Campaign Master (UK) Limited v Forty Two International Pty Ltd

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

BETWEEN: CAMPAIGN MASTER (UK) LIMITED

AND: FORTY TWO INTERNATIONAL PTY LTD

GENERAL DIVISION NSD 2018 of 2008

INTRODUCTION 1 The question currently before me concerns the appropriate orders for costs that should be made arising from orders made on 14 May 2010 in respect of three notices of motion that were heard together on 17 December 2009 and 5 and 18 February 2010. Evidence read or otherwise received in one motion was taken to be evidence read or otherwise received in the other motions. 2 One notice of motion had been filed by Messrs Barnes and Hawksley (to whom I will refer in these reasons as "the respondents") in proceeding NSD 651 of 2008 (the 651 proceeding) seeking an order setting aside a subpoena (the NAB subpoena) or, alternatively, a declaration that the NAB subpoena was an abuse of process. An order was also sought setting aside leave which had been granted on 23 September 2009 to use the documents produced in answer to the NAB subpoena for the purposes of proceeding NSD 2018 of 2008 (the 2018 proceeding). The respondents were unsuccessful and the motion has been dismissed. I will refer to the reasons for judgment given in respect of that notice of motion (Campaign Master (UK) Limited v Forty Two International Pty Ltd (No 4) [2010] FCA 398) as "the 651 reasons". 3 In the 651 reasons at [95] I noted that, in the normal course, costs would follow the event but that, because the motion had been heard with the two other motions on the particular basis to which I have referred, it was appropriate that the question of costs should be considered in the context of the fate of all the motions. 4 The remaining two notices of motion had been filed in the 2018 proceeding. Of those two, one notice of motion had been filed by the respondents seeking orders that the proceeding be stayed or dismissed as an abuse of process and that, in any event, by reason of certain pleading deficiencies, the statement of claim be struck out. The respondents had some measure of success. Some paragraphs of the statement of claim were struck out. However, although I found that Forty Two International Pty Limited and Bluefreeway Limited (the applicants) had used documents produced pursuant to another subpoena issued in the 651 proceeding (the CM(UK) subpoena), and information derived from their production, in breach of an implied obligation not to use those documents or that information other than in and for the purposes of that proceeding, I granted leave nunc pro tunc, on the application of the applicants, to use the documents and information in the 2018 proceeding. I rejected a separate application by the respondents to stay or dismiss the 2018 proceeding on the ground that the applicants allegedly had commenced the proceeding solely or substantially for the collateral and improper purpose of intimidating or harassing the respondents and assisting the applicants (as respondents in the 651 proceeding) in the prosecution of their defence in that proceeding. 5 The other notice of motion in proceeding 2018 had been filed by the applicants seeking, amongst other relief, leave to join an additional applicant and leave to file amended pleadings incorporating amendments which, for the greater part, pleaded new and additional causes of action against the respondents using the documents produced in answer to the NAB subpoena. The respondents resisted the relief sought in this notice of motion on various grounds, which included the matters that they had raised with respect to the relief they claimed in the two notices of motion which they had filed in both proceedings. The respondents also raised pleading issues. I refused leave to file amended pleadings in the form proposed on the ground that they contained certain pleading deficiencies. These deficiencies were, nonetheless, remediable. To this end I made orders giving the applicants the opportunity to bring in pleadings with amendments conforming to the reasons I had given. For that purpose, I indicated that that opportunity would carry with it leave to join the additional applicant. 6 It can be seen that, in respect of the two notices of motion filed in the 2018 proceeding, the parties had mixed success. I will refer to the reasons for judgment given in respect of the two notices of motion filed in the 2018 proceeding (Forty Two International Pty Limited v Barnes [2010] FCA 397) as "the 2018 reasons".

The parties' respective positions on costs 7 The parties' respective positions on the question of costs are set out in their respective written submissions in that regard. 8 In essence, the respondents submitted that, in relation to their notice of motion filed in the 651 proceeding, on which they were wholly unsuccessful, it would be appropriate for costs to be awarded against them but only if costs were otherwise ordered as they seek in relation to the notices of motion filed in the 2018 proceeding. In that regard they seek: (a) an order that the applicants' solicitor, Mark Petrucco, be ordered to pay, personally, on an indemnity basis, the respondents' costs incurred in respect of the issue (on which they were successful) that the 2018 proceeding was instituted in breach of the implied obligation to which I have referred; and (b) an order that the applicants pay "the balance" of the respondents' costs in respect of the applicants' notice of motion and the respondents' notice of motion filed in the 2018 proceeding, including (it would seem) in respect of issues on which the respondents were unsuccessful. The respondents also submitted that it should be ordered that all costs be taxed and payable forthwith. 9 The applicants submitted that, having regard to the fact that the opposing parties have each had a measure of success or failure, the appropriate order is that each party should bear his or its own costs and that no special orders should be made for the assessment, taxation or payment of costs. 10 It is convenient to approach the resolution of this question by considering, first, the basis on which the respondents seek the orders that they propose.

consideration 11 The substance of the respondents' submissions was that the breach of the implied obligation that I have found constituted significant misconduct and default on the part of Mr Petrucco, being (in their submission) conduct that fell below the minimum standard of professional competence that should be expected of a legal practitioner in this Court. In making that submission the respondents sought to personalise to Mr Petrucco a number of findings I had made, including findings with respect to the respondents' own solicitors. They submitted that this conduct had caused them to incur costs which could have been avoided if the implied obligation had been complied with. They submitted that the costs they had incurred since the prospect of a breach of the obligation had been raised in their solicitors' letter dated 19 November 2009 were entirely due to Mr Petrucco's default and his unreasonable insistence, in the face of the obvious, that no default had ever occurred. For that reason they submitted that indemnity costs were appropriate. They submitted that it is not appropriate that the applicants should have to pay for such default and that it is not appropriate that the respondents themselves should have to suffer the possibility of non-payment if the applicants are impecunious and cannot pay such costs. Finally they submitted that the fact that I granted leave nunc pro tunc to the applicants to use the documents and information does not alter the position, but that it is relevant on the question of costs that, according to the respondents, no such application for leave had been made by the applicants. They submitted that an indulgence has been granted and that if no costs penalty is imposed on Mr Petrucco, it will suggest that his conduct has been lightly excused by the Court. 12 The Court's powers conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) to award costs are wide. It is undoubted that the power to award costs includes the power to order a party's lawyer to bear costs personally (s 43(3)(f) of the Federal Court Act and O 62 r 9) and the power to order that costs be assessed on an indemnity or some other basis (s 43(3)(g)). 13 However, the power to make an order for costs against a party's lawyer is one "to be exercised with care and discretion and only in clear cases": De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544 at 547-548; see also Levick v Commissioner of Taxation (2000) 102 FCR 155 at [38]-[39] and [43]. While misconduct or default may justify the making of such an order in certain circumstances, it is to be borne in mind that the objective of an order that a party's lawyer pay costs is not punishment; rather it is "to protect the client who has suffered and to indemnify the party who has been injured": Myers v Elman [1940] AC 282 at 289. 14 At all times Mr Petrucco has been the solicitor on the record for the applicants in the 2018 proceeding, and in the 651 proceeding in which they were respondents. The evidence shows that he was instrumental in commencing the 2018 proceeding in the circumstances to which I have referred in the 2018 reasons. He had participated in the inspection of the documents produced in answer to the CM(UK) subpoena and had satisfied himself that those documents supported the making of the allegations in the statement of claim that came to be filed in the 2018 proceeding. He certified the pleadings. But, although I have found that the applicants had used the documents and information to commence the 2018 proceeding in breach of the implied obligation arising out of the production of documents in the 651 proceeding, there is no evidence that shows or even suggests that, to the extent of his involvement or participation, Mr Petrucco acted consciously in breach of that obligation. I would add that the state of the evidence does not satisfy me that Mr Petrucco acted incompetently to the degree suggested by the respondents in their submissions or, subsequently, unreasonably in the applicants' defence of their position. My recitation of the respondents' submissions in this regard should not suggest otherwise. No questions directed to Mr Petrucco's state of mind in that particular regard were put to him in the course of his cross-examination during the hearing of the motions. And, although I have rejected the bases on which the applicants sought to justify their use without prior leave of the documents and information in the 2018 proceeding, the matters they raised in that regard were not unarguable. Following my ruling, the most that can be said is that, in not seeking prior leave, the applicants had acted on either an erroneous or mistaken basis or bases in using the documents and information in the way that they had for the purposes of the 2018 proceeding. The conduct was not of a more serious kind. For the avoidance of doubt, I am not satisfied on the evidence that Mr Petrucco's conduct can be characterised as serious misconduct or default of the kind identified in the respondents' submissions. This does not, of course, excuse the breach; nor do I resile from the observation in [95] of the 2018 reasons that such a breach is not to be excused lightly. But the true nature of the breach in its setting is, nevertheless, a relevant consideration to be taken into account in considering the respondents' submissions on costs. In this regard the respondents' submissions fail to take into account the wider context to which I referred in [96]-[99] of the 2018 reasons and the fact that, in my view, it was appropriate, in all the circumstances, to refuse to grant the relief the respondents sought and to grant leave nunc pro tunc. 15 In this connection, as I have noted, the respondents have submitted that it is relevant to the question of costs that no application for leave nunc pro tunc was made by the applicants. I am not sure that such a consideration is relevant where the respondents' application for relief (that is to say, for an order that the 2018 proceeding be stayed or dismissed by reason of the breach) has been rejected. But, in any event, and perhaps more fundamentally, the factual premise for the respondents' submission is missing. In their written submissions dated 16 December 2009 in the 2018 proceeding the applicants, after making submissions which I ultimately rejected (see [76]-[93] of the 2018 reasons), made the following application: If, contrary to the submissions above, the Court were to find that the filing of the application and statement of claim involved a misuse of the documents produced by the Respondents in the Campaign Master proceedings, then the Applicants would seek leave nunc pro tunc. 16 The respondents did not respond to this in their own written answering submissions (5 February 2010 and 18 February 2010) or orally; nor did they respond in oral submissions in reply when the relevance of certain matters to the question of granting leave nunc pro tunc was raised in the course of the applicants' oral submissions: see transcript of hearing, 18 February 2010, at 38(42)-39(1). In this connection the statement in [76] of the 2018 reasons that the applicants did not seek leave to use the documents or information plainly refers to the issue of the necessity for seeking leave in the context of the submissions then advanced by the applicants but ultimately rejected by me. The subsequent consideration respecting the granting of relief, including retrospective leave, is to be found in [94]-[103] of the 2018 reasons. 17 As to the submission that the breach of the implied obligation caused the respondents to incur costs which could have been avoided, I assume that the respondents refer to costs that they have incurred in seeking orders to stay or dismiss the 2018 proceeding by reason of the breach I have found. These costs, however, were not forced on the respondents. It was a matter for them as to whether they should seek to have the proceeding stayed or dismissed. They did so in the circumstances that I found in [99] of the 2018 reasons. In the end result they were unsuccessful in obtaining that relief, although they were successful in demonstrating that a breach of the implied obligation had taken place. 18 I would add that there is no evidence before me that the applicants are unable to meet any costs that may be ordered against them, as the respondents' submissions portend. I note that, in any event, by agreement, the applicants have provided security for costs to the satisfaction of the respondents to enable the motions to be heard and determined. Moreover, any inability on the part of an applicant to meet an order for costs is not a reason for sheeting home liability for costs to that party's solicitor; still less is it a reason to order that that party's solicitor pay indemnity costs. 19 For these reasons, I am not satisfied that an order should be made that Mr Petrucco pay, personally, on an indemnity basis, the respondents' costs incurred in respect of the issue that the 2018 proceeding was instituted in breach of the implied obligation to which I have referred. 20 More generally, the orders for costs that the respondents seek do not truly reflect the measure of their success. Moreover, the orders they seek do not address the difficulty of apportioning costs according to issues having regard to the fact that the issues fell to be resolved against the background of evidence that had been adduced to provide a common substratum of fact for this purpose. The interwoven nature of the evidence and the submissions consequent thereon makes it inappropriate to make orders that attempt to apportion costs on the basis of issues.

CONCLUSION AND DISPOSITION 21 Having reflected on the matter it seems to me that the order proposed by the applicants is fair and proper. Costs should lie where they fall. In the circumstances I propose to order, in each proceeding, that each party bear his or its own costs in relation to the motion(s) filed in that proceeding. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.