Andrews v Australia and New Zealand Banking Group Limited

REASONS FOR JUDGMENT 1 In the substantive proceedings, Separate Questions were identified for resolution: see Sch A to Andrews v Australian and New Zealand Banking Group Limited [2011] FCA 1376 (the Substantive Proceedings). The Separate Questions considered specific Exception Fees charged to one of three Applicants referred to, respectively, as Andrews, Saliba and Field in relation to an identified ANZ account. On 5 December 2011, reasons for judgment were published in relation to those Separate Questions: Andrews v Australian and New Zealand Banking Group Limited [2011] FCA 1376 (the Substantive Reasons). I adopt the same defined terms in these reasons for decision. Orders were made to give effect to those reasons for judgment on 13 December 2011. 2 The parties now seek orders in relation to the costs of and incidental to the hearing and determination of the Separate Questions. The Applicants submitted that the appropriate order is that, save for one matter, all parties' costs be costs in the cause, or alternatively, there be no order as to costs. The one matter excluded from the Applicants' proposed order is the material that ANZ prepared and which the Court ruled inadmissible at [142] of the Substantive Reasons (the Inadmissible Material). The Inadmissible Material is set out in Schedule A to these reasons for judgment. 3 ANZ, on the other hand, submitted that the following order should be made in relation to the costs of the hearing of the Separate Questions: 1. the Applicants pay 90% of ANZ's costs of and incidental to the hearing of the Separate Questions, less the costs of and incidental to the preparation of the Inadmissible Material; 2. the following costs be reserved: 2.1 10% of ANZ's costs of and incidental to the hearing of the Separate Questions; 2.2 the costs of and incidental to the preparation of the Inadmissible Material; and 2.3 10% of the Applicants' costs of and incidental to the hearing of the Separate Questions. 4 The applicable principles are not in dispute. The Court's discretion to order costs under s 43 of the Federal Court of Australia Act 1976 (Cth) (the FCA) is at large and ought not be read down otherwise than in accordance with accepted principle: Cirillo v Consolidated Press Property Ltd (No 2) [2007] FCA 179 at [3]. Costs ordinarily follow the event. An order for costs is intended to compensate the successful party, not to punish the unsuccessful party: Demetriou v Gusdote Pty Ltd (ACN 089 937 253) (2010) 78 ACSR 566 at 576, referring to Brennan CJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at 75. Fairness should dictate how the discretion is exercised: Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5]. Of course, the circumstances of each individual case must be considered. Those circumstances include an evaluation of the real degrees of success and failure. 5 The present case is not straightforward. The hearing and determination of the Separate Questions marks an appropriate juncture at which to award costs to either party. Like the position in Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] FCA 325 at [5], there has been a split trial of disputed questions of fact or law. Unlike the position in Baulderstone, the split trial has not disposed of those disputed questions. The parties accepted that the trial would be conducted in two stages. The second stage has not commenced and will not commence until the conclusion of the appeal process. 6 Leaving to one side the issue of costs of the Inadmissible Material, the Applicants submitted that their proposed order is the appropriate order for the following four reasons: 1. in circumstances where all issues in relation to the Exception Fees have not been determined, it would be wrong for the Court to receive evidence and/or submissions as to the Court's broad discretion to award costs. As a matter of principle, the assessment of ultimate success should await a resolution of all issues in relation to the Exception Fees. This factor sets this case apart from some examples of separate trials, which finally resolve all issues in relation to a component part of the litigation; 2. the answers to the Separate Questions have not resulted in any final determination of the Applicants' claims. In particular, the penalty claim is only one of several grounds on which the Applicants seek recovery of the Exception Fees. For example, the Applicants may ultimately succeed in claiming that the Exception Fees constituted unconscionable conduct, and as successful parties should have their entire costs of the proceeding, regardless of the fact that they may have failed on a particular issue or issues; 3. both parties enjoyed a substantial measure of success in relation to the determination of the Separate Questions. The Applicants succeeded in establishing that the Late Payment Fees were payable on breach (a result vigorously contested by ANZ). Given the detail of the legal argument necessary to resolve this issue, the Court time necessary to deal only with the Late Payment Fees would not have been significantly less than the hearing which in fact took place; and 4. this is not a case in which it is possible nor desirable to attempt to divide, even on a "broad-brush" basis, the costs between those issues on which each party was successful, and to make separate orders as to costs in relation to those issues. It would, in particular, be wrong to assume (for example) that because the Late Payment Fees comprised four of the seventeen identified exception fees, that four-seventeenths would be an appropriate allocation, or that because the late payment fees comprised one of the five different types of Exception Fees in issue, that one-fifth would be an appropriate allocation. If a "broad-brush" apportionment were to take place, a relevant consideration would be the proportion of the late payment fees to the overall claims made in the representative proceeding. This is a matter in respect of which there is no evidence at this stage of the proceeding. 7 I will deal with each of the Applicants' submissions in turn. 8 First, the submission that the assessment of ultimate success should await a resolution of all issues in relation to the Exception Fees. That submission should be rejected. As Finkelstein J stated in Baulderstone at [5]: … in a case where there has been a split trial of disputed questions of fact or law and it is possible at each stage of the case to identify the successful party, the ordinary rule which is applied after a final hearing should also be applied to the split trial. That is, there is no justification for implying to the discretionary power to award costs a limitation to the effect that costs should only be ordered once the outcome of the whole action is known. While the split trial has not finally disposed of a component part of the litigation, it has finally disposed of the claims that the Honour, Dishonour, Overlimit and Non-Payment Fees are penalties. That component was a major part of the Applicants' case. By notice of motion dated 22 February 2011, the Applicants sought a separate hearing for the determination of their entitlement to relief arising out of paragraphs 46 to 69 of the Amended Fast Track Statement (AFTS). The Applicants stated that the penalty causes of action were the most important or principal part of their case and that an adverse determination of the penalty causes of action would cause the Applicants and group members "to reconsider whether or not to pursue the other causes of action pleaded in the [AFTS]." 9 Second, the submission that the Applicants' claims have not been finally determined. In the Substantive Proceedings, the penalty claim was the only ground on which the Applicants sought to challenge the Exception Fees. That the Applicants may attack the Exception Fees on grounds not raised in the Substantive Proceedings should not preclude the awarding of costs in respect of the Substantive Proceedings. 10 The third and fourth submissions are interrelated. Both parties enjoyed a measure of success in relation to the determination of the Separate Questions. There was no one winner. It was a mixed result. The Applicants were unsuccessful in seeking to persuade the Court of what they described as the "Expanded Penalty Case" and 13 of the 17 Exception Fees were rejected as being incapable of characterisation as a penalty. But at the same time, four Exception Fees were found to be capable of being characterised as a penalty. Whether those Exception Fees were in fact penalties is yet to be determined. In addition, an allocation of costs in the case of a mixed result can rarely be achieved with mathematical precision. The Applicants submitted that it is inappropriate to divide the costs between those issues on which each party was successful. That submission should be rejected. As Tamberlin J observed in Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 recent authorities accept that in complex commercial matters, the discretion may be exercised to apportion costs concomitant with the parties' relative success or failure on certain issues. 11 It is appropriate in the present case to consider the question of costs by reference to the manner in which the Separate Questions were answered in respect of each of the Exception Fees. That was how the case was presented and argued before the Court: see also Esso Australia Resources Pty Ltd v The Commissioner of Taxation (No 2) [2011] FCA 521 at [20]. The Applicants were unsuccessful in relation to four of the five Exception Fees: see [8] above. A large proportion of the parties' submissions and the contractual evidence considered by the Court related to those Exception Fees. 12 What then should be the appropriate costs order? Whatever order is made should not involve the parties in extensive and expensive work seeking to allocate particular costs to particular issues that a party won or lost. Given the nature of the issues in dispute, it will be inevitable that some of the work undertaken will be relevant to issues where a party succeeded and to issues where the same party was unsuccessful. 13 Having regard to the emphasis placed on the separate and prior determination of the penalty claims by the Applicants; the time dedicated to the "Expanded Penalty Case" on which the Applicants failed and that ANZ was successful in relation to 13 of the 17 Exception Fees, I consider that substantial justice warrants an order that the Applicants pay 50% of ANZ's costs of and incidental to the hearing of the Separate Questions, such costs to be taxed in default of agreement. 14 In relation to the Inadmissible Material, that material was the subject of detailed discussion at the directions hearing on 5 May 2011 (at which the order for the determination of the Separate Questions was made, together with directions for the conduct of the hearing). At that time, Counsel for the Applicants squarely raised the irrelevance of the Inadmissible Material and contended that its preparation was inimical to the overarching purpose. Nevertheless, ANZ insisted on preparing that material for the hearing, which delayed the commencement of the Substantive Proceedings. ANZ made no attempt to tie the Inadmissible Material to the Exception Fees, nor did it admit that the Inadmissible Material comprised facts known to both parties prior to entering into the contract: see Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337. The Applicants should not be burdened with the costs of preparing the Inadmissible Material. I will therefore order that ANZ should bear the costs of and incidental to the preparation of the Inadmissible Material. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.