Chapman v Luminis Pty Ltd

REASONS FOR JUDGMENT THE COURT: 1 The background circumstances of this application are explained in the decision of this Full Court in Kebaro Pty Ltd v Saunders [2003] FCAFC 5 and in the decisions of von Doussa J in Chapman v Luminis Pty Limited (No 5) [2001] FCA 1106 and Chapman v Luminis Pty Limited (No 7) [2002] FCA 1098. For present purposes it is unnecessary to repeat them. 2 On 15 November 2002 the appellants filed a Notice of Discontinuance of the appeal to the Full Court which had been fixed for hearing on 18 November 2002. As a result of the Notice of Discontinuance being filed, the appeal was abandoned and the appellants became liable to pay the respondents' costs occasioned by the appeal: Federal Court of Australia Rules (Cth) O 51 r 19(1A), (3). 3 By the Notice of Motion filed on 20 November 2002 the third and fourth respondents sought the following orders: '1. Kebaro Pty Ltd (Kebaro) be joined as a party to the within appeal for the purpose of enabling the third and fourth respondents to seek orders with respect to their costs of the appeal as against Kebaro. 2. Kebaro do pay to the third and fourth respondents their costs of the appeal on the footing that the liability of the appellants or any of them and of Kebaro to pay costs be joint and several. 3. The third and fourth respondents' costs of the appeal be assessed in a sum to be ascertained on the basis that such sum is to comprise all costs except so far as they are of an unreasonable amount or were unreasonably incurred, so that, subject to such exception the third and fourth respondents will be completely indemnified for their costs. 4. Costs. 5. …' 4 On 12 March 2003 Beaumont J, on behalf of the Full Court, made the following orders by consent: '1. The first and second appellants by virtue of the Notice of Discontinuance filed on 15 November 2002 be liable for the costs of the appeal, such costs to be taxed on a party/party basis. 2. Kebaro do pay to the third and fourth respondents their costs of the appeal … on the footing that the liability of the first and second appellants or any of them and of Kebaro to pay such costs be joint and several.' The transcript of the proceedings on that date makes it clear the liberty to apply was reserved in case the parties were unable to reach agreement as to the costs of the Notice of Motion. That proved to be the case. The Court directed that the parties should lodge written submissions on the issue of costs, and indicated that it would determine the cost question 'on the papers'. The written submissions of the parties have been placed with the papers, and except to the extent necessary to explain our decision, we do not propose to summarise the contents of those submissions. 5 In substance, the third and fourth respondents contend that they were the successful parties on the motion, and for that reason should receive their costs. On the other hand, Kebaro contends that the consent orders made by Beaumont J represent a genuine compromise between the parties in that Kebaro accepted a liability to pay the costs of the appeal, and the third and fourth respondents abandoned their claim for indemnity costs. In those circumstances, Kebaro submits that it is appropriate that no order be made as to costs, or alternatively, that cost orders should be made on an issues basis. 6 Kebaro was resisting any order that it should pay the costs of the appeal whether on an indemnity basis or otherwise. Kebaro only acknowledged a liability for the costs of the appeal after this Court handed down its judgment in Kebaro v Saunders on 10 February 2003. That judgment affirmed the third party costs order which von Doussa J had made against Kebaro in relation to the costs of the trial. Once Kebaro acknowledged that liability, the third and fourth respondents did not persist in their claim for indemnity costs. 7 The authorities establish the following propositions in relation to the making of costs orders in circumstances such as the present: - where a proceeding terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; - this does not mean that a Court can never make an order for costs. Often it will be unable to do so, but in other cases an examination of the reasonableness of the conduct of the parties may provide the basis for an order, or a judge may be confident that one party was almost certain to have succeeded if a matter had been fully tried: Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 625 (McHugh J); - a distinction is to be drawn between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should be bear the costs: ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 171 ALR 227 at 231-232 (Burchett J). 8 In our view, the present case is one in which Kebaro effectively surrendered to the third and fourth respondents on the issue of costs in the light of this Court's judgment in Kebaro v Saunders. Once the obstacle of Kebaro's resistance to any order for costs was removed, the issue of costs on the appeal was resolved relatively quickly and efficiently. In those circumstances, the appropriate order is that Kebaro Pty Ltd should pay the costs of the third and fourth respondents of the Notice of Motion, and of this application. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.