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[2015] FCA 552
Federal Court of Australia
2015-06-05
Tracey J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 Earlier this year I dismissed an application by Dr Qizhi Chen in a proceeding in which she sought various forms of relief for what she alleged was harassment and unlawful discriminatory conduct on the part of academic and administrative colleagues at Monash University: see Chen v Monash University [2015] FCA 130. I ordered that Dr Chen pay the respondents' costs of the application. 2 The respondents subsequently filed an interlocutory application seeking orders that the costs be paid on an indemnity basis in the fixed amount of $1,003,684.98. 3 The parties agreed that the interlocutory application should be determined on the basis of written submissions. Submissions were filed on both sides. Having considered them I have determined to make the orders sought, save for the quantum of the lump sum costs order. My reasons follow.
INDEMNITY COSTS 4 Dr Chen's application was filed in the Federal Circuit Court ("the FCC") on 28 February 2013. 5 On 14 May 2013 the respondents made her an offer of compromise. Mindful that, at that time, she was not legally represented, the respondents' solicitors went to some trouble to explain to her the implications of the making of such an offer, including the consequences of a failure unreasonably to accept it. The offer (formal parts omitted) was in these terms: "Offer to settle We enclose, for your attention, Notice of Offer to Compromise in accordance with Rule 25.01 of the Federal Court Rules 2011 (Cth) (Enclosure 1). We confirm that this represents an offer to settle the proceeding you have brought against the Respondents for $30,000 inclusive of the legal costs you have incurred in this proceeding. We set out below what legal costs are covered by this offer, and what are not. The offer is open for 14 days after service, meaning that it is open for acceptance until 28 May 2013. If you do not accept the offer by this date, the offer will not be available to be accepted after that date, and your non-acceptance may have serious costs consequences for you. Given previous discussions with you about what might be involved in you deciding whether to accept an offer of settlement about your claims, the Respondents are concerned to ensure you understand their position on the limits of this offer, so far as legal costs are concerned. … We are instructed to strongly encourage you to seriously consider this offer, and to seek legal advice in considering the offer set out above particularly given the costs consequences that not accepting the offer may have for you." The respondents' solicitors also explained the costs regime applying in the FCC at the time and the costs consequences, provided for in Rule 25.14 of the Federal Court Rules 2011 (Cth) ("the Rules") which applied in the FCC. A copy of the then recent judgment of Buchanan J in Richardson v Oracle Corporation Australia Pty Limited (No 2) [2013] FCA 359 was attached to the letter. Although that decision dealt with the operation of Rule 25.14(1) rather than Rule 25.14(2), it explained the principles underlying offers of settlement and the potential consequences for a party who does not accept an offer made under the Rules. 6 Dr Chen did not accept the respondents' offer. 7 The implications of such a failure to accept an offer are stipulated in Rule 25.14 of the Rules. Relevantly, that Rule provides: "(2) If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant's proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent's costs: (a) before 11.00 am on the second business day after the offer was served - on a party and party basis; and (b) after the time mentioned in paragraph (a) - on an indemnity basis." 8 The Dictionary to the Rules defines "costs on an indemnity basis" to mean "costs as a complete indemnity against the costs incurred by the party in the proceeding, provided that they do not include any amount shown by the party liable to pay them to have been incurred unreasonably in the interests of the party incurring them": see Rule 1.51 and Schedule 1 to the Rules. 9 At the time at which the offer was made the respondents had incurred costs of $22,676 and disbursements amounted to $389.10. 10 Dr Chen sought to resist the respondents' application for indemnity costs for a range of reasons. Among these reasons (as best as I could understand them) were the contentions that: The respondents had failed to accept 10 offers of compromise made by Dr Chen. Professor Simon had made some misleading claims during without prejudice exchanges in the course of consideration of her complaints by the Australian Human Rights Commission. The matter would not have proceeded had Professor Simon "not masterminded (sic) [her] laboratory and office relocation next to his offices". Dr Chen firmly believed in the merits of her case which was arguable. The respondents had won the case "by making numerous falsities/inconsistencies" while she had "failed by making no court-misleading evidence". Costs do not necessarily follow the event and should not, as a matter of discretion, be awarded in the present case because of the University's "unmeritorious conducts (sic) … which led to the litigation which they won and sought the costs of, and the devastating financial losses, employment termination, and huge stresses suffered by the unrepresented Applicant …". 11 Dr Chen acknowledged that she had received an offer to settle the proceeding for $30,000 but submitted that the offer did not address "the real dispute" which, at the time, did not relate to her desire for monetary compensation. 12 Dr Chen implied that the respondents had, in some way, erred in referring her to the judgment of Buchanan J in Richardson (No 2) because the Full Court had subsequently upheld an appeal relating to the amount of compensation awarded at trial. 13 Dr Chen sought an order that the University pay her "costs of the entire proceedings (sic) at a fixed compensation of $188,147." She did not explain the basis of the calculation of this sum. 14 Dr Chen is, of course, correct in submitting that awards of costs are discretionary in nature. That said, Rule 25.14(2) establishes an entitlement, on the part of a respondent, to particular forms of costs orders in the event that an applicant unreasonably fails to accept an offer. 15 The Rule gives effect to a number of important policy objectives. Those objectives include the early resolution of disputes to avoid the time and expense of trials. To this end parties to litigation are to be encouraged seriously to consider, and not lightly reject, offers made by another party with a view to compromising their dispute and avoiding a trial: see Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121 at 125. 16 The reasonableness of an applicant's failure to accept an offer of compromise is to be assessed having regard to all the relevant circumstances at the time the failure occurred and in the knowledge that the applicant has failed at trial. 17 To a large extent Dr Chen's submissions involved an attempt to reargue the merits of her case and to traverse many of the adverse findings made by the Court in rejecting her claims. She persisted, for example, in asserting that Professor Simon had arranged to have her office relocated next to his despite a finding that this had not occurred: see Chen at [179]-[184]. 18 Dr Chen's subjective view in the rightness of her cause and her conviction that she had an arguable case do not sit comfortably with the fact that she had, in January 2013, received written advice from a senior lawyer at Victoria Legal Aid that much of the conduct about which she complained did not constitute sexual harassment. The lawyer had also expressed the opinion that the claim to this Court would not be "meritorious". In the event this opinion was vindicated. It is also to be borne in mind that, by the time the offer had been made, her complaints had been investigated by an independent consultant who had found the allegations to be unsubstantiated. 19 It is not appropriate that I give consideration to the various offers of compromise which were made by Dr Chen. A number of them were made in the course of "without prejudice" communications and the respondents have not waived privilege. Many of them post-dated the offer on which the respondents now rely. In any event what is being assessed is the reasonableness of Dr Chen's failure to accept the respondents' offer, not the reasonableness of their response to any offers made by her. 20 Dr Chen's assertion that an offer of money to settle the proceeding did not interest her ignores the fact that her claim sought a considerable sum by way of compensation for discrimination and harassment. 21 Her complaint about the relevance of the decision in Richardson (No 2) lacks substance. On appeal, the Full Court reassessed the appropriate range of damages awarded to the applicant at first instance. Consequently, it was not necessary for the Full Court to revisit Buchanan J's review and application of principles relating to indemnity costs and, in any event, the appeal decisions were handed down well after the expiry of the two week period during which the offer was open. 22 There is nothing in Dr Chen's submissions which persuades me that the respondents should not have the benefit of the operation of Rule 25.14(2). 23 Her failure to accept what was, in the circumstances, a generous offer of settlement before any substantial costs had been incurred on either side was, in my view, unreasonable. She was in possession of independent legal advice which highlighted the weakness of her case and the respondents' solicitors had gone to some trouble to ensure that she was aware of the implications of any failure by her to accept the offer. 24 The indemnity costs order sought by the respondents should be made.
ADDITIONAL MATTER 25 The respondents sought to support their application for indemnity costs on an additional basis. It was that the applicant had breached directions which I had given in Court on two occasions during the trial that there be no recording of proceedings other than by the official transcript service. They advanced a good deal of evidence from which it might reasonably be inferred that either Dr Chen or someone acting on her behalf had continued to record proceedings after the directions had been given. 26 Dr Chen denied having recorded the proceedings but, in written submissions, implied that her husband had done so when she said that he has a hearing disability "and failed to understand what the court ordered". 27 I have not found it necessary to make any findings about the matter because I consider that the respondents are entitled to an indemnity costs order whether or not any illicit recording of the proceedings occurred.
LUMP SUM COSTS 28 Rule 40.02(b) empowers the Court to order a party to pay costs in a lump sum. 29 The Court's power to make such an order is conferred in broad terms and may be exercised whenever the Court considers that circumstances warrant it: see Black & Decker Inc v GMCA Pty Ltd (No 4) [2008] FCA 1737 at [3] (Heerey J). The power is conferred in order to "avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation": see Beach Petroleum NL v Johnson (1995) 57 FCR 119 at 120 (von Doussa J) (a decision on the forerunner of the present power). A lump sum order may "avoid an ongoing counter productive dispute [as to costs], in the interests of achieving finality, subject always to the need to ensure that unreasonable amounts of costs are not pursued and awarded": see Ualesi (t/as Australian Empire Imports) v Expeditors International Pty Ltd [2006] FCA 26 at [14] (Conti J). The relevant principles are collected by Gordon J in Telstra Corporation Limited v Phone Directories Company Pty Ltd [2011] FCA 1463 at [2]. 30 The respondents contended that the award of a lump sum is warranted in the circumstances of the present case. They point to the complexity of the pre-trial process, the large number of allegations which they were called on to refute and the length of the trial as factors which would make a taxation process extremely difficult and protracted. They propose the fixing of a lump sum of $1,003,684.98. This appears to be the costs of the entire proceeding on an indemnity basis. 31 This figure is based on a review, undertaken by a partner in the firm acting for the respondents, of the costs and disbursement accounts maintained by the firm. She deposed that: "…for the period since the Application was filed and until judgment was issued on 27 February 2015…the Respondents have incurred costs of $447,636.00 and disbursements of $556,048.98 (comprising counsels' fees of $510,256.64 and other disbursements of $45,792.34). For the period since the offer of compromise … expired until judgment was issued on 27 February 2015, the Respondents incurred costs of $424,960.00 and disbursements of $555,659.88 (comprising counsel's fees of $510,256.64 and other disbursements of $45,403.24)." She further deposed that in her professional opinion "all of the costs incurred by the Respondents in defending this proceeding were reasonable and necessary to properly defend that multitude of allegations made against them." 32 Dr Chen contended that the sum sought by the respondents was unreasonable but did not elaborate on this submission. She sought to distinguish Beach Petroleum on the basis that it was a far more complex matter than the present. Dr Chen proposed that each party be required to file and serve a bill of costs. She did not advance any reasons for suggesting that this was a preferable course. 33 Lump sum costs orders may be appropriate even in relatively straightforward matters: see Byrnes v Brisconnections Management Company Limited (No 2) [2009] FCA 1432 at [51] (Emmett J). The present matter was, in any event, far from simple. Dr Chen pressed some 53 allegations arising from events that had occurred over a five year period. It was necessary for the respondents to call multiple witnesses to refute the claims and for them to search for and produce scores of documents. 34 I consider it likely that any taxation of the costs would be a long drawn out and difficult exercise. In no small part this would be because of Dr Chen's failure to confront the reality of her position notwithstanding the dismissal of her application. As I have already mentioned she continues to press her claims and, in doing so, to malign the respondents. I have no confidence that she would play a co-operative part in any taxation. 35 It is in the interests of the parties that the proceeding be brought to a speedy conclusion by the making of a lump sum costs order. Such an order will avoid further aggravation of the fraught relationship between the parties. It will also serve to bring an early closure to matters in dispute and, it may be hoped, relieve Dr Chen of much of the anxiety to which she has given expression in her submissions. 36 It remains to determine the sum in which the order should be made. 37 The evidence relating to the costs incurred by the respondents is limited. It is confined to the evidence of the respondents' solicitor which has been set out above at [31]. Aggregate figures are provided but the supporting documents on which they are based are not exhibited to the affidavit. 38 In saying this I imply no criticism of the respondents' conduct. I can well understand why they would not wish to incur further expenses in adding to the size of the affidavit, engaging a costs consultant or having a bill of costs in taxed form prepared. This is particularly so in a case in which the unsuccessful party is unlikely to be able to pay the amount of costs ordered either following taxation, or on a lump sum basis: cf Sparnon v Apand Pty Ltd [1998] FCA 164 at 4 von Doussa J. 39 The respondents are entitled to indemnity costs reasonably incurred in the period between 28 May 2013 and handing down of judgment on 27 February 2015. They claim $980,619.88 in respect of this period. Prior to that they were entitled to their costs on a party and party basis. 40 In the absence of more detailed evidence it is difficult to make an assessment of the reasonableness of the claims made although I note the assertion (which I do not question) of the respondents' solicitor that the costs incurred were reasonable and necessary in order properly to defend Dr Chen's claims. 41 In the circumstances, I consider that a discount should be applied because the respondents' entitlement to indemnity costs did not arise until 14 days after the offer was made and in order to remove any disadvantage that Dr Chen might otherwise suffer by being deprived of the opportunity to challenge the reasonableness of any costs claimed had a bill been prepared and taxed. 42 There will be an order that the lump sum be fixed at $900,000. 43 After these reasons were prepared but before they were delivered Dr Chen sought to file an interlocutory application in the Registry in which she sought, among other things, an order that the respondents pay her costs "of $669,123.32, that have equivalently (sic) been incurred to the Applicant if she had been legally represented …". The application was not accepted for filing and was unsupported by any affidavit. 44 On 27 February 2015 I ordered that Dr Chen pay the respondents' costs of the proceeding. Her application seeks to traverse that order. She has failed to demonstrate any proper basis for any order for costs being made in her favour. No such order should be made. The District Registrar will be directed not to accept Dr Chen's interlocutory application for filing. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey.
Chen
Monash University
(2002) 190 ALR 121
(1995) 57 FCR 119