Applicant v Respondents

1 On 5 May 2021, I published a judgment in this proceeding that refused an application by Bougainville Copper Limited ('BCL') for pre-action discovery of documents under rule 32.05.[1] That outcome was not based on discretionary considerations. It was attributable at a primary level to an inability of BCL to adduce the objective evidence to satisfy the dominant requirement under part (a) of the rule which requires an applicant to show that 'there is reasonable cause to believe that the applicant has or may have the right to obtain relief' in this Court against the respondents. Put in another way, BCL's ostensible belief that it may have a right to obtain relief against the respondents was, so I found, shown on the corpus of objective evidence put before the Court to be a belief that could not be reasonably held.

2 Before that outcome was obtained, the application required more than a passing visit on the proper purpose and operation of rule 32.05, and then an assimilation and critical evaluation of intricate facts and events put before the Court by both parties and obtained from other public sources. The evaluation had to be made in the context of: the historical facts concerning the operation of the Panguna mine; the blight of the civil war on Bougainville; the re-making of the mining laws of Bougainville; and the political machinations concerning the redevelopment of the mine which involved the senior members of Bougainville government and the leadership of customary landowner groups or associations, all happening amidst the simmering post-civil‑war tensions and enmities. The judicial evaluation was quite a peculiar and testing exercise, as much as it was interesting.

3 In the closing paragraph of the judgment, with a view to finality, I gave an indication that 'I can see no patent reason why the costs of the application should not follow the event, and be taxed on the standard basis' but I allowed the parties to make written submissions on the question. For the reasons that follow, I think the application for indemnity costs was arguable, but such was the nature and elements of this case, that I maintain the judgment that costs should be ordered on the standard basis.

4 This Court's procedural rules state that costs shall be taxed on the standard basis unless the Court otherwise orders.[2] It is describable as the usual order. The other bases on which costs may be taxed are on 'the indemnity basis' or 'such other basis as the Court may direct'.[3] Those are describable as special or exceptional costs orders. I shall return to the differences later.

5 There is no special rule in order 32 concerning costs in a case of a refused application, as there is for an application that is granted.[4] But, it is elementary that the determination of by whom and to what extent costs are to be paid is in the discretion of the Court.[5] Such a discretion is expected to be judicially exercised to do justice between the parties. In the adversarial model, the natural expectation is that, absent disentitling conduct of the 'winning party', the 'losing' party should compensate the other party for the legal costs incurred in bringing or opposing the legal action in the way or to an extent prescribed by the procedural rules. That coheres with an underlying public interest of instilling the need to give careful consideration before commencing legal proceedings. It finds expression elsewhere as an overarching obligation on a person under the Civil Procedure Act 2010 to not make any claim in a civil proceeding that does not, on the factual and legal material available to the person at the time of making the claim, have a proper basis.[6]

6 As the winning party, the respondents seek an order that BCL pay their costs on 'the indemnity basis'. As an alternative, the respondents submit that if their costs are to be taxed on 'the standard basis', then two ancillary orders concerning certain expenses ought be made, as follows.

7 First, the respondents seek an order to allow as a disbursement, the travel and accommodation and away-from-home expenses of Ms Amy Rumble. She is an employee solicitor of the law firm in Perth acting for the respondents, and swore an affidavit in the application although not on matters concerning the merits of the application. Ms Rumble attended the three-day hearing in Melbourne as instructing solicitor.

8 Secondly, the respondents seek an order that BCL pay the witness expenses of Ms Justine Magee. She too was from Perth. She is a director of both respondents, as well as being the Chief Executive Officer of RTG Mining Inc. BCL served her with a notice to attend for cross examination on an affidavit she had sworn on behalf of the respondents on the merits. Hers was the only affidavit from the respondents on the merits. In the course of the hearing, and for reasons that were deferred to be given within the eventual judgment, I refused an application by BCL for leave to cross‑examine Ms Magee. I ordered BCL to pay her costs of attendance on the notice. Now, the respondents seek an order that 'the Costs Court shall allow the deponent's costs as a country witness including her actual costs of travel to and from Melbourne for the hearing, her actual accommodation costs and her reasonable expenses for maintenance and sustenance'.

9 The quaint description 'country witness' comes from Appendix B to the Supreme Court civil procedure rules.[7] That is a scale for assessing witnesses' expenses and interpreters' allowances. It says that a country witness is 'a witness who does not reside within 50 kilometres of the place of hearing'. It adds: 'The Costs Court may allow a country witness, in addition to the above expenses, a reasonable sum for the actual expenses of travel to and from the place of trial or hearing and for maintenance and sustenance'.

10 In opposition, BCL submits that the appropriate costs order is for costs on the standard basis, as is usual.

11 On the question of travel expenses for Ms Magee, BCL says it does not know what those expenses are, but does not dispute that she is 'entitled to her costs necessarily and reasonably incurred as a result of her attendance at the hearing'. It submits that 'those costs ought be limited to costs which are reasonable and necessarily incurred'. That concession appears to be no different in substance to what Appendix B allows, that is: '... a reasonable sum for the actual expense of travel to and from the place of trial or hearing and for maintenance or sustenance'. So I do not see an issue here. Appendix B will apply on a taxation.

12 On the question of Ms Rumble's travel expenses (and she is a legal practitioner, not a 'country witness') BCL states that as the law firm SBA Law in Melbourne were acting as town agents, there should be 'no duplication of legal costs arising from the representation of the respondents from both Bennett & Co based in Perth and SBA based in Melbourne'.[8] In interstate litigation, town agents are usually confined to attending to the administration of local process, but not instructing counsel in Court. BCL cannot tell if there has been a duplication of legal work or attendances by principal and agent, so its submission is taken to be a prospective objection.

13 The respondents' costs submissions in reply (signed by Mr M L Bennett as counsel) state that Ms Rumble was the only instructing solicitor at the hearing, and 'there was no duplication between the respondents' legal costs arising from Bennett & Co's substantive work and SBA Law's work as town agent'.[9]

14 I see no necessity for me to make any order or direction to the Costs Court about witness expenses or travel expenses for Ms Magee and Ms Rumble. Appendix A to the Supreme Court civil procedure rules is the applicable scale of fees and charges to be paid to legal practitioners other than counsel.[10] Item 1(a)(ii) concerns fees for 'Attendances' by a legal practitioner to instruct counsel in Court. As for Ms Rumble's travel expenses, they are a disbursement. Assessment of such financial matters are a task in the conduct of a taxation, in the absence of agreement on costs.

15 Thus, the issue calling for a costs determination is whether BCL should be ordered to pay 'costs on the standard basis' or 'costs on the indemnity basis' as that phraseology is used in the rules.[11] To see what is at stake here, something should be said about the difference between the two. The two bases of costs were introduced into this Court's procedural rules in April 2013, and are better understood by the very well-known costs measures that preceded them.

16 Any costs order is a form of 'indemnity'. Under the previous base measure of taxation known as 'party/party' and under the more generous 'solicitor/client' basis of taxation, there could never be a complete indemnity because there would be costs which could not be reasonably charged to the other (losing) party even though such costs may have been incurred by the successful party. The usual example is the cost of 'luxuries' such as two counsel, or a team of solicitors on the case to enable the litigation to be conducted more conveniently.[12] A complete indemnity for costs − and by that I mean a costs order to the last cent according to the costs incurred by the winning party according a pre-existing private costs agreement with its solicitor − could only be obtained on a specific order to that effect. I believe those to be a rarity.

17 All that has been replaced by the current rules. Rule 63.30 states that 'on a taxation on the standard basis, all costs reasonably incurred and a reasonable amount shall be allowed'. As I understand it, reasonable in that context does not mean what is reasonable to charge the client, but costs for which it is reasonable to charge the other side. Costs on the standard basis are said to more generous than the former 'party/party' basis and more likely to equate with the previous solicitor/client costs basis of taxation because a receiving party is not confined to costs on a strict test of what was only necessary or proper, but could be allowed all costs on a test of costs which may not have been strictly necessary but nevertheless were reasonable and were for a reasonable amount.[13]

18 As for 'costs on the indemnity basis' rule 63.30.1 states:

(1) Subject to paragraph (2), on a taxation on the indemnity basis all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred.

(2) Any doubt which the Costs Court may have as to whether the costs were unreasonably incurred or were unreasonable in amount shall be resolved in favour of the party to whom the costs are payable.

19 The difference between this rule and the standard costs rule is not crystalline clear. It is thought the distinction lies in who bears the onus of proof on a question of reasonableness.[14] That is, in the case of indemnity costs, the onus is on the paying party to demonstrate that the receiving party's costs were unreasonably incurred or were unreasonable in amount.[15]

20 But more importantly, and to add another qualification, despite the distinction between standard costs and indemnity costs, the costs allowed on either basis are assessed on the same Supreme Court Scale of Costs in Appendix A of the rules ('the Scale'), with a power to increase on taxation. Rule 63.34 states (with my underlining):

(1) Subject to paragraph (3), a legal practitioner for a party to whom costs are payable (whether the basis of taxation is the standard basis or the indemnity basis) shall be entitled to charge and be allowed costs in accordance with the scale in Appendix A unless the Court or the Costs Court otherwise orders.

(2) Witnesses' expenses and interpreters' allowances shall be fixed in accordance with the scale in Appendix B.

(3) The Court may, on special grounds arising out of the nature and importance or the difficulty or urgency of the case, allow an increase not exceeding thirty per cent of the legal practitioner's charges allowed on the taxation of costs with respect to-

(a) the proceeding generally; or

(b) to any application, step or other matter in the proceeding.

(4) Where the Court so directs, the Costs Court shall have the same authority as the Court under (3) to allow an increase in the fees set forth in Appendix A.

21 There are additional powers to increase an allowance for costs on the Scale. Item 17 of the Scale allows an additional amount to be allowed having regard to the levels of skill, care and responsibility involved in the case. Outside the Scale, and more broadly, rule 63.72 states that 'In any particular taxation of costs, the Costs Court may increase or decrease the amount or value of any allowance or expense in Appendix A or Appendix B as the Costs Court thinks fit'.

22 There are three points to be taken from this overview. First, taxation of costs on the standard basis ought not be regarded as a minimalist or an economising 'entry level' measure. It is more generous than that. It appears to equate with the previous solicitor/client basis of taxation. Secondly, whatever the basis of taxation, the costs still fall to be taxed according to the Scale, with a power in the Costs Court to increase amounts allowed under the Scale. Thirdly, taxation on the indemnity basis does not mean the client will be indemnified from being out of pocket.

23 There are numerous authorities, State and Federal, that expound on the discretionary considerations for an indemnity costs order.[16] I shall confine myself to adopting, as a concise judicial statement, that the exercise of the discretion is reserved where:

The applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.[17]

24 There may be other considerations concerning the delinquent, irresponsible or counterproductive conduct of litigation by a party which led to prolongation or wastage or infliction of greater costs. Depending on the degree, that can justify the Court making a special costs order to show its disapproval of such conduct. The following circumstances have been identified as instances in which it could be proper to order indemnity costs:[18]

(a) the making of an allegation, known to be false, that the opposite party is guilty of fraud;

(b) the making of an irrelevant allegation of fraud;

(c) conduct which causes loss of time to the Court and to other parties;

(d) the commencement or continuation of proceedings for an ulterior motive;

(e) conduct which amounts to a contempt of court; and

(f) the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.

25 The last of those considerations equates with the overarching obligation under s 18 of the Civil Procedure Act 2010 which obliges a person to not make any claim in a civil proceeding that does not, on the factual and legal material available to the person at the time of making the claim, have a proper basis. The Act states that, when it comes to exercising its discretion on costs, the Court can take into account any contravention of the overarching obligations.[19]

26 The respondents seek an order for its costs on the indemnity basis on three grounds.

27 First they look to the evaluations of the facts made in the judgment. In the aggregate, those judicial evaluations informed my ultimate legal opinion that having regard to all the objective evidence, BCL's ostensible belief that 'something wrong might have happened' in the denial of BCL's application for an extension of its exploration licence came off, I said, an extremely weak base insufficient to support a reasonable belief of bribes or corruption. The respondents say my evaluation showed there was no base at all for the ostensible belief. From there, they say the objective facts or factors as marshalled and evaluated by the Court 'must have been known to [BCL] given its historical dealings and the current dealings in Bougainville'.[20] Therefore, the respondents say BCL made this application disregarding known facts, and without a proper basis.

28 Secondly, and as a corollary to the first ground, the respondents say they seek indemnity 'because of the serious unfounded allegations of bribery or illicit conduct that were made against the respondents which the applicant knew or ought to have known were unsupportable'[21] and about which in pre-application correspondence, they gave BCL's lawyers a stern warning to desist from making scandalous allegations and from proceeding to a Court application without a proper basis.

29 Thirdly, the position of the second respondent RTG Mining was isolated by the respondents as calling for separate attention. The facts are in the judgment, but in essence: Central Exploration was the one pursuing the exploration tenement in joint venture with SMLOLA;[22] RTG Mining was involved in a separate role as the development partner of the joint venture company for the prospective redevelopment of the mine, as the mining company nominated by SMLOLA as the joint venturer with Central. The complaint against RTG Mining in the application concerned its involvement, by invitation, in a presentation to the ABG concerning the joint venture and the example of RTG Mining's operations at its Masbate Mine in the Philippines. RTG Mining made an announcement to the Stock Exchange concerning the reconciliation deed, and likewise made a later announcement about the Warden's hearing and the making by Central Exploration of 'transparent and arm's length' payments' to enable SMLOLA to carry out educational and awareness campaigns. Beyond an allusive reference to an 'impairment expense' in RTG Mining's balance sheet, no part of the application was directed as saying that RTG Mining might have been part of any the bribery or corruption that might have occurred. But, RTG Mining submits it was wrongfully tarred with the same brush.

30 Indemnity costs orders are certainly attracted where a plaintiff takes the irresponsible step (and by its lawyers, possibly unethical step) of pleading a serious or scandalous allegation such as fraud or criminal conduct without sufficient evidence to justify such allegations. To be precise, BCL was not making any allegations of criminal conduct. It could not. It would risk a serious conflagration if it did. But, aided by the reputed benevolence of rule 32.05, BCL tried to gain discovery of documents to see whether it could make such an allegation in legal proceedings. I think the rule can enable an applicant to wound but not strike, but the legitimacy of the use of rule 32.05 for that purely investigative purpose was the subject of the judgment.

31 Nevertheless I can understand the respondents' indignation. It was provocative for BCL to insinuate that the crime of bribery at the hands of the respondents might have occurred to defeat its extension application. The advocacy for BCL at the hearing did not shy away from the insinuation. Its thinking that 'something wrong' might have happened in the decision to refuse its extension application was part of the narrative of the post-civil war tensions and hostilities already embedded in Bougainville over mining at Panguna. That was shown by the histrionics of the political discourse which had the responsible Minister who was also Vice President of the Autonomous Bougainville Government (a shareholder in BCL) openly denouncing 'foreigners' and 'unscrupulous companies' who were 'exploiting our people' and had 'bribed' certain Bougainvilleans to 'sell their birthright' and 'gain landowner consent'. This was all part of the political dynamics that permeated so much of the understanding and evaluation of the facts of this application. The insinuations of bribery upgraded the narrative. But perhaps more potently, as I see it, the seriousness of BCL's insinuation also markedly escalated the strength or cogency of the evidence that the Court required of BCL to show the objective reasonableness of its belief, an evidentiary burden which, so I found, BCL could not meet. It may be academic now, but I reject BCL's submission that the evidentiary burden on BCL was made more difficult because of the denials in Ms Magee's affidavit and the Court's refusal to allow a cross examination on her affidavit.[23] This submission overlooks the evidentiary burdens that were on BCL as applicant and disregards the Court's reasons for refusing leave to cross‑examine.

32 In exercising the discretion whether to order indemnity costs, it is well to recognise that a number of matters naturally affect judgment. They do not include a desire to punish a litigant. The Supreme Court has to deal with weak, marginal and adventurous cases as well as strong cases. A resounding defeat does not therefore demonstrate that an application was brought in the knowledge that it lacked a proper basis.

33 In my judgment, it comes to this. The Court's judgment was that available objective evidence could not support BCL's ostensible belief that something was amiss or had gone wrong in the cultivation of votes from the customary landowners of the land compromising EL1. That adjudication was made in the clinical conditions of a Supreme Court hearing after an extensive evaluation of all of the facts in a complicated case riddled with historical hangovers and overt politics, and with the benefit of the presentation and a testing of arguments in Court, followed by a long judicial deliberation. Of course, it is true to say BCL has a distinct involvement and place in the history and the politics of mining in Bougainville. Even so, I think it is a non sequitur, or it is unjust, to say - with the splendid benefit of hindsight - that before commencing the application BCL should be taken to have known the facts as presented to the Court and, moreover, to then say BCL was therefore able beforehand to exercise all the faculties of evaluation of the facts as were available to the Court so as realise there were no grounds to the application or no prospects of success. Costs orders are meant to be compensatory, not punitive. There was enough in the grounds of the application to give the Court much to consider. All things considered (including the operation of the costs rules) I maintain the view that the second respondent's costs of the application ought be paid on the standard basis.

34 Finally, I think it would be anomalous to not make the same order for the costs of the first respondent RTG Mining. Of course there were differences between the respondents as a matter of corporate role and undertaking. RTG Mining was not pursuing an exploration licence, and had a minority interest in Central Exploration. But all the evidence identified RTG Mining as SMLOLA's choice of development partner of the joint venture. It was part of the presentation to the ABG in showcasing the Masbate mine in the Philippines. It was the one that made the announcement to the stock exchanges on 5 and 12 December 2017 about the 'transparent and arm's length payments'.

35 It is true to say that, in the end, there was no real suggestion by BCL that RTG Mining had made payments that might be shown to be 'wrong'. But RTG Mining was certainly not an outsider. Its commercial interests were concurrent with the joint venture. It may have had a separable or distinct role as a mining company, but it was rowing the same boat. It was within the same purview of the Court's overall evaluation of the facts and ultimate decision on the application. Therefore, the costs order for RTG Mining ought be the same as for Central Exploration.

36 It is for those reasons that I shall order the applicant to pay the respondents' costs of this application to be taxed, in default of agreement, on the standard basis under rule 63.30.

[1] See [2021] VSC 231.

[4] See rule 32.11 which concerns a respondents' costs and expenses of carrying out a discovery order, about which see Guest v Guest (No.2) [2016] VSC 76.

[5] Section 24 of the Supreme Court Act 1986.

[7] Appendix B is first identified in r 63.43(2).

[12] See commentary in Williams, Civil Procedure, Vol 1, [63.02.160] to [63.02.190].

[16] See Williams, Civil Procedure Victoria, Vol 1 [62.02.180]. See also Dal Pont, Law of Costs (Fourth ed) (2018) pp 580-599.

[17] See Fountain Selected Meats (Sales) Pty Ltd v Int. Produce Merchants Pty Ltd (1988) 81 ALR 397, 401 (Woodward J, Federal Court of Australia).

[18] See Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [7].

[19] Section 28(2) Civil Procedure Act 2010 (Vic).

[21] Submissions of 26 May 2021, [2].

[22] That is, Special Mining Lease Osikaiyang Landowners Association Inc.

[23] Para 14, submissions of 4 June 2021.