Costs reduction because of a refusal to admit facts?
67 The ACCC seeks a reduction of the costs it must pay to Farm Pride, IMS and Mr Ironside on account of their refusal, until just before trial, to admit a matter. It submitted that the refusal had been unreasonable and had caused it to incur significant unnecessary expense.
68 In order for the ACCC to make out the attempt it alleged, it had to establish that at least two of the attendees at the Summit were, or were likely to be, in competition with one another in relation to the production for supply and the supply of eggs: s 44ZZRD(4) (the Competition Condition).
69 The ACCC Statement of Claim (SoC) pleaded the following in relation to this element:
[13] At all material times, and in particular between 26 November 2010 and 9 February 2012, at least two of the Specified Members were, or were likely to be, in competition with each other in relation to the production for supply and the supply of eggs to wholesale or retail businesses in the regions of South Australia (SA), Western Australia (WA), the Northern Territory (NT), Queensland (QLD), New South Wales (NSW), Victoria (VIC) and Tasmania (TAS) as denoted in Schedule A.
70 Schedule A was in the form of a table listing each Specified Member, the name of the person representing the Specified Member who attended the Summit, and the State(s) or Territory in which the Specified Member was in competition with other Specified Members.
71 The AECL and Mr Kellaway admitted the allegation in [13] of SoC. However, each of the defences of Farm Pride (15 August 2014), IMS (18 August 2014) and Mr Ironside (18 August 2014) denied the allegation in SoC [13], while adding pleas as to the activities of Farm Pride and IMS respectively. Farm Pride's defence to SoC [13] was as follows:
[13] In answer to paragraph 13, the Third Respondent says as follows:
[13.1] The Third Respondent refers to and repeats paragraph 5.2 above.
[13.2] At all material times the Third Respondent:
[13.2.1] produced eggs for supply only in Victoria and New South Wales;
[13.2.2] supplied eggs to wholesale or retail businesses throughout Australia, but predominately in New South Wales, Victoria and Queensland; and
[13.2.3] engaged in other commercial activities in relation to value-added egg products throughout Australia.
[13.3] The Third Respondent does not admit the allegations in paragraph 13 insofar as it relates to the conduct of the other respondents.
[13.4] The Third Respondent otherwise denies the allegations in paragraph 13.
72 The pleas of IMS and Mr Ironside to SoC [13] were (relevantly) identical:
[13] In response to paragraph 13, it/he:
(a) admits that at all material times it/Twelve Oaks Poultry carried on business as an egg producer based in Queensland; and
(b) otherwise denies the allegation in paragraph 13.
73 None of these defences admitted the central allegation made by the ACCC in SoC [13].
74 The ACCC contends that, on any reasonable view, the question of whether at least two or more of the attendees were in respect of the identified States and Territories in competition with one another should not have been an issue. The denials of Farm Pride, IMS and Mr Ironside had the consequence that it had had to undertake extensive work involving significant expense, to prove the Competition Condition before, by amended defences filed 12 days before the commencement of the trial, each of Farm Pride, IMS and Mr Ironside admitted that the Condition was satisfied.
75 Upon this basis, the ACCC submits that it should not have to pay the costs incurred by Farm Pride, IMS and Mr Ironside concerning the Competition Condition and that each should pay the costs which it incurred in obtaining the evidence to prove that element of its claim.
76 The work of the ACCC directed to this issue included the following:
(a) discovering to the respondents the transcripts of examinations of various egg producers conducted pursuant to s 155 of the CC Act;
(b) by correspondence dated 3 October 2014, informing the 74 individuals and companies who had been examined pursuant to s 155 or which had produced documents to it pursuant to s 155, as the case may be, of the discovery orders made by the Court on 18 September 2014 which gave them an opportunity to apply for orders to protect the confidentiality of the information they had provided to the ACCC and which it would be disclosing to the respondents;
(c) dealing with telephone calls and correspondence from the egg producers referred to in (b) who raised concerns about the disclosure of their confidential information;
(d) engaging in extensive correspondence with the respondents between 10 October 2014 and 27 October 2014 concerning possible agreement as to means of addressing the concerns of the egg producers;
(e) considering and addressing interlocutory applications by seven non-party egg producers seeking orders for the protection of their confidential information which it was otherwise obliged by the Court's orders to disclose to the respondents;
(f) attending at a substantial directions hearing on 29 October 2014 at which the applications of the seven egg producers and some of the respondents for orders protecting the confidentiality of their information were addressed;
(g) preparing, filing and serving on 6 November 2014 a substantial notice to admit facts directed to the competition issue;
(h) considering the notices of dispute filed by the respondents in response to the notice to admit facts;
(i) filing, on 17 November 2014, an interlocutory application and supporting affidavit seeking leave to rely at trial on affidavits filed by a number of the non-parties in October 2014;
(j) addressing the means by which the evidence from the egg producers on the competition issues was to be adduced at trial, including addressing this as a significant topic at the directions hearing on 3 February 2015;
(k) obtaining leave to issue, and subsequently issuing, subpoenas to seven egg producers requiring them to produce documents relating to the Competition Condition;
(l) issuing subpoenas to individual egg producers requiring them to attend at trial to give oral evidence;
(m) addressing until April 2015, and at the pre-trial directions hearing on 8 April 2015, issues relating to the evidence to be given by the proposed egg producer witnesses, including identifying the portions of affidavits from six egg producers to be relied upon at trial, preparing outlines of the evidence to be adduced from the egg producer witnesses generally, and obtaining leave to inspect, and inspecting, documents produced on subpoena;
(n) considering between 12 November 2014 and April 2015, various aspects of the evidence to be presented in support of its proof of the Competition Condition.
77 The evidence did not disclose the work of the respondents in relation to the Competition Condition. It is unlikely to have been as extensive as that of the ACCC but, nevertheless, is likely to have been significant.
78 The discretion with respect to costs granted by s 43 of the FCA Act may be exercised so as to deprive a successful party of some of its costs and, further, to require that party to pay some of the costs of the unsuccessful party: Cretazzo v Lombardi (1975) 13 SASR 4 at 11-12. In particular, a successful party which has unreasonably or improperly raised issues on which it has failed may be ordered to pay the costs of the other on those issues and may be deprived of part of its own costs: Re Elgindata Ltd (No 2) [1993] 1 All ER 232; Cummings v Lewis (1993) 41 FCR 559 at 603.
79 In Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; (2015) 327 ALR 192 at [6], the High Court deprecated applications for an apportionment of costs on an issue-by-issue basis requiring the exercise of the costs discretion to take into account the issues upon which the successful party has succeeded, and not succeeded. Nevertheless, there are cases in which such an apportionment is appropriate. Allsop J referred to one such circumstance in Baxter Healthcare at [10] when he said that "unnecessary stubbornness, unreasonable taking of points and a refusal to co-operate in the efficient running of litigation (including penalty litigation) should be able to be dealt with in a flexible way by orders for costs".
80 Farm Pride, IMS and Mr Ironside raised a number of matters in resisting the ACCC contention. These were to the effect that, at the time they filed their respective defences, they had insufficient knowledge to be able to make an admission of SoC [13]; that the identification of competition in a market involves complex questions; that it had been inappropriate for the ACCC to assume that the markets in which egg producers were in competition were defined by State or Territory boundaries; that it had been inappropriate for the ACCC to seek admissions of facts in the liability trial which were more pertinent to issues of penalty in the event that the contraventions were established; and that having regard to the fact that these were penalty proceedings, it had been open to them to require the ACCC to prove its case (citing Daniels Corporation International Pty Ltd v ACCC [2002] HCA 49, (2002) 213 CLR 543 at [31] and Rich v ASIC [2004] HCA 42, (2004) 220 CLR 129 at [24]). In addition, the respondents referred to correspondence with the ACCC in which they had indicated a willingness to admit that Farm Pride was, or was likely to be, in competition with Days Eggs Pty Ltd in relation to the supply of eggs in South Australia, which they had contended was sufficient for proof of the Competition Condition.
81 I consider that the ACCC submission should be upheld. The contention that the subject matter of SoC [13] was outside the knowledge of Farm Pride, IMS and Mr Ironside is simply implausible. None of these respondents adduced evidence at the costs hearing in support of this submission and it is belied by the evidence at the trial. Farm Pride is the third largest egg producer in Australia. It defies common sense to suppose that its directors and senior management know so little about the competition it faces in the markets in which it operates, and the egg industry generally, that it was unable readily to acknowledge the truth of the assertion made in SoC [13].
82 Mr Ironside has had an extensive involvement in the Australian egg industry, having been Chairman of the Board of Directors of AECL since its incorporation in 2002; having previously held roles in the Australian Egg Industry Association, the activities of which were taken over by AECL upon its incorporation; having been Vice-President of the Queensland Egg Farmers' Association for about five years; having been Secretary of the North Queensland Poultry Farmers' Association from about 1977 to 1990; having held the position of Financial Controller in the International Egg Commission from 2009 to date; and having been President of Egg Farmers Australia from 2010 to date. Again, it defies common sense to suppose that Mr Ironside was not able readily to recognise the truth of the ACCC assertion in SoC [13]. Given Mr Ironside's background and experience, I am not willing to act on a bare submission from the Bar table that Mr Ironside did not have this knowledge. Further, I am satisfied that it is appropriate to attribute to IMS the knowledge of Mr Ironside.
83 It is true, as the respondents submitted, that the identification of competition within a market can in some contexts be a matter of complexity. In some contexts and for some purposes, it can, however, be a matter which is quite straightforward and the subject of common knowledge. On my assessment, the content of SoC [13] falls clearly into the second of these categories.
84 It was not reasonable for these respondents to put the ACCC to proof of the competition condition. Farm Pride and IMS did not have the benefit of the privilege against self-incrimination and, in any event, an unreasonable failure to admit facts is inconsistent with the overarching obligation imposed by ss 37M and 37N of the FCA Act. Those provisions apply as much in penalty proceedings as to other forms of litigation.
85 The circumstance that the markets in which participants in the egg industry are engaged are not confined by State or Territory boundaries is a matter of no consequence presently and did not bear upon the ability of the respondents to make the admission of SoC [13].
86 Finally, the ACC was entitled to regard the proposed admission that Farm Pride was, or was likely to be, in competition with Days Eggs Pty Ltd in relation to the supply of eggs in South Australia as being inadequate in the circumstances.
87 It was common ground that, in the event that the Court considered that the ACCC should have its costs resulting from the denial of SoC [13], it should be reflected in a percentage reduction of the costs to be paid by the ACCC to these respondents. It was also common ground that the reduction should take account of the costs unnecessarily incurred by the ACCC as well as denying the respondents the costs they incurred in relation to the competition issue. I agree that that is sensible, as it will facilitate the taxation of the costs to be paid, should such a taxation become necessary.
88 The ACCC proposed a reduction of 15%. The respondents submitted that the reduction should be no more than nominal and, in particular, no more than 5%.
89 It is not possible for the Court to engage in any precision in assessing the appropriate reduction as it has been provided with only limited material for the purpose. Instead, the Court has to rely upon its own general experience of costs, have regard to the extent of the work carried out by the ACCC identified earlier as well as that likely to have been carried out by the respondents, and compare the likely costs incurred in connection with the Competition Condition with the costs likely to have been incurred by the respondents generally. These were the costs of a seven day trial, including the costs of substantial preparation on issues other than the Competition Condition. Account must also be made of the fact that the ACCC seeks that three respondents (effectively two because IMS and Mr Ironside had common representation) contribute to the one set of costs it incurred, so that there is the potential for it to be over compensated.
90 In those circumstances, the ACCC's proposed reduction of 15% is excessive. I consider that justice will be done by an order that the ACCC pay 90% of the costs of Farm Pride, IMS and Mr Ironside on a party/party basis.