Australian Competition & Consumer Commission v MHG Plastic Industries

Federal Court of Australia|2003-12-15|Before: Emmett J

THE PROCEEDING 1 I have before me an application for review of a decision of a taxing officer, pursuant to O 62 r 44 of the Federal Court Rules ('the Rules'). The questions in issue arise out of a proceeding commenced in 1999 by Australian Competition and Consumer Commission ('the Commission'). In the proceeding, the Commission sought relief in the nature of injunctions and declarations against MHG Plastic Industries Pty Ltd ('MHG'). The Commission asserted that MHG was engaging in contraventions of the Trade Practices Act 1974 (Cth)by supplying motor cycle helmets that did not comply with Australian Standard AS1698-1988. 2 On 13 July 1999, I made orders substantially as sought by the Commission. The orders included declarations that motor cycle helmets of specified models did not comply to the standard. I ordered that MHG be restrained from supplying such motor cycle helmets to wholesalers and other purchasers and that they cause to be published, in a major daily newspaper, in each Sate of Territory, and in other magazines, an advertisement in the form annexed to the orders. The forms of advertisement drew attention to the declarations that I had made and advised persons in possession of such helmets not to use them and to arrange for a replacement. 3 I also directed that MHG establish a 1800 telephone number and made orders that MHG refund the purchase price or recommended retail price for a helmet to any person who telephoned the 1800 number, quoted the serial number of the helmet in question and delivered the helmet to named retailers or to MHG. I also ordered that MHG use its best endeavours to obtain from wholesalers and retailers helmets that had not been sold and to refund to those persons the price of the helmets. For reasons that I gave on 13 July 1999 I stayed certain of the orders but declined to stay those orders that required the establishment of the 1800 telephone number, the publication of the advertisement and the orders restraining supply of the helmets: see Australian Competition & Consumer Commission v MHG Plastic Industries Pty Ltd [1999] FCA 970. 4 On 9 August 2000, a Full Court allowed an appeal from the orders that I made, ordered that the orders be set aside and that the original application by the Commission be dismissed: see MHG Plastic Industries Pty Ltd v Australian Competition and Consumer Commission [2000] FCA 1069. For reasons given on 12 October 2000, the Full Court ordered the Commission to pay MHG's costs of and incidental to the proceeding at first instance: see MHG Plastic Industries Pty Ltd v Australian Competition and Consumer Commission [2000] FCA 1419. In the course of their reasons, the Full Court observed that they thought MHG 'should have all of its costs of the trial'. 5 Pursuant to that order, MHG lodged a bill of costs with the Court for taxation. In the course of taxing the bill, a Deputy District Registrar disallowed certain items in the bill, to which I shall refer shortly. On 28 March 2003, the Deputy District Registrar issued a certificate of taxation in the amount of $239,762.

THE RELEVANT RULES 6 Section 43(1) of the Federal Court of Australia Act 1976 (Cth) relevantly provides that the Court or a Judge has jurisdiction to award costs in all proceedings before the Court. Under s 43(2), the award of costs is in the discretion of the Court or Judge. 7 Order 62 r 19 of the Rules, which is headed 'Costs to be allowed on taxation', relevantly provides that, on every taxation, the taxing officer shall allow all costs, charges and expenses as appear to him or her to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party. 8 Order 62 r 42(1) provides that, where a taxing officer decides to disallow any item in a bill, the taxing officer must not give a certificate until the expiry of 14 days after the date of the decision. Under r 42(1A), a party to the taxation who objects to the decision may apply to the taxing officer to reconsider the decision. Such an application is made by motion to the taxing officer. Under r 43(1), upon such a motion, the taxing officer must reconsider the decision to which objection is made and must, upon request by any party, state, in the certificate, the taxing officer's reasons for the decision on reconsideration. 9 Order 62 r 44 then provides that, where a taxing officer gives a certificate in accordance with the decision on reconsideration under r 43, and a party, pursuant to that rule, requests the taxing officer to state reasons for the decision, the Court is required, on motion by any party interested, to review the decision of the taxing officer. That is the way in which the proceeding has now come before me again.

THE BILL OF COSTS 10 The bill of costs is substantial and contains in excess of 1500 items. There are eight items in issue in the review. The eight items can be categorised into two groups. The items in the first group, comprising items 1659, 1661 and 1663 to 1666, relate to costs said to have been incurred by MHG as a consequence of the appointment of an administrator under a deed of administration, after the orders that I made on 13 July 1999. The items in the second group, comprising items 1660 and 1662, have been described as the costs of executing the orders that I made on 13 July 1999.

COSTS OF ADMINISTRATION 11 Item 1659 consists of fees paid to Michael Wayland, chartered accountant, said to be fees and costs payable in respect of the voluntary administration of MHG. The fee notes from Mr Wayland, for example, refer to '[p]rofessional services rendered in connection with the appointment of an [a]dministrator'. 12 Item 1661 also consists of professional fees paid to chartered accountants, Calleia Chapman. They relate to such matters as attendances in respect of issues pertaining to subsidiary activities, namely MHG, and safeguarding equity therein. Expenses in this category were described by MHG in its submissions to the Deputy District Registrar as 'costs of accountants required to assist in the administration of MHG'. 13 Item 1663 is a sum of $75,000, which was described by MHG as funds contributed to the implementation of the deed of company arrangement entered into by MHG, 'being funds contributed by a related entity on its behalf, such amount being ultimately incurred by MHG'. 14 Items 1664, 1665 and 1666 consist of professional fees paid to Peter Kemp, solicitor, for various matters described by MHG as 'legal advice sought as a consequence of' the orders that I made on 13 July 1999. They are of diverse descriptions. 15 Item 1664, for example, relates to: · attendances on officers of MHG and on the chartered accountants, Messrs Wayland and Calleia

· attendances concerning possible litigation funding;

· attendances concerning, and research on, stamp duty on the sale of business assets;

· attendance concerning the granting of adverse possession of a property mortgaged to the Commonwealth Bank of Australia;

· attendances concerning defamation, breach of the Trade Practices Act and recision of contract; and

research on 'attempt' to induce a contract, arrangement or understanding. 16 Item 1665 is described in the bill of costs as fees for advice in relation to and implementing a voluntary administration and deed of company arrangement. Item 1666 is described in the bill of costs as relating to Quality Assurance Services Pty Ltd and advice regarding claims arising out of the orders that I made on 13 July 1999.

COSTS OF COMPLIANCE 17 The second category of items relate to expenses incurred in complying with the orders that I made. Item 1660 relates to fees that were paid to Wimble Stott & Associates Pty Ltd for media bookings in relation to a number of publications, being those described in my orders, and to media placements in those publications, together with typography and artwork bromides in connection with such advertisements. 18 Item 1662 relates to fees paid to MHG Plastic Industries (Vic) Pty Ltd, described as 'Services provided in relation to the Helmet Recall' during various periods, and the costs of storage of helmets, materials and related equipment for various periods.

CONCLUSIONS 19 The question is whether the items described above can fairly be described as costs of and incidental to the proceeding before me. I consider that the word 'costs', as used in s 43, and as used in the order of the Full Court, signifies professional legal fees, together with other expenses actually incurred in the conduct of litigation: see, for example, Cachia v Hanes (1994) 179 CLR 403 at 409-410 dealing with Pt 52 r 23(2) of the Supreme Court Rules 1970 (NSW) and the phrase 'all such costs as were necessary or proper for the attainment of justice or for enforcing or defending the rights of the party whose costs are being taxed'. 20 MHG sought to gain comfort from the use of the expression 'and incidental to' in the orders made by the Full Court. I do not consider that those words relevantly add a great deal in the present context. The phrase 'costs of and incidental to' is one of some antiquity. For example, it is a phrase found in s 76 of the Supreme Court Act 1970 (NSW). It does have some work to do. Thus, it would ensure that costs incurred as part of the preparation for litigation will be recoverable as costs of the litigation: see, for example, Federal Commissioner of Land Tax v Jowett (1930) 45 CLR 115, and the observations made by Finn J in Comcare v Labathas (1995) 133 ALR 744 at 752-753. However, those observations relate only to costs and expenses that can fairly be characterised as professional legal fees and expenses actually incurred in the conduct or preparation of the litigation. I do not consider that the expression extends to include expenses incurred as a consequence of the orders that I made, whether those expenses be legal professional fees or otherwise. 21 The Commission put in issue the question of whether or not the expenses relating to the voluntary administration of MHG were in fact the direct consequence of the orders that I made. It is unnecessary for me to consider that question having regard to the conclusion that I have reached concerning the limited meaning that is to be given to the expression 'costs of and incidental to' when used in the order of the Full Court and in other places in this context. 22 I did advert to this difficulty in my reasons of 13 July 1999 for refusing a stay to a greater extent than I allowed at that time. There is a difficulty that arises from the consequences of final orders that are ultimately overturned on appeal. Great injustice can result. An innocent party may have to bear expenses and costs incurred as a consequence of orders made by a Judge at first instance which are on appeal found to be erroneous. Where interlocutory relief is sought, on the other hand, it is almost invariable that an undertaking as to damages be given as a term of the grant of interlocutory relief. 23 The position, of course, is complicated in some instances where, for example, the Commission is not required to give such an undertaking as a term of obtaining interlocutory relief aimed at the protection of the community. I indicated in my reasons the difficulty of the balancing exercise that arises in such a case. For the reasons there given, I concluded that, on the findings that I had made, the safety of the public was at risk and that the possible detriment to MHG was outweighed by the risk to the public of not granting at least part of the relief sought by the Commission at that stage. As the Full Court observed, the matter had been brought on with considerable expedition because of the concern as to the safety of members of the public. 24 Be that as it may, I consider that the antiquity of the phrase in question, as well as the concept of costs of a proceeding or litigation, is such that the consequences of final orders ultimately being overturned are not something that can be compensated for by an order for costs, as that term is understood in the law. 25 It follows in my view that the certificate of the Deputy District Registrar was not attended with any error in so far as she disallowed the items that I have described. The notice of motion filed on 23 June 2003 on behalf of MHG seeks an order that 'the decision of the taxing officer on reconsideration be reviewed'. No other orders for substantive relief in respect of the decision of the Deputy District Registrar are sought. Order 62 r 44(5) relevantly provides that, on a review of this nature, the Court may exercise all the powers and discretions of the taxing officer in relation to the subject matter of the review. In the circumstances, it is appropriate that MHG's costs as between party and party be taxed and allowed in the sum of $239,762.00. As MHG has been unsuccessful on the application for review, MHG should pay the Commission's costs of the review.

I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Solicitor for the Applicant: Australian Government Solicitor

Solicitor for the Respondent: Peter Kemp Solicitors

Trade Practices Act 1974(Cth)

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