Federal Court of Australia

McClure v Medibank Private Limited (No 2) [2025] FCA 343

ORDERS

THE COURT ORDERS THAT:

1.    The applicants’ interlocutory application dated 20 December 2023 in so far as it seeks the production of documents 1–14 listed in Annexure A to McClure v Medibank Private Limited [2025] FCA 167 be dismissed.

2.    There be no order as to the costs of the interlocutory application dated 20 December 2023.

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

REASONS FOR JUDGMENT

ROFE J:

1    On 7 March 2025, I delivered my reasons in McClure v Medibank Private Limited [2025] FCA 167 (Principal Judgment or PJ). On 17 March 2025, I ordered the parties to file submissions on the question of costs of the Applicants’ interlocutory application dated 20 December 2023 (Application), which was the subject of the Principal Judgment. This judgment adopts the abbreviations used in the Principal Judgment.

2    The parties’ respective submissions as to costs are outlined below. For the reasons that follow, I am satisfied that each party should bear its own costs.

Applicants’ submissions

3    The Applicants submit that they should be awarded their costs of the Application.

4    The Applicants stress that central to the substance and conduct of the Application was whether privilege subsisted in the Deloitte Reports and that the privilege in the remaining Cyber Expert Documents were “peripheral” matters.

5    The Applicants noted that the Court should not “cast undue analysis”, however directed the Court to the following facts.

(1)    Neither Mr Wilkins nor Mr Koczkar led any direct affidavit evidence on the other Cyber Experts. They were the only two witnesses required for cross-examination — cross-examination of Ms Ramsay and Mr Gatto having been “resisted” by Medibank.

(2)    Almost all the cross-examination in the hearing of the Application related to the Deloitte Reports.

(3)    The affidavit evidence of Mr Forbes, Ms Ramsay and Mr Gatto, which was read, also mostly concerned the Deloitte Reports.

(4)    The parties’ written submissions and their oral submissions developed at the hearing also principally related to the Deloitte Reports.

6    In support of their position, the Applicants noted that the “ordinary rule is that costs follow the event, although a successful party may be awarded less than its costs, or costs may be apportioned, based upon success on the issues”: Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 at [3] (per Nicholas, Beach, and Burley JJ).

7    The Applicants further cite N.V. Sumatra Tobacco Trading Company v British American Tobacco Services Ltd [2011] FCA 1295 at [17], where Greenwood J observed that:

The question of apportionment ought to take account of the substance of the outcomes; whether a considerable part of the trial is taken up in determining issues upon which a party fails; whether the evidence relevant to the matters on which the party failed nevertheless overlapped with other issues in the controversy upon which the party was successful; whether it was reasonable to agitate the issue even though the party was unsuccessful; and, not cast undue analysis upon whether a successful party has been unsuccessful on “particular issues” in the context of its predominant success in the controversy overall…

(Emphasis added.)

8    As such, the Applicants submit that they should have their costs as they have had “predominant success in the controversy overall”.

Medibank’s submissions

9    Medibank sought the following orders in relation to costs:

(a)    The respondent pay the applicants’ costs of and incidental to the application, as they relate to the documents 14, 15 and 17 in Part 1 of the affidavit of Melissa Monks affirmed 20 December 2023, being documents 15, 16 and 17 in Annexure A to the [Principal] Judgment.

(b)    The applicants pay the respondent’s costs of and incidental to the application, as they relate to the remaining documents the subject of the application.

10    Medibank submits that its proposed orders reflect the parties’ mixed success on the Application. That is, the Applicants were successful in resisting Medibank’s claims for privilege in respect of the three Deloitte Reports, whereas Medibank was successful in maintaining its claims for privilege in respect of the remaining 14 documents the subject of the Application.

11    Medibank contends that in this case, it is appropriate to award costs on an issues basis where the parties have experienced mixed success on those issues. Neither party has been wholly successful on the application, so the ‘usual rule’ is inapposite to do substantial justice in relation to costs and fairness dictates that an issues-based approach be adopted: Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 12) [2012] NSWSC 1591 at [4] (per Black J); Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5] (per Finkelstein and Gordon JJ).

12    Medibank submits that the Application gave rise to distinct and severable issues, with the Deloitte Reports comprising one such issue or set of issues, and the remaining documents, categorised on the Application by reference to the identity of the relevant Cyber Experts, comprising the others.

13    Medibank’s proposed orders are said to ensure that both the parties’ mixed success on those issues, as well as the relative contribution of those issues to the overall disposition of the Application, can be brought to account in any assessment of the costs. The Applicants’ proposal that Medibank pay their costs of the Application is said to be irreflective of the fact that apart from the Deloitte Reports, the Applicants failed on the balance of the issues in the Application. Medibank contends that this approach is unfair and inappropriate, as it would see the Applicants compensated at the expense of Medibank for costs in respect of issues on which they were wholly unsuccessful.

14    In the alternative, Medibank proposed the following position that, if the Court was not minded to make orders in the form proposed by Medibank, the appropriate order is that there be no order as to costs. To this end, taking a broad and overall view of the outcome, both parties achieved a substantial measure of success, particularly having regard to the Court’s consideration of the issues at [198]–[446] in the Principal Judgment. In support of this position, Medibank cited AWB Ltd v Cole (No 6) (2006) 235 ALR 307 at [16]–[17] (per Young J).

Consideration

15    Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a broad discretion in awarding costs. The discretion must be exercised judicially: Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [305] (per Bennett, Besanko and Beach JJ).

16    In Impiombato v BHP Group Limited (No 2) [2025] FCAFC 28, Beach and O’Bryan JJ noted the following at [13]:

While not a rigid rule, usually the discretion to award costs is exercised in favour of a successful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at [35] per Gaudron and Gummow JJ, [66]-[67] per McHugh J and [134] per Kirby J; Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 at [25] per Gleeson CJ, Gummow, Hayne and Crennan JJ; Sangare at [25]. A successful party may be deprived of a proportion of its costs, or even required to pay costs to the other party, if the successful party succeeded only upon a portion of its claim, or failed on issues that were not reasonably pursued, or where the result of the litigation might be described as mixed: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11]ff; Queensland North Australia Pty Ltd v Takeovers Panel (No 2) (2015) 236 FCR 370 at [11]. However, the mere fact that a court does not accept all of a successful party’s arguments does not make it appropriate to apportion costs on an issue by issue basis: Australian Trade Commission v Disktravel [2000] FCA 62 at [3]-[4]; The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [8]; Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 327 ALR 192 at [6]…

17    In exercising my discretion, I consider that the following factors are relevant.

18    First, the Application sought the production of 17 documents, the Principal Judgment found that three of those documents were not privileged and hence should be produced. Therefore, both parties have had some measure of success in relation to the Application.

19    Second, while only three of the 17 documents (being, the Deloitte Reports) were not found to be privileged, an overwhelming proportion of the evidence filed, cross-examination and written and oral submissions was directed to the three Deloitte Reports.

20    Third, undertaking an issue-by-issue costs assessment can be an expensive and protracted exercise. I consider that any benefit from a costs assessment reflective of the parties’ success by reference to an issue-by-issue analysis would be far outweighed by the costs and time expended by the parties and the Court in achieving that result.

21    Fourth, this proceeding remains at an early stage. This means that the litigation may take many turns from here, with subsequent events in the litigation potentially generating additional costs orders: Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136 at [37] (per Heerey, Branson and Merkel JJ).

22    Fifth, I consider that both parties reasonably defended and brought the Application. This was not an instance where any party brought unmeritorious grounds or pursued frivolous arguments.

23    One of the underlying rationales behind issues-by-issues costs orders is to provide a “disciplining effect on the parties and their advisers about the issues they select to run”: Boomerang Investments Pty Ltd v Padgett (Costs of Liability Phase) [2021] FCA 385 at [20] (per Perram J). Issues based costs orders are generally appropriate where a discrete or distinct issue has caused additional costs to be incurred or where the overall costs have been increased by the unreasonable raising of an issue on which a successful party failed. Neither of these two bases apply to this case.

24    In all the circumstances, I consider that it is more appropriate that I should make no order for costs in favour of any parties. Each has had a reasonable measure of success and allowing costs to lie where they have fallen is the most just and practical outcome.

Associate:

Dated:    9 April 2025