Federal Court of Australia

Pekar v Holden (No 2) [2021] FCA 343

ORDERS

THE COURT ORDERS THAT:

1.    The applicant pay the respondent’s costs of the proceeding (including those pertaining to the respondent’s interlocutory application dated 10 February 2021), such costs to be assessed (if not agreed) on an indemnity basis and paid out of the applicant’s bankrupt estate.

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

REASONS FOR JUDGMENT

SNADEN J:

1    On 26 February 2021, the court made orders herein against the applicant, Mr Pekar, under s 37AO(2) of the Federal Court of Australia Act 1976 (Cth) (hereafter, the “FCA Act”): Pekar v Holden [2021] FCA 141 (hereafter, “Pekar”; Snaden J). The effect of those orders was to summarily dismiss the matter that Mr Pekar had sought to prosecute and to prevent him (save for limited exceptions) from instituting further proceedings in the court. Those orders were made on the application of the respondent, Mr Holden, who now seeks orders that his costs in the proceeding be paid on an indemnity basis out of Mr Pekar’s bankrupt estate.

2    At the court’s invitation (Pekar, [36]), Mr Holden filed short and helpful submissions in support of his costs application. Mr Pekar did not take up the court’s invitation to respond to them. I proceed, nonetheless, upon the obvious basis that the costs application is opposed.

3    In summary, Mr Holden’s contention in support of an indemnity costs order is that Mr Pekar’s substantive application lacked any reasonable prospect of succeeding and, thus, amounted to an abuse of the court’s process.

4    Recently in Australian Competition and Consumer Commission v PZ Cussons Australia Pty Ltd [2021] FCA 246, Wigney J had occasion to summarise (at [6]-[10]) as follows the principles relevant to an application for an indemnity costs order:

The Court’s discretionary power to award costs derives from s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). The usual rule is that an order for costs means costs “as between party and party”: r 40.01 of the [Federal Court] Rules; see also the definition of “costs” in the Dictionary in Sch 1 of the Rules; Mango Boulevard Pty Ltd v Whitton [2015] FCA 1352 at [12]. A party or person who is entitled to costs may, however, apply for an order that costs be awarded in their favour “other than as between party and party”: r 40.02(a) of the Rules. That includes an order that costs be awarded on an indemnity basis.

The discretion to award costs on a basis other than as between party and party, including on an indemnity basis, is “unfettered, save that it must be exercised judicially and not arbitrarily or capriciously”: Australian Competition and Consumer Commission v The Construction, Forestry, Mining and Energy Union (No 4) [2018] FCA 684 at [96]. The discretion must also be exercised in light of the requirement that the Court consider any failure by a party to comply with the overarching purpose of the civil practice and procedure provisions to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see ss 37N(4), 37M(1) of the FCA Act; LFDB v SM (No 2) [2017] FCAFC 207 at [7].

The discretion to depart from an order for party and party costs will not be exercised unless there is some special or unusual feature or the justice of the case so requires: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3]; Seven Network Ltd v News Ltd (2009) 182 FCR 160; [2009] FCAFC 166 at [1102]; Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 at [5].

The purpose of a costs order is to compensate the successful party, not to punish the unsuccessful one: King v Yurisich (No 2) [2007] FCAFC 51 at [19], citing Latoudis v Casey (1990) 170 CLR 534; Seven Network at [1099]. An award of indemnity costs is to “serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales (2002) 188 ALR 659; [2002] FCAFC 97 at [20]; see also Kazal v Independent Commission Against Corruption and Ors (No 2) [2020] NSWSC 17 at [60]-[62]; Cirillo at [4]-[5]; Melbourne City Investments at [5].

The circumstances in which it may be found to be unreasonable for the successful party to be subjected to the expenditure of any costs are not fixed or closed, but have been found to include, relevantly: where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at 401; De Alwis v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 77 at [7]); where the moving party “persists in what should on proper consideration be seen to be a hopeless case” (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303); where the applicant’s case was “always clearly foredoomed to fail” and “they ought to have known this to be so” (Smolle v Australian and New Zealand Banking Group Ltd (No 2) [2007] FCA 1967 at [25]); where an application is “wholly untenable and misconceived” (Henke v Carter [2002] FCA 492 at [22]); and where an applicant persists in prosecuting a proceeding without regard to the evidentiary difficulties in the case (Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685 at 693): see generally Melbourne City Investments at [5]; Seven Network at [1102]; Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.

5    I gratefully adopt that summary of relevant principle. To it, I would add only—and relevantly, for present purposes—that courts are more reluctant to make orders for indemnity costs against litigants in person than against legally-represented litigants: Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792, [45] (Kenny J).

6    In Pekar, I concluded (at [35]) that Mr Pekar “…has no reasonable prospect of successfully prosecuting any of the claims that are detailed in his amended originating application [and that h]is action amounts to an abuse of process”. I gave reasons in support of those conclusions, which it is unnecessary to here restate. It suffices to say that I consider the circumstances of this case fall squarely within those in which an indemnity costs order would ordinarily be appropriate.

7    It is to be recalled that part of the costs that Mr Holden has incurred to date have been incurred in connection with his own application for orders under s 37AO(2)(b) of the FCA Act. I do not consider that to be a circumstance that warrants any deviation from the observation made above. Mr Pekar’s substantive proceeding was one that ought never to have been made. The costs that Mr Holden incurred—including those directed to ensuring that he should not be vexed by any further proceedings, which Mr Pekar’s litigation history suggested was all but inevitable—were costs that he ought not to have had to incur.

8    In those circumstances, I consider it appropriate to (and will) make an order that Mr Holden’s costs be paid on an indemnity basis.

Associate:

Dated:    14 April 2021