondent to release the Applicant from its entitlement to costs in the Appeal Proceedings (which at the time were estimated to be $322,339.88); and

•    the parties to provide each other with full releases in relation to the Proceedings and NSD1610/2016; (Offer 1). The Applicant never responded to Offer 1.

17    On 26 February 2020, the Respondent made an offer of settlement in respect of the Proceedings, the Appeal Proceedings and NSD1610/2016 on the following terms:

•    the Respondent to pay the Applicant $100,000.00 in respect of the Proceedings;

•     the Respondent to release the Applicant from its entitlement to costs in the Appeal Proceedings (which at the time were estimated to be $322,339.88); and

•    the parties to provide each other with full releases in relation to the Proceedings and NSD1610/2016; (Offer 2). The Applicant has never responded to Offer 2.

18    The Applicant was awarded damages of $160,530.00 in the Proceedings (Awarded Damages).

19    The Respondent submits:

•    Offer 1 and Offer 2 were expressed clearly and represented genuine offers of compromise;

•    it was unreasonable for the Applicant not to accept Offer 1 or Offer 2; and

•    not only did the Applicant not accept Offer 1 or Offer 2 but he also refused to make a counter-offer or engage in any meaningful settlement discussions.

20    Similar conduct was found to be a reason for awarding indemnity costs against a party in the case of Boensch (as trustee of Boensch Trust) v Pascoe (No 2) [2016] NSWSC 343. Accordingly, it is submitted that it would not be appropriate for the Applicant to be awarded indemnity costs in proceedings where he refused to engage in meaningful settlement discussions.

21    In light of the above, the Respondent submits that it would be an appropriate exercise of the Court’s discretion to order that the parties bear their own costs from the date in which Offer 2 was made, being 26 February 2020 up to finalisation of the Proceedings. .

(Footnotes omitted).

13    In Martin No 11, the Court awarded the Applicant a total of just over $160,000.00 for his claims in proceeding SAD49/2017. It made a small award of damages in his favour in proceeding NSD1610/2016, but also ordered that he have his costs in that proceeding on an indemnity basis. Whether or not costs in proceeding SAD49/2017 should similarly be awarded on an indemnity basis is the subject of dispute. However, the Respondent does not suggest that the Applicant is otherwise disentitled to his costs in proceeding SAD49/2017 on a party-party basis. It does not submit that his rejection of its two offers engage the principles in Calderbank v Calderbank [1975] 3 All ER 333.

14    The Respondent accepts that it made its offers on the basis that Mr Martin’s liability to it for costs in what it describes as the Appeal Proceedings would be $322,339.88. That was a wildly inflated estimate, having regard to his ultimate liability of $141,376.37 as assessed by Registrar Parkyn. The real value of the highest offer Mr Martin did not accept as the price for making both proceedings NSD1610/2017 and SAD49/2017 go away was therefore $241,376.37. That total exceeds the amounts awarded to the Applicant in Martin No 11. However, once one adds the amount to which Mr Martin has become entitled as his costs awarded on an indemnity basis in proceeding NSD1610/2016 (which I infer will not be insubstantial given that he was at an earlier time represented in those proceedings by Mr Harmer, the principal of a major Sydney-based law firm) and his costs however to be awarded in these proceedings (in which at an earlier time he was similarly represented by Mr Harmer and at a later time by solicitors in Adelaide who engaged counsel to appear on his behalf for the final two days of the trial and to prepare submissions) I have no reason to apprehend that the ultimate balance may not ultimately fall in Mr Martin’s favour. To the extent that I need to determine that question, I am satisfied that that is the more likely outcome.

15    Moreover, such a narrow calculus sets at no value what truly was in issue in these proceedings: the contest between the parties over whether Mr Martin had been the subject of an abuse of process and improper conduct on his former employer’s part as was contrary to its professional obligations. There is no suggestion that any offer was accompanied by an acknowledgment that, as I have found, that had been the case: let alone an apology.

16    I reject that the Respondent establishes that it was unreasonable for the Applicant not to have accepted either of the offers that it made to him.

17    I turn now to the question before me as it more generally presents itself.

18    In those regards, the Respondent submits that the relevant principles are as follows:

1.    The Court has a broad discretion to award costs which it considers to be appropriate in the interests of justice. This includes awarding costs on a party and party basis and on an indemnity basis. The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another, the order is for payment of those costs on a party and party basis.

2.    In Clarke Nominees Pty Ltd v Adder Holdings Pty Ltd [2015] FCA 277, Gilmour J stated at [13] that:

Importantly, the court should only make an order for the payment of costs on some basis other than a party and party basis where the circumstances of the case warrant the court departing from the usual course, including where the justice of the case might require or where some special or unusual feature in the case justifies the court in departing from the ordinary practice. The categories in which the discretion may be exercised are not closed.

3.    Further, in Construction, Forestry and Energy Union v BHP Steel (AIS) Pty Ltd (2003) 196 ALR 350, Moore J stated at 351-352 that “Because of the potentially burdensome nature of indemnity costs, they are awarded in exceptional cases” and that “the categories of case tend to involve gross party misconduct during the trial or proceedings”.

4.    According to the decision of Colgate-Palmolive Company v Cussons Pty Limited, the circumstances which may warrant the exercise of the discretion to award indemnity costs include:

•    evidence of a particular misconduct that causes loss of time to the court and the other parties;

•    the fact that the proceedings were commenced for some ulterior motive;

•    the fact the proceedings were commenced in wilful disregard of known facts or clearly established law;

•    the making of allegations that ought never to have been made, or the undue prolongation of a case by groundless contentions;

•    an imprudent refusal of an offer to compromise; or

•    an award of costs on an indemnity basis against a contemnor

(Relevant Circumstances).

(Footnotes omitted).

19    I proceed on the basis that the Respondent is correct that the observations of Gilmour J in DS Clarke Nominees Pty Ltd v Adder Holdings Pty Ltd [2015] FCA 277 accurately summarise the principles to which I am to have regard in the exercise of my discretion to award costs on a basis other than a party-party basis. While I am entitled to have regard to other instances in which judges of this Court have concluded that that discretion is or is not to be exercised, the outcome is not rules based and the categories in which the discretion may be exercised are not closed.

20    I should now say something about the Respondent’s plainly correct submission that the Applicant’s conduct in pursuing, unsuccessfully, a number of futile interlocutory applications during the trial and thereby putting the Respondent to unnecessary expense is to be put in the balance.

21    In addition to the three unsuccessful interlocutory applications the Applicant pressed before the commencement of the trial proper in respect of which the Respondent no longer seeks orders in its favour but to which it points as instances relevant to my discretion, the Respondent submits that the Applicant’s conduct otherwise frequently delayed the progression of the proceedings including by:

•    frequently failing to comply with the Court’s directions and orders, including orders and/or directions to:

•    meaningfully confer and prepare a joint court book, a joint draft trial timetable and a joint bundle of authorities in accordance with the orders of Kerr J dated 11 June 2019 and 24 December 2019, and the email direction from Kerr J’s Associate dated 11 February 2020. This resulted in the Respondent preparing these bundles / documents at its own cost;

•    file opening submissions in accordance with the orders of Kerr J dated 24 December 2019;

•    file closing submissions and closing submissions in reply by the required deadline in accordance with the orders of Kerr J dated 6 and 11 March 2020;

•    file submissions in relation to the costs of the interlocutory applications made at the trial by the required deadline in accordance with the orders of Kerr J dated 6 and 11 March 2020; and

•    file exhibits A5, A6 and A8 which were tendered by the Applicant at the trial in the form directed by Kerr J; and

•    making multiple protracted and unsuccessful interlocutory applications at case management hearings and at the trial often without providing prior notice to the Respondent. Some of these applications were also repeated multiple times, for example:

•    applications for Kerr J to recuse himself due to apprehended bias; and

•    applications for the related proceeding NSD1610/2016 (which was heard with the Proceedings and therefore affected the progress of the Proceedings) to be remitted for determination by a Full Court on the basis that a single judge of the Court lacked jurisdiction to hear and determine it.

(Footnotes omitted).

22    Having regard to those circumstances, the Respondent submits that in the ordinary course an application for orders that the Applicant meet the costs of those failed applications and defaults on an indemnity basis might well have been open to be made. No such application is pressed. However, it is submitted on the Respondent’s part that it would be inappropriate for the Applicant to be awarded indemnity costs in circumstances where he himself has engaged in such conduct.

23    It cannot be gainsaid that when self-represented the Applicant did both himself and the Court a disservice by the manner in which he conducted his side of this proceeding. Indeed I observed in Martin No 11 that but for the assistance provided to him late in the trial by his counsel Mr Cameron, Mr Martin may not have succeeded in presenting the case he was required to prove and securing the outcome he ultimately did.

24    However, two things might be thought significant in those regards.

25    First, whatever the basis on which Mr Martin is to be awarded costs that award will not sound in an economic advantage to him in respect of the aspects of his conduct that the Respondent identifies. All of his forensic misjudgements (as I accept them to have been), save as to the confusion that emerged after he had been directed to file exhibits A5, A6 and A8 in the trial, were made when he was not independently represented. In relation to those circumstances, whether Mr Martin is to be awarded costs on a party-party basis or an indemnity basis is without consequence. In either event, he will be able to recover only any disbursements he actually incurred.

26    Second, I would not discount the possibility that Mr Martin’s demonstrated and repeated interlocutory forensic failures gave false comfort to the Respondent in making what ultimately proved to be a fatal misjudgment: being that at trial it could rely on the Applicant failing to present his case in a manner which would allow judgment against it, notwithstanding the flaws in its own position. In any event, I hesitate to hold it against the Applicant that in a contest with his former employer whose conduct I have held to have involved deceit and abuse of process (events he repeatedly had asserted caused him distress) once Harmers had ceased to act for him (which I infer was related to his financial circumstances) he may have been out of his depth. That is not to imply any general want of capacity on his part. However, the capacity for objective judgment in one’s self-interest in litigation is given to few.

27    Having regard to those observations, I am satisfied that while the Respondent’s submission that Mr Martin’s conduct of his litigation is relevant to the exercise of my discretion may be accepted that does not require the conclusion pressed on its behalf. Mr Martin’s conduct of the proceeding once self-represented certainly involved many ill-judged decisions which caused his opponent to incur costs that it should not have been required to bear. However, as against the injury done to him by the Respondent’s conduct in denying the fundamental premise of his claim without good cause I give that circumstance only slight weight.

28    In view of that conclusion and the premise upon which I apprehend the Respondent now puts its contentions as to costs, I will also discharge Order 2 of the orders I made on 6 January 2020 in respect of an earlier unsuccessful interlocutory application the Applicant had advanced: see Martin v Norton Rose Fulbright Australia (No 7) [2020] FCA 5. In respect of costs reserved in other interlocutory applications, I would order that Mr Martin be awarded costs on the same basis as he will be entitled to generally but as he was then self-represented as I have earlier indicated that will be confined to any disbursements he can establish he actually incurred.

29    For the reasons I have given, I am satisfied that to the extent the categories referred to in Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 801; 46 FCR 225 are useful in guiding my discretion this is an instance whereby the Respondent’s defence and its continued maintenance of groundless denials of critical aspects of the case pleaded against it falls within the fourth of those categories as is listed in the Respondent’s submissions (see above at [18]).

30    Given those circumstances, I am satisfied that there are special and unusual circumstances as justify the Court departing from the ordinary practice. The Respondent constitutes the Australian partners of a global legal firm. I have made significantly critical findings against it. It is not to punish it further but to ensure that its default and the requirement it imposed on Mr Martin to prove his case against those partners - notwithstanding the documentary evidence in its hands - does not leave Mr Martin with an obligation to pay any part of the legal costs incurred to such of his legal representatives as he has been able to afford that I am satisfied that it would be proper, and within the Court’s broad discretion to award costs, that the Applicant be awarded his costs on an indemnity basis.

31    I will order accordingly.

Associate:

Dated:    15 December 2020