Clarence City Council v Commonwealth of Australia

order made by: JAGOT, KERR AND ANDERSON JJ DATE OF ORDER: 11 September 2020

1. The costs orders made by the primary judge on 18 October 2019 be set aside.
2. The costs of the proceeding at first instance are reserved, pending final determination of the proceeding by the primary judge.
3. The second respondent pay the appellant's costs of the appeal as agreed or assessed.
4. There be no order as to the first respondent's costs of the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Summary 1 On 6 August 2020, this Court made Orders in each of proceeding TAD35 of 2019 and proceeding TAD36 of 2019 (the appeals). The Court allowed each appeal, dismissed the notice of contention of each of the second respondents in the appeals, set aside the orders made by the primary judge on 24 September 2019, remitted the proceedings to the primary judge for final determination, and directed that the parties file orders by agreement in respect of costs or, if no agreement was reached, written submissions as to the appropriate orders in respect of costs. These orders are set out in the judgment on appeal, Clarence City Council v Commonwealth of Australia [2020] FCAFC 134 (Appeal judgment). 2 On 20 and 21 August 2020, the parties filed submissions on costs. 3 The Court will make the following orders in respect of the costs of each appeal: (1) The costs orders made by the primary judge on 18 October 2019 be set aside. (2) The costs of the proceeding at first instance are reserved, pending final determination of the proceeding by the primary judge. (3) The second respondents pay the appellants' costs of the appeal as agreed or assessed. (4) There be no order as to the first respondent's costs of the appeal. 4 These are the reasons for making these costs orders (Costs Orders). 5 Unless stated otherwise, or the context indicates to the contrary, the terms used in this judgment have the same meaning as defined terms used in the Appeal judgment.

The appellants' costs 6 Section 43(2) of the Federal Court of Australia Act 1976 (Cth) gives the Court a broad discretion in awarding costs: Davies v Lazer Safe Pty Ltd (No. 2) [2019] FCAFC 118 at [5] (Greenwood, White and Burley JJ). Although the power is discretionary, it is to be exercised according to settled principle. The ordinary rule is that costs follow the event. An award of costs "generally favours the successful party": Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (In Liq) [2011] FCAFC 136; 197 FCR 113 at [5] and [9] (Greenwood and Rares JJ). 7 The relevant "event" in these appeals is the appellants' success in appealing against the primary judge's order that the proceedings be dismissed on the basis that the appellants did not have standing to seek declaratory relief with respect to the proper construction of cl 26.2(a) of the relevant leases (see Appeal judgment, [4] and [18] to [22] concerning the entry into the relevant leases). In this respect, there is no reason to depart from the ordinary rule that "costs follow the event". The appellants will have their costs paid by the second respondent in each of the appeals.

The costs of the first respondent, the Commonwealth of Australia, in the appeals 8 The next issue is whether the first respondent in each appeal, the Commonwealth of Australia, is entitled to its costs of the appeal. 9 Whilst the general rule is that costs follow the event there are "certain limited exceptions": Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; 247 FCR 61 at [297] and [303] (Bennett, Besanko and Beach JJ). The general rule that costs follow the event must also take into account that the "costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs": Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] (Hodgson JA; Mason P agreeing). 10 The question arising from the present appeals is "whether it is reasonable for the unsuccessful litigant to bear more than one set of costs": HP Mercantile Pty Ltd v Hartnett [2017] NSWCA 79 (HP Mercantile) at [14] (Bathurst CJ, Leeming and Payne JJA); Muswellbrook Shire Council v Hunter Valley Energy Coal Pty Ltd [2019] NSWCA 216; 372 ALR 695 at [173] (Macfarlan JA; Leeming JA agreeing). That is, whether the second respondent in each appeal should pay the appellants' costs, as well as the costs of the first respondent (ie the Commonwealth) in each of the appeals. 11 Before the primary judge, the Commonwealth submitted that each of the appellants had standing to seek declaratory relief in respect of the relevant leases. However, in both of the proceedings below, the Commonwealth's Amended Defences (each dated 31 October 2018) stated in effect that, in relation to the relief sought by the appellants, the Commonwealth: … denie[d] that [each of the appellants] is entitled to the relief sought … and … says further that … the [particular] declaration[s] sought … are impermissibly imprecise … and … the jurisdiction or power of the court under which the [appellants seek particular] consequential relief … is not identified. 12 The primary judge in Clarence City Council v Commonwealth of Australia [2019] FCA 156 noted (at [9] and [10]) that: On the question of construction, the councils [ie the appellants] contended that the whole of each of the airport sites is "rateable", except for [certain other areas] … They say so because, they contend, "trading or financial operations are undertaken" within the meaning of cl 26.2(a) of the leases on all other areas of the airport sites - which include, by way of example only, areas in the terminals such as departure and arrival lounges, baggage claim areas, security facilities, bathrooms and waiting circulation areas. The lessees and the Commonwealth disagree. They contend that the phrase "trading or financial operations" in cl 26.2(a) of their agreements is not to be construed as the councils would have it. They contend, among other things, that once regard is had to the principle of "competitive neutrality", which was the essence of the rationale for cl 26.2(a), it is manifest that the phrase "trading or financial operations" was not intended to have application to "aeronautical services and facilities" (which the councils say are included in the rateable areas), because such services and facilities were not "contestable" - that is, the lessees could not enjoy a competitive advantage because there was no comparable business over which they could enjoy such an advantage. 13 The primary judge then decided the proceedings on the question of standing. 14 Following the decision of the primary judge to dismiss both of the underlying proceedings, the first respondent sought no order from the appellant for the costs of the proceedings at first instance: Clarence City Council v Commonwealth of Australia (No. 2) [2019] FCA 172 at [3] (the "Commonwealth seeks no order for costs"). 15 Notwithstanding the first respondent's opposition to the ultimate relief sought by the appellants at first instance, the first respondent elected to advance both written and oral submissions in support of the appellants' position on appeal including in respect of the notice of contention. The first respondent could have filed a notice submitting to the orders of the Full Court but it did not do so. The first respondent elected to participate in the appeals by filing submissions and appearing with senior and junior counsel on the hearing of the appeals. The Commonwealth submitted that the appeals raised significant legal issues, and that it was appropriate for the Commonwealth to be heard on those issues rather than simply filing a submitting notice on the appeals. 16 We would not wish to be understood as suggesting that it was in the least inappropriate for the Commonwealth to have taken that position. It was of course entitled to do so and the Court has had the significant benefit of the submissions advanced by counsel for the Commonwealth. However, in circumstances where we are entitled to infer that the Commonwealth was aware that the appellants were represented by competent senior counsel, in our view, it is not "reasonable" or "fair" in all the circumstances for the second respondents to bear more than one set of costs in respect of the appeals. In circumstances where the legal issues raised by the appeals were dealt with by the appellants, and there being no conflict between the appellants and the Commonwealth, the Commonwealth has not demonstrated a sufficient reason for the second respondents "to be burdened with more than one set of costs" in relation to the appeals brought by the appellants: HP Mercantile at [15].

Costs before the primary judge 17 As to the costs before the primary judge, the appellants invite the Court to apportion the costs at first instance by reference to the issues of standing and justiciability and to make orders in respect of the payment of those costs. The appellants submitted that this apportionment could be conducted by reference to a review of the transcript of the proceeding before the primary judge. 18 In making an order as to costs, the Court will not ordinarily attempt to differentiate between those issues upon which a party did or did not succeed unless a particular issue is "clearly dominant and separable": Bostik Australia Pty Ltd v Liddiard (No. 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA). As the High Court has cautioned, there are "good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like": Firebird Global Master Fund II Ltd v Republic of Nauru (No. 2) [2015] HCA 53; 90 ALJR 270 at [6] (French CJ, Kiefel Nettle and Gordon JJ). 19 We do not believe it is appropriate for this Court to make Costs Orders in respect of the proceeding at first instance. The most appropriate course is for the costs of the proceeding at first instance to be reserved, pending final determination of the proceedings by the primary judge. 20 There will be orders as to costs in each appeal in the form set out at paragraph 3 above. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Jagot, Kerr and Anderson.