Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd

Federal Court of Australia|2008-10-17|Before: Collier J

The applicants pay the first and second respondents' costs of the proceedings, excluding the costs of the interlocutory applications referred to in para 2 of these orders, to be taxed if not otherwise agreed.
(a) the first and second respondents pay the applicants' costs thrown away in consequence of the adjournment of these proceedings on 18 July 2006 and the costs of the appearances on 18 July 2006 and 21 July 2006, to be taxed if not otherwise agreed; (b) the first and second respondents pay the applicants' costs of the hearing on 6 November 2006 and the costs of the application for security for costs on 9 November 2006, to be taxed if not otherwise agreed; (c) there be no order as to costs of the motions brought by the applicants and the respondents which costs were reserved by the Court on 4 August 2006. 3. Upon the agreement of the parties as to the total costs to be paid to the First and Second Respondents, or, in default of agreement, following taxation of costs in accordance with O 62 Federal Court Rules, liberty to the First and Second Respondents to apply to the Court for an order that the cheque for $150,000 and the bank guarantee for $75,000, provided by the First and Third Applicants as security for costs, be released to the First and Second Respondents. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA

SUNSTATE CITRUS PTY LTD (ACN 112 847 560) (SUBJECT TO DEED OF COMPANY ARRANGEMENT)

AND: SUNSTATE ORCHARDS PTY LTD (ACN 095 659 733)

REASONS FOR JUDGMENT 1 On 5 September 2008 I delivered judgment in the substantive proceedings in this matter. In doing so I made the following orders: 1. The Amended Application filed 16 February 2006 be dismissed. 2. The Cross-Claim filed 5 June 2007 be allowed as follows: (a) the Cross-Respondent pay the Cross-Claimant damages in the sum of $385,383 for breach of the Packing Shed Agreement; (b) the Cross-Respondent pay the Cross-Claimant the sum of $150,000 for a loan which remains due and owing; and (c) the Cross-Respondent pay the Cross-Claimant interest at the annual rate of 10% on the sums ordered to be paid in subparas 2(a) and 2(b) herein pursuant to s 51A Federal Court of Australia Act 1976 (Cth) to be calculated from the date the relevant cause of action arose. 2 After delivering judgment I directed the applicants and the first and second respondents ("the respondents") to the substantive matter to file and serve submissions as to costs, and informed the parties that I proposed to make orders as to costs based on the papers unless: · either the parties informed each other and the Court that they wished to attend Court and make oral submissions; or · I informed the parties that I required their attendance at Court to make oral submissions. 3 Neither party requested a hearing on the issue of costs to be listed, and on the basis of the written submissions received I did not require their attendance at Court.

Issues not disputed 4 The following issues do not appear to be in contention: 1. The applicants in their written submissions conceded the general principle that costs follow the event, and that subject to consideration of a number of issues the applicants are not in a position to argue against an order that they pay the respondents' costs in these proceedings, including reserved costs. 2. On 4 August 2006 I made orders determining two notices of motion, one brought by each party, concerning further disclosure (Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 2) [2006] FCA 1001). Each party had success on its motion. I reserved the costs of both notices of motion, and the applicants submit that no costs order should be made on either notice of motion. This approach is not contested by the respondents, and I propose to adopt it. 3. In relation to the hearings of 6 and 9 November 2006: · On 6 November 2006 I made directions to facilitate the bringing of an application for security for costs by the respondents, and reserved the costs of that directions hearing. · On 9 November 2006 I dismissed the application for security for costs brought by the respondents, and ordered that costs be reserved: Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 3) [2006] FCA 1498. · The applicants submitted that the security for costs application was a discrete application lost by the respondents and that they should have the costs of the directions hearing on 6 November and the costs of the application for security for costs having regard to the order of 9 November 2006. This submission is not contested by the respondents in their written submissions. I accept the submissions of the applicants and order that the costs of the applicants of the hearings of 6 November 2006 and 9 November 2006 be paid by the first and second respondents on a party to party basis. 4. In their written submissions the applicants also conceded that they were not in a position to resist an order that they pay the respondents' costs for the remaining interlocutory hearings, with the exception of costs associated with orders made on 18 July 2006 and 21 July 2006. I will deal with these costs later in the judgment. 5. In their written submissions the respondents submitted that, for the proper attainment of justice and enforcing the respondents' rights in these proceedings, it was appropriate for the respondents to have: (a) retained and incurred the fees of both senior and junior counsel; (b) engaged and incurred the costs of the expert forensic accountant, Mr Lytras; (c) engaged and incurred costs of the expert valuer, Mr Harrison. These submissions are not disputed by the applicants. Indeed I note that both applicants and respondents retained senior counsel, and engaged experts to provide expert evidence including forensic and valuation evidence. However, whether these costs were incurred for the proper attainment of justice and enforcing the respondents' rights is, in default of agreement, a matter for the taxing officer under O 62 r 19 Federal Court Rules rather than this Court: Fubilan Catering Services Ltd v Compass Group (Australia) Pty Ltd [2007] FCA 1497 at [2].

Issues requiring consideration 5 Three issues remain in dispute between the parties. These issues are: 1. The basis upon which the respondents' costs, payable by the applicants, should be assessed. The respondents have submitted that the applicants should be ordered to pay the costs of the respondents in the proceedings, including the cross-claim which was defended on the basis of the misrepresentation case, and including any reserved costs, on an indemnity basis. The applicants have submitted that these costs should be paid on the standard basis, namely party to party. 2. Liability for costs related to the orders of 18 July 2006 (Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd [2006] FCA 920) and the directions hearing of 21 July 2006. 3. Release of the cheque of $150,000 and bank guarantee of $75,000 provided by the first and third applicants as security for the respondents' costs. 6 I shall consider each of these issues in turn.

(1) Basis upon which the respondents' costs should be assessed 7 The respondents made detailed submissions in support of their contention that the applicants should be ordered to pay the costs of the respondents on an indemnity basis. In summary the respondents submitted that assessment of costs on an indemnity basis was warranted in the circumstances of this case because: a. the proceedings were based on serious unfounded assertions of impropriety, lies and deceit against the first and second respondents, including a very serious assertion against the second respondent that he attempted to destroy relevant records. These assertions were maintained by the applicants throughout the proceedings, notwithstanding that there was no evidentiary or factual foundation for them; b. relief was sought against the second respondent as knowingly concerned in the alleged misleading and deceptive conduct when no proper case was pleaded for such relief, and indeed the Court found that that case failed at the threshold; c. the applicants sought to maintain the serious allegations in para 19 of the Further Amended Statement of Claim upon a distorted record produced on the instructions of the second applicant; d. this is a case warranting the making of an order for indemnity costs within the principles articulated in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 232-234; e. it is a fundamental premise that serious allegations of propriety should not be made in the absence of any evidentiary or factual foundation for them; f. it is not enough that there is some hope to prove such serious allegations out of the mouths of the witnesses for the respondents; g. the only characterisation of the conduct of the applicants is that they chose to deliberately adopt the course of making serious and wanton assertions of impropriety to attack the first and second respondents. 8 The applicants submitted that indemnity costs were not warranted in the circumstances of this case because, in summary: a. in all matters in which a failure to disclose relevant information is alleged under s 52 Trade Practices Act 1974 (Cth) ("the Act") there will be elements of impropriety and deceit; b. had the court accepted the second applicant's version of events in relation to the provision of Block Summary data, actionable deception would have been found; c. no allegation of fraud was pleaded against the respondents; d. the purpose of an award of indemnity costs is not to punish an unsuccessful litigant because the case was lost on the basis of adverse findings of credit or fact; e. the applicants did have evidentiary or factual foundations in making the allegations contained in the Further Amended Statement of Claim, namely the packing shed records and the various scenarios. The applicants failed because of factual findings relating to those issues; f. to the extent that the respondents' claim for indemnity costs relies upon a claim that the applicants ought never have made the relevant allegations, this imports a notion of pre-knowledge on the part of the unsuccessful litigant that the allegation advanced by the litigant is not only false but known by him to be false. This was not the case here because the allegations advanced by the applicants were not simply allegations of oral conversations, but were mixed allegations relying upon documents, conduct and oral representations. It could not be said that the allegations pleaded were "groundless" because the ultimate proof of the allegations depended upon a finding by the Court as to the context of certain oral representations alleged; g. accordingly, costs of the action should be awarded to the respondents on a party to party basis. 9 The discretion of the Court to award costs is found in s 43 Federal Court of Australia Act 1976 (Cth) which provides as follows: (1) Subject to subsection (1A), the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded. …… (2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge. 10 Principles applicable to the award of indemnity costs have been considered on numerous occasions in this Court, including by the Full Court. As observed by the Full Court in De Alwis v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 77: [6] The purpose of an order for costs is to indemnify or compensate the person in whose favour it is made, not to punish the person against whom it is made: see Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534; Ohn v Waltob (1995) 36 NSWLR 77 at 79 per Gleeson CJ. The usual rule is that costs should be on a party-party basis, but that the Court has a wide and unfettered discretion to award costs on an indemnity basis in appropriate cases in particular circumstances: see Colgate-Palmolive v Cussons (1993) 46 FCR 225 at 231-234. [7] In deciding whether to award indemnity costs each exercise of discretion depends on the particular facts. Indemnity costs can be awarded where it appears that a proceeding is commenced or continued in circumstances where the applicant properly advised should have known there was no chance of success… 11 Circumstances warranting the Court in departing from the usual course of ordering costs on a party to party basis were described by Sheppard J in Colgate-Palmolive at 233 as including: · making allegations of fraud knowing them to be false; · making irrelevant allegations of fraud; · evidence of particular misconduct that causes loss of time to the Court and to other parties; · the fact that proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law; · the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and · an imprudent refusal of an offer to compromise. 12 In InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 at [11], the Full Court noted additional categories of cases in which indemnity costs can be awarded as including: · where the bringing of an application is "high-handed"; · where an application has "no chance of success" or "hopeless"; · where an application is "unnecessary"; · where an application is brought and prosecuted "not for the bona fide purpose of protecting and enforcing a legal right, but to achieve an ulterior or extraneous purpose"; · where there has been "some relevant delinquency on the part of the unsuccessful party"; and · where the justice of the case warrants such an order. 13 The categories of cases I have listed are not exhaustive. The Court may exercise its discretion to award indemnity costs in circumstances falling outside these categories where there are some special or unusual features in a case so as to justify the court exercising its discretion in this way (InterTAN Inc [2005] FCAFC 54 at [11]). 14 Turning now to the case before me, I do not accept the submission of the applicants that in all matters in which a failure to disclose relevant information is alleged under s 52 of the Act there will be elements of impropriety and deceit. It is well settled that, unlike in relation to a claim of fraud (Derry v Peek (1889) 14 App Cas 337), the intent of a representor is not relevant in the context of a s 52 claim (Stephen J in Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228, Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197). although as observed by Miller the courts have been more ready to find a breach of s 52 where an intention to mislead can be inferred (see cases cited in Miller RV, Miller's Annotated Trade Practices Act (28th ed, Thomson, 2007) at [1.52.35]), proof of an intent to deceive is not required under s 52. 15 Notwithstanding this point however, I am not persuaded that the circumstances of this case are such as to warrant a departure from the usual practice of the Court in awarding costs so far as the costs of the first respondent are concerned. I form this view because: 1. I do not consider that this case exhibited special or unusual features so as to justify the court exercising its discretion in this way. 2. I accept the submission of the applicants that the case turned on factual findings, which in this case were against the applicants. To that extent I do not consider that the applicants' case against the first respondent was "hopeless" or had no chance of success. 3. I accept the submission of the applicants that their case was based on evidentiary or factual foundations, although as my judgment in the substantive case demonstrates, I was not persuaded by the applicants' submissions. 4. I consider that, as against the first respondent, the applicants, in particular the second applicant, had an honest belief in the soundness of their case (cf Ian David Morwood v Chemdata Pty Ltd [1998] FCA 194). 16 In relation to the claims of the applicants against the second respondent, Mr Strahley, I also consider that, on balance, the case did not exhibit special or unusual features warranting the court exercising its discretion to award indemnity costs. While the applicants' claim against the second respondent for accessorial liability pursuant to s 75B of the Act failed at the threshold, and while I consider that the applicants' assertions against Mr Strahley with respect to his alleged attempts to destroy packing shed records were without foundation, nonetheless: 1. as a general proposition it is not uncommon in a claim for misleading or deceptive conduct against a corporation that a claim for accessorial liability against the managing director of that corporation will be commenced, as occurred in this case. 2. the applicants' case against Mr Strahley was intertwined with their case against the first respondent - an inevitable approach in my view given Mr Strahley's position as managing director of the first respondent. 3. Although throughout the proceedings the applicants (in particular the second applicant) made what I consider to be unnecessarily dramatic and inaccurate declarations of impropriety on the part of the second respondent with respect to the alleged attempts of the second respondent to destroy records, these assertions were, although serious, not pleaded as part of the case the respondents had to meet. This point was also made by Counsel for the applicants during the proceedings (TS 17 July 2006 p 11 ll 8-13). 4. I do not consider that the applicants, in making assertions of impropriety against the second respondent, did so with an ulterior motive or in the knowledge that the assertions were false. 5. This is not a case where the applicants, although alleging accessorial liability, did not press their claims against the second respondent so as to warrant indemnity costs for failure to properly abandon the claims (cf Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602). 17 Accordingly, I am not persuaded that the circumstances warrant the costs of the second respondent being paid on an indemnity basis.

(2) Costs related to the orders of 18 July 2006 and the directions hearing of 21 July 2006 18 On 18 July 2006 I ordered that the trial of the substantive proceedings be adjourned until Friday 21 July 2006 at 10.15 am for further directions, and that costs be reserved. 19 The applicants submitted that, as the proximate cause of the adjournment of the trial was the late delivery by the respondents of multiple additional witness statements, that the applicants should have their costs thrown away by the necessity to adjourn the trial against the respondents on a standard basis, as well as the costs of the appearance on 21 July 2006. 20 The respondents submitted that the application for the adjournment of the trial was occasioned by the inability of the applicants to prove their case, and that the fundamental reason why the applicants sought to adjourn the trial was because the applicants did not have an expert valuation report to establish the loss or damage alleged to have been suffered by the first applicant. The respondents point, in particular, to the fact that the valuations of Mr Robertson, the expert valuer whose evidence was tendered by the applicants at trial, were not undertaken until 20 October 2006. Accordingly, the respondents submit that applicants' contention that the adjournment was occasioned by the late delivery of the respondents' material did not address the fact that the applicants were not in a position to prove their case as at 18 July 2006. 21 The proximate reason for the adjournment of the trial on 18 July 2006 was, as I explained in Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd [2006] FCA 920, the inability of the applicants to properly consider additional witness statements totalling some 3785 pages in length, delivered over 10 days in the lead up to the scheduled commencement of the trial. While I note the late completion of Mr Robertson's expert reports, there is, in the absence of evidence, no basis for the respondents' claim (in considerable hindsight) that the absence of those reports meant that the applicants were not in a position to prove their case had the hearing proceeded as scheduled on 17 July 2006. The practical effect of the vacation of the trial dates was that both applicants and respondents were able to file, at later dates, supplementary evidence including further expert reports as permitted by my orders of 9 August 2006. Indeed I also note that, in accordance with my orders of 9 August 2006, the respondents filed considerable additional evidence upon which they relied at trial, including an affidavit of Mr Burns (filed 28 July 2006), affidavits of Mr Strahley (filed 11 August 2006 and 18 August 2006), and affidavits of Mr Harrison, Mr Breed and Mr Bailey (filed 18 August 2006). 22 In my view the appropriate order is that the applicants should have their costs thrown away by the adjournment of the trial on 18 July 2006 on a party to party basis, as well as the costs of the hearing of 21 July 2006.

(3) Release of funds 23 The respondents have submitted that they should have the benefit of a cheque and bank guarantee in the combined amount of $225,000 as security for their costs pursuant to the orders made on 1 June 2006 in the sum of $150,000 and on 5 December 2006 in the sum of $75,000. The applicants have submitted that the moneys paid into Court as security for costs should not be released without the ascertainment of the actual costs payable by the applicants to the respondents. 24 Throughout this matter, which has included multiple interlocutory hearings, thousands of pages of evidence, and a substantive trial of four weeks spread over several months, the respondents retained a firm of solicitors and junior counsel, as well as senior counsel during the trial. I consider it very likely that the costs of the respondents exceed $225,000 and it is not in dispute that, with the exception of reserved costs relating to a number of interlocutory hearings, the respondents are entitled to their costs. However in the absence of quantification of the actual costs payable by the applicants to the respondents, there is a risk, however negligible, that the total sum paid into court by way of security for costs exceeds the amount actually payable by the applicants to the respondents. Accordingly I consider that once the parties have either agreed as to the total costs to be paid to the respondents by the applicants, or in default of agreement, following taxation of costs in accordance with O 62 Federal Court Rules, the respondents may apply to the Court for an order that the cheque for $150,000 and the bank guarantee for $75,000 provided by the first and third applicants as security for the respondents' costs be released to the respondents. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.

Associate: Dated: 17 October 2008 Solicitor for the Applicants: Mr PG Lynch of LynchMorgan

Solicitor for the Respondents: McCullough Robertson

Trade Practices Act 1974(Cth)s 52, s

At a glance

Court

Decision date

Before

Source

Judgment (12 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (14)

Cited By (3)