Colgate-Palmolive Co v Cussons Pty Ltd

REASONS FOR JUDGMENT On 6 May 1998 I granted the applicant's motion for leave further to amend its statement of claim. The applicant concedes that it must pay the respondent's costs of that motion, together with all costs thrown away in consequence of it and any costs occasioned by the adjournment of the hearing of a preliminary issue which had been listed for hearing on 11 May 1998. The only question remaining for decision is whether, as the respondent claims, the applicant should pay those costs on an indemnity basis. It is well established that the Court has a discretion to make such an order in an appropriate case under s 43(2) of the Federal Court of Australia Act 1976 (Cth) - see for example Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 and Cameron v Rural Press Pty Ltd (1992) 35 FCR 211 at 224-225. There are, so it seems to me, three relevant alternatives. The costs might be awarded in accordance with the ordinary practice - i.e. on a party and party basis. Alternatively they could be ordered on a solicitor and client basis which, as the Full Court noted in Cameron, normally results in a greater sum being awarded. By way of further alternative the costs might be ordered on an indemnity basis, which normally results in an even greater sum being awarded. My understanding of one method applied when costs are taxed on an indemnity basis is that an approach is taken along the lines required, for example, by Rule 28A of the Supreme Court Rules 1970 (NSW), referred to by Sheppard J in Colgate-Palmolive at 229. That is, the order would be that all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred and any doubts which the Taxing Officer may have as to whether the costs were reasonably incurred or were reasonable in amount should be resolved in favour of the receiving party. I note that in Love v Williams (Federal Court of Australia, 16 December 1994) Foster J declined so to circumscribe the discretion of the Taxing Officer if doubts arose about amounts being reasonable or unreasonably incurred. I shall approach the exercise of the discretion in this matter in accordance with the guidance provided by the following passage from the reasons for judgment of Black CJ (Cooper and Merkel JJ concurring) in Re Wilcox; Ex parte Venture Industries Pty Ltd (No. 2) (1996) 72 FCR 151 at 152: "The circumstances under which indemnity costs will be ordered have been discussed in many cases in this Court and it is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the Court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which will fall short of complete indemnity. Nevertheless the Court has an absolute and unfettered jurisdiction in awarding costs, although that discretion must be exercised judicially. So, indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the Court exercising its discretion in that way." I now turn to the circumstances in which this issue is raised in this matter. The principal application was filed, with a statement of claim, on 12 May 1995. In it the applicant sought damages said to have resulted from its acquisition of a printing press, the components of which were manufactured in the United States of America. The printing press, on the applicant's case, was delivered in or about June 1989. From 12 May 1995 until 30 April 1998, when the applicant filed its notice of motion for leave further to amend its statement of claim, it relied solely on allegations that the respondent had contravened s 52 of the Trade Practices Act 1974 (Cth). In view of the time which had elapsed between June 1989 and the filing of the application on 12 May 1995, the respondent included in its defence a limitation defence. In particular the respondent pleaded that the whole of the applicant's claim was statute-barred by s 82(2) of the Trade Practices Act. That plea was made as early as 29 August 1995. In those circumstances, on 27 February 1997, an order was made by consent that there be a trial of the following preliminary issue: "Is the respondent entitled to succeed on its defence that the applicant's claim is barred by s 82(2) of the Trade Practices Act 1974?" The applicant was granted leave to amend its statement of claim on two occasions, namely on 5 September 1996 and 23 January 1998. On 9 February 1998 the preliminary issue was set down for hearing for four days commencing on 11 May 1998. On 22 April 1998 the applicant gave notice to the Court and to the respondent that it had received instructions further to amend the statement of claim to add claims in contract and tort. As I have mentioned, on 30 April 1998 it filed a motion seeking leave to that effect. On 6 May 1998 I heard that motion which was vigorously opposed by the respondent. For reasons which I then delivered, I granted leave but said that there would have to be an order that the respondent pay any costs thrown away by reason of the very late amendments. I said also that it might be appropriate for those costs to be taxed on an indemnity basis and paid forthwith. I said that I would hear counsel on those matters. Although I canvassed with counsel for the parties the possibility that the hearing of the preliminary issue might proceed in a manner different to that contemplated by the orders made on 27 February 1997 (with a view to using the four days set aside for the hearing), both parties indicated that they wished the hearing date to be vacated. Is there some special or unusual feature in this case which justifies the Court exercising its discretion to order costs on otherwise than a party and party basis? I think that there is. The only explanation tendered for the late amendments was that the applicant's legal advisers now considered that these additional claims in contract and tort should be added to its statement of claim. I would have thought that the possibility of making these claims would have been in the forefront of the mind of the person who drafted the statement of claim in its original form. After all, the applicant (on its case), having consulted the respondent, bought the printing machine from it. I appreciate that there is an issue whether the respondent was acting as agent or principal, but it is the applicant's case that the respondent was acting as principal in the matter. I infer that the draftsperson of the statement of claim, as originally pleaded, made a conscious decision (presumably on instructions) not to sue in contract or tort. I infer that a similar decision was made, nearly sixteen months later, on the first occasion when leave was sought to amend the statement of claim. Yet again, seventeen months later, when the statement of claim was further amended, I infer that the same decision was made. Some months after the preliminary issue was listed for hearing and only about three weeks before the hearing of that issue the applicant sought to make these radical changes to the basis of its claim. I regard those circumstances as special or unusual. The applicant, in its written submissions, says that this is not an appropriate case for an order for indemnity costs. It suggests that the authorities disclose that indemnity costs are generally reserved for those cases in which the conduct of a party has been deserving of criticism. The categories of cases in which an order for indemnity costs may be made are quite clearly not closed: Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (Federal Court of Australia, 3 May 1991 at 8). However, accepting for the moment the applicant's proposition that generally an indemnity costs order is not made unless the conduct of the paying party has been deserving of criticism, I think that the applicant's conduct warrants criticism. The explanation tendered (such as it was) for the lateness of this third application to amend was really no explanation at all. I do not think that the conduct has to be described (as the applicant submits) as "reprehensible" or "high-handed" before anything other than the usual order for costs can be made. In my view, the manner in which the applicant has approached the conduct of the preparation and presentation of its case is simply not good enough, to the extent that it should be ordered to pay indemnity costs in the same terms as ordered in Re Wilcox and in Love. There will be an order in the following terms: 1. The costs referred to in paragraph 3 of the orders made on 12 May 1998, and the respondent's costs of its subsequent submissions on costs, are to include all costs except insofar as they are of an unreasonable amount or were unreasonably incurred, so that, subject to such exceptions, the respondent will be completely indemnified by the applicant for those costs. I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment of Justice Carr Associate: Dated: 22 May 1998 Counsel for the Applicant: Mr P Nisbet QC Solicitors for the Applicant: Messrs Solomon Brothers Counsel for the Respondent: Mr L W Maher Solicitors for the Respondent: Messrs Young Hubbard & Co Date of Hearing 6 May 1998 Date of Judgment: 22 May 1998