Bookarelli Pty Ltd v Katanga Developments Pty Ltd

Bookarelli Pty Ltd v Katanga Developments Pty Ltd - [2017] NSWCA 94 - NSWCA 2017 case summary — Zoe

Judgment

THE COURT: The Court gave judgment in this appeal on 5 April 2017. [1] The following orders were made: "1. The Amended Summons filed on 8 December 2016 be dismissed. 2. The applicant pay the respondent's costs of the proceedings in this Court. 3. Subject to any application as to costs that may be made by the respondent, the applicant file and serve written submissions within 14 days as to whether it should be ordered to pay the costs of the proceedings in this Court on an indemnity basis."
The judgment gave the following reasons for making Order 3: [2] "[54] … the Amended Summons is, in effect, Bookarelli's third attempt to challenge the Costs Assessor's determination. One of the consequences of the High Court's decision in Kirk [v Industrial Court of New South Wales [3] ] is that even if a privative clause purports to preclude an appeal or application for review of a decision of a tribunal or inferior court, the provision cannot prevent an application being made to the Supreme Court for judicial review on the ground of jurisdictional error. Thus a party dissatisfied with the decision of a tribunal or inferior court is entitled to apply to the Supreme Court for judicial review of the decision on the ground of jurisdictional error. [4] This is so even if the applicant has already taken advantage of more than one level of review or appeal from the original decision. [55] In the present case, the amount in issue in the costs dispute which underlies Bookarelli's application for judicial review is apparently less than $50,000. Had Bookarelli sought to appeal to the Supreme Court from a costs order made by the District Court involving a similar amount (or indeed a larger amount) leave to appeal would be required. [5] An application for leave to appeal would ordinarily be heard by a two-member Court and, if the application was found to be unmeritorious, it would be dismissed after a short hearing. [56] If applications for judicial review on the ground of jurisdictional error are plainly without merit, it may be appropriate for the Court to consider making an order for indemnity costs against the applicant, even in the absence of such an application by the respondent. Such an order might be thought particularly appropriate if the unmeritorious application concerns a small monetary amount and the applicant has already had the benefit of two levels of review or appeal in relation to the decision." (Footnotes in original.)
The applicant has filed written submissions contending that the Court should not make an order requiring it to pay indemnity costs. The written submissions contend that if the applicant's challenge to the decision of the primary Judge had succeeded on both grounds, it would have been better off by nearly $80,000, rather than the $50,000 referred to in the Principal Judgment. We are prepared to proceed on the basis that the amount in dispute, at least in theory, was in the order of $80,000.
Counsel for the applicant, Mr Jones, submitted that the characterisation of the applicant's argument as "plainly without merit" does not cause the case to fall within the line of authority that enables a court to order indemnity costs against a moving party where that party, properly advised, should have known that it had no chance of success. Mr Jones submitted that the applicant should not be subjected to an order for indemnity costs "simply because the Constitution leaves further room, apart from the statutory procedures, to challenge the decision of the primary judge for jurisdictional error". Mr Jones also contended that any procedural inconveniences identified in the Principal Judgment were the product of the legislation or the operation of the Constitution. An order for indemnity costs should not be used to correct any perceived deficiencies in the principles governing the availability of judicial review of decisions of costs assessors and of inferior courts.
Section 98(1) of the Civil Procedure Act 2005 (NSW) (CP Act) provides as follows: "Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis."
The general rule is that if the court makes any order as to costs, the court is to order that the costs should follow the event, unless it appears to the court that some other order should be made. [6]
UCPR r 42.2 states that: "Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis." If the court determines that costs are to be paid on an indemnity basis, all costs, other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount, are to be allowed. [7]
UCPR r 42.2 makes it clear that the ordinary rule is that where an order is made that one party to litigation pay the costs of another party, the order is for payment of costs on the ordinary basis. Nonetheless, r 42.2 contemplates that the Court may order otherwise.
As Mr Jones pointed out, there is a well-established line of authority that a moving party should be required to pay costs on an indemnity basis if it appears that proceedings have been commenced or continued in circumstances where that party, properly advised, should have known that it had no chance of success. [8] As Lindgren J has observed, however, this principle may not be easy to apply given that the Court addressing the question of costs will always have the benefit of hindsight. Furthermore, depending on the circumstances, it may be necessary to make assumptions about the party's knowledge of the facts and the nature and level of legal advice given to that party. [9]
It is important to appreciate that pursuing a hopeless case is not the only situation in which it may be appropriate to order the unsuccessful moving party to pay costs on an indemnity basis. In Colgate-Palmolive Company v Cussons Pty Ltd (Colgate-Palmolive), [10] a decision often cited with approval, [11] Sheppard J referred to many different circumstances in which courts have made orders that the unsuccessful party pay costs on an indemnity basis. [12]
Sheppard J explained the general principles as follows: [13] "In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes [(1887) 39 Ch D 133] at 141 said the Court had a general and discretionary power to award costs as between solicitor and client 'as and when the justice of the case might so require'. Woodward J in Fountain Selected Meats [(Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 364; 81 ALR 397] appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston [[1981] 3 WLR 619] at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said [in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 225], 'The categories in which the discretion may be exercised are not closed'." Sheppard J observed that the question must always be whether the particular facts and circumstances of the case warrant the making of an order for the payment of costs other than on a party and party basis. [14]
In NMFM v Citibank, Lindgren J pointed out that although the discretion to award indemnity costs must be exercised in accordance with principle, its exercise is not confined to particular categories of cases in which such orders have been made in the past. His Honour also observed that statements in cases where indemnity costs have been awarded are not to be read as if they are statutes marking the outer limits of the exercise of a judicial discretion. [15]
Mr Jones was correct to submit that Bookarelli should not be ordered to pay indemnity costs simply because it has been unsuccessful in its application for judicial review of the decision of the District Court. Bookarelli was entitled to invoke the supervisory jurisdiction of the Court. This is so notwithstanding that the application constitutes Bookarelli's third attempt to challenge the original costs assessment and that the dispute concerns a relatively modest monetary sum. Equally, however, Bookarelli's entitlement to invoke the supervisory jurisdiction of the Court does not render it immune from an indemnity costs order if the circumstances are sufficiently unusual to warrant a departure from the ordinary rule. The question is whether such circumstances exist.
Bookarelli's argument in this Court essentially rested on its construction of the Consent Costs Order. It contended that the Consent Costs Order should be understood as implicitly embodying the so-called "rule of thumb". Bookarelli also submitted that the Consent Costs Order, properly construed, does not oblige Bookarelli to pay the costs of the application for Freezing Orders.
Bookarelli's contentions have varied at different stages of the costs dispute. Bookarelli did not submit to the Costs Review Panel (Panel) that the Consent Costs Order was intended to incorporate the rule of thumb. That argument was made for the first time in the District Court proceedings, but was rejected by the primary Judge on the ground that the argument did not raise a question of law. His Honour might have added that, in any event, Bookarelli could hardly have been dissatisfied with the Panel's decision as to a matter of law [16] when Bookarelli did not put the relevant argument to the Panel.
The Principal Judgment noted that Bookarelli's construction of the Consent Costs Order as incorporating the rule of thumb was "to say the least, elusive". [17] To put the matter another way, the construction of the Consent Costs Order advanced on Bookarelli's behalf in this Court was not reasonably arguable. Bookarelli's legal advisors should have appreciated the weakness of the argument before the judicial review proceedings were commenced.
Bookarelli's contention that the Consent Costs Order was not intended to cover the costs of the Application for Freezing Orders also fell well short of being reasonably arguable. It is difficult to understand how the Consent Costs Order could be read in any way other than as requiring Bookarelli to pay Katanga's costs of the application for Freezing Orders. No plausible argument to the contrary was put to this Court.
If Bookarelli is ordered to pay costs on the usual basis, Katanga would be required to bear some of the costs it has incurred in defending the judicial review proceedings. This is because Katanga would not be reimbursed for the difference between its solicitor and client costs and the costs recoverable on a party and party basis. Bookarelli's two previous unsuccessful challenges to the original costs assessment [18] caused the parties to incur substantial costs in connection with a dispute over a relatively modest amount of costs. Some of the costs incurred by Katanga, at least in the District Court proceedings, are not recoverable from Bookarelli since the costs order made by the primary Judge in Katanga's favour was on the usual basis. [19]
The following circumstances warrant making an order that Bookarelli pay Katanga's costs of the judicial review application in this Court on an indemnity basis:

Bookarelli did not advance a reasonably arguable case for judicial review of the District Court decision;
the weakness of Bookarelli's case should have been apparent to its legal advisors before the summons was filed in this Court;
Bookarelli's successive challenges to the original costs assessment have involved a relatively modest amount;
Bookarelli's unsuccessful challenges have already generated substantial costs and have effectively deprived Katanga of some of the fruits of the Consent Costs Order; and
requiring Katanga to bear some of the costs it has incurred in the judicial review proceedings would unjustly deprive it of yet more of the fruits of the Consent Costs Order.

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Judgment (5 paragraphs)

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