Axent Holdings Pty Ltd v Compusign Australia Pty Ltd

submissions 3 By its written submissions, Axent sought an order that: The costs ordered to be paid by the second respondent in order 2 of the orders made on 18 September 2017 be assessed on a lump sum basis if not agreed, and paid forthwith. 4 The parties agreed that this matter should be dealt with on the papers. 5 In support of an order that costs be paid forthwith, Axent referred to Dale v Clayton Utz (No 3) [2013] VSC 593 (Dale) and submitted that an order of the kind made in that case was appropriate because of: (1) the conduct of the unsuccessful party; (2) the likely delay before completion of the proceeding; and (3) the fact that the security for costs application involved a separate and discrete issue. 6 Regarding the conduct of the unsuccessful party, Axent submitted that the application for security was "wholly misconceived as a matter of substance". In support of this proposition, Axent submitted: Hi-Lux's lawyers had many months before been provided by Axent with a management report. That report was ultimately reviewed by the Court, and the Court was not persuaded that the threshold issue required for security to be considered was met. There was also a delay in issuing the application that was either tactical or resulted in the application serendipitously coinciding with Axent pressing for discovery and attempting to take steps to prepare its evidence on infringement. 7 As to delay, based on a trial in late November 2017, Axent submitted that the determination of liability issues was not likely to occur for at least six months. Axent also submitted that the issue of security for costs was wholly separate from all other issues; had no bearing on any substantive issue in the proceeding; and would not be affected by the ultimate outcome. 8 Axent contended that the matters to which it referred outweighed the policy considerations underlying r 40.13 of the Rules. This was because: (1) Axent was a respondent to the application; (2) a lump sum order assessed by a Registrar would, consistently with ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (FCA Act), avoid the delay and the complexity associated with what it termed "the default position" under rule 40.13 and the need for taxation; and (3) Axent's "legitimate request for a simplified and more timely costs assessment process outweigh[ed] the possibility that Hi-Lux will achieve some sort of costs order in the proceeding in the future which it may seek and be permitted to offset". Axent also submitted that the order it sought accorded with paragraphs 3.13 and 4.1 of the Costs Practice Note GPN-COSTS. 9 Hi-Lux contended that Axent failed to identify any proper basis to depart from the position set out in r 40.13 of the Rules. By its written submissions, Hi-Lux opposed the making of a costs order in the terms sought by Axent. Hi-Lux submitted that the appropriate order was that: The Applicant's application for a special costs order that rule 40.13 does not apply to the costs order made on 18 September 2017 is dismissed, with costs. 10 Hi-Lux submitted that the purposes of r 40.13 included avoiding: (1) the need for multiple taxations in a proceeding; and (2) unfairness, such as where a party is unable to set off an order for costs in its favour against an earlier liability to pay costs. Whilst Hi-Lux accepted that the Court might dispense with the operation of r 40.13 in the interests of justice, it submitted that the interests of justice did not justify this in the present case. Hi-Lux submitted that its application had not been "wholly misconceived"; that it had not been made for any "tactical" reasons; and that no finding to that effect was made. Hi-Lux further contended, based on a trial date in November 2017, that there would be no great delay until the completion of the liability phase of the proceeding and that the procedure for a lump sum costs assessment would entail costs "of the same order of magnitude as the costs of the security for costs application itself".

Consideration 11 Pursuant to s 43(2) of the FCA Act, the award of costs is at the discretion of the Court. The discretion must, of course, be exercised judicially. 12 Generally speaking, costs follow the event. It is not disputed here that Axent is entitled to its costs of the security for costs application that Hi-Lux made against it. 13 Where a costs order is made on an interlocutory application, the ordinary position, for which r 40.13 provides, is that the party in whose favour the order is made must not tax those costs until the proceeding is finished. This position is not, however, invariable. It is accepted that the Court may order that costs be taxed and paid immediately where the interests of justice require it: regarding r 40.13 of the Rules, see QS Holdings Sarl v Paul's Retail Pty Ltd (No 2) [2011] FCA 1038 at [33]; and, regarding O 62 r 3(2) of the former Rules, see McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 at [41]. It is also the case that the Court may order that costs be assessed on a lump sum basis: see r 40.02(b) of the Rules. 14 As Hi-Lux in effect submitted, in order to determine whether it is appropriate to depart from the position set down in r 40.13, one must first consider the reasons for r 40.13 and weigh them against the factors said to justify the form of order sought by Axent here. 15 Rule 40.13 discourages interlocutory applications and recognises that it is usually inappropriate to require the unsuccessful party in interlocutory proceedings to pay costs immediately, since that party might ultimately succeed in the substantive proceeding: Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2013] FCA 567 (Coretell) at [29]; Courtney v Medtel Pty Ltd (No 3) [2004] FCA 347 (Courtney v Medtel) at [20]; and Telstra Corporation Ltd v Phone Directories Company Pty Ltd (No 3) [2014] FCA 949 (Telstra) at [29]. Important reasons for r 40.13 are that it avoids the need for multiple taxations in a proceeding and the unfairness that results where a party is unable to set off an order for costs in its favour against an earlier liability to pay costs: Telstra at [28]; Brasington v Overton Investments Pty Ltd [2001] FCA 571 at [13]; Orrcon Operations Pty Ltd v Capital Steel and Pipe Pty Ltd (No 2) [2008] FCA 24 at [18]. Rule 40.13 is also designed to avoid the inconvenience and possible oppression involved in a series of taxations where there are successive interlocutory applications: Coretell at [29]; Courtney v Medtel at [20]. 16 Having regard to the reasons for r 40.13, the three factors on which Axent relied do not, in my opinion, justify a departure from that rule in this case. I do not consider that Hi-Lux's conduct warrants a departure from the ordinary position. Plainly enough, the fact that the security for costs application made by Hi-Lux was unsuccessful does not by itself justify a departure from the ordinary position; and I reject Axent's submission that the security for costs application was "wholly misconceived". An examination of my reasons for dismissing that application does not warrant this description: see Axent Holdings Pty Ltd v Compusign Australia Pty Ltd (No 2) [2017] FCA 1102 at [36]-[47]. Further, while noting at [60] that Axent submitted that Hi-Lux's application was "quite tactical", I made no finding in those terms. 17 Whilst I accept that, as Axent submitted, it will be some time before the proceeding is completed, I do not consider that the likely delay is of a kind so as to justify in the circumstances of this case a departure from the ordinary position under r 40.13. This was clearly the case based on a trial listing for November 2017, and, in my view, remains the case notwithstanding that the trial is now to be in April this year. 18 Although it may be accepted for present purposes that the issues that arose on Hi-Lux's security for costs application were "separate and discrete" from the issues arising at the trial, this does not in the circumstances of the case justify a departure from r 40.13, whether considered by itself or combined with likely delay. The security for costs application was argued efficiently and did not involve undue difficulties or complexities. 19 Axent relied particularly on the decision of Hollingworth J in Dale, in which her Honour considered r 63.20.1 of the Supreme Court (General Civil Procedure) Rules 2005, which is in similar terms to r 40.13 of this Court's Rules. Her Honour specifically referred to Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 14) (Lindgren J, 18 August 1995, unreported: BC9056840), in which Lindgren J said that where the final determination of a proceeding was "far away", it might be appropriate to make an order that costs on an interlocutory application be payable forthwith, and to Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 13) (Full Federal Court, Lockhart, Lindgren and Tamberlin JJ, 17 August 1995, unreported: BC9501951), in which a Full Court of this Court noted that, in the context of complex litigation in which final judgment was likely to be more than a year away, "[i]t would be wrong if the successful parties do not enjoy the fruits of their order for costs for such a long time". Her Honour also referred to Branson J's decision in Life Airbag Co of Australia Pty Ltd v Life Airbag Co (New Zealand) Ltd [1998] FCA 545, in which Branson J ordered that costs should be payable forthwith where the litigation was complex, a hearing date could not be expected "for many months" and the matter had thus far proceeded slowly. 20 Having reviewed these cases and others, Hollingworth J also ordered costs taxable immediately on the basis that the proceeding, which had commenced two years earlier, was proceeding slowly with the pleadings not yet completed and the parties taking "every conceivable point of fact or law", such that "[t]here [was] no basis for [her Honour] to assume that a trial in this proceeding [would] take place within the near future". A further difficulty in Dale arose from the fact that both parties were well-known within the legal community, with a consequent potential for delays caused by the availability of a limited number of judges free of possible conflict. 21 Dale was a very different case from the present, where the matter will be tried in the near future and no issue arises as to the availability of judges. Hollingworth J made the order principally because she accepted that the likelihood of there being a considerable lapse of time between the interlocutory application and the final determination of the proceeding would in the circumstances make it unfair to deprive the successful litigant of the benefit of their costs order for such a lengthy period. I would not reach the same conclusion in the circumstances of this case. 22 I conclude that none of the three factors relied on by Axent as justifying a departure from the ordinary position under r 40.13 are sufficient to support a finding that the costs order that it sought should be made in the interests of justice. In my opinion, the reasons for r 40.13 are important and the interests of justice are not better served by an order of the kind that Axent has sought. 23 As indicated above, Axent attempted to circumvent or meet the reasons for r 40.13. It does not seem to me that it has successfully done so. The fact that it was a respondent to the interlocutory application in question in this case does not mean that the rule does not operate on the general level to discourage interlocutory applications in a proceeding. There would seem to be no basis for the proposition, implicit in Axent's contention, that the operation of the rule should be confined to costs orders in favour of only successful applicants on interlocutory applications. 24 Further, whilst a lump sum costs order might avoid a series of taxations, for a lump sum assessment to occur, various preparatory steps would need to be taken and a hearing would be required, involving further professional work and the incurring of expense. This might also be seen as inconvenient at this stage and possibly oppressive. 25 Axent did not suggest that it sought a lump sum assessment independently of the making of a costs order payable forthwith, and at this stage of the proceeding I can discern no basis for such assessment, bearing in mind that there are likely to be other costs orders, both interlocutory and at the conclusion of the trial, that will require taxation. This is not to say that a reason for making a lump sum assessment order cannot arise at a later date: compare, for example, Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd (No 4) [2017] FCA 436 at [10]-[16] and Halpern v BWA Group Services Pty Ltd [2013] FCA 673 at [23]-[26]. 26 The interests of justice depend on the circumstances of the case. In the circumstances of this case, I would not regard the factors advanced by Axent as sufficient justification to depart from the ordinary position set down in r 40.13 and supported by the considerations to which reference has already been made. Accordingly, for the reasons stated, I am not satisfied that the circumstances are such as to warrant a departure from the usual position. 27 As already stated, it was not in dispute that Axent should be awarded its costs of the security for costs application made by Hi-Lux. 28 I would order therefore that the second respondent pay the applicant's costs of and incidental to the second respondent's application for security for costs, as agreed or taxed. I would dismiss the applicant's application for an order that the costs payable by the second respondent be assessed on a lump sum basis (if not agreed) and be paid forthwith. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

SCHEDULE OF PARTIES VID 1408 of 2016 Cross-Claimants Second Cross-Claimant: HI-LUX TECHNICAL SERVICES PTY LTD (ACN 006 654 691)