- Colgate-Palmolive Co v Cussons Pty Ltd

Judgment 1By Interlocutory Processes dated 6 November 2013 filed in these proceedings, Transit (NSW) Liverpool Pty Ltd ("Transit Liverpool"), ComfortDelGro Cabcharge Pty Ltd and certain other entities ("Interested Parties") and Transport for NSW ("TfNSW") sought orders setting aside certain paragraphs of a subpoena issued to TfNSW, at the request of Busways Blacktown Pty Ltd and others ("Active Defendants"), requiring production of copies of certain Sydney Metropolitan Bus Service Contracts. I set aside that subpoena by my judgment delivered on 2 December 2013 ([2013] NSWSC 1912). I expressed the preliminary view, in paragraph 58 of my judgment, that the Active Defendants should pay the costs of Transit Liverpool, the Interested Parties and TfNSW of and incidental to the application to set aside the subpoena, as agreed or as assessed, but indicated that I would hear any party which contended for a different order as to costs. 2Agreement has been reached between the Active Defendants on the one hand and Transit Liverpool and TfNSW on the other as to the orders which should be made consequential upon my judgment and I make orders as agreed between those parties in the form initialled by me and placed in the court file. 3The Active Defendants proposed that similar orders should be made as between it and the Interested Parties, providing for payment of the Interested Parties' costs on the ordinary basis. The Interested Parties accepted that an order should be made that the Active Defendants pay the Interested Parties' costs forthwith, and on the ordinary basis up to and including 2 December 2013. However, the Interested Parties contended that the Active Defendants should be required to pay their costs incurred after 2 December 2013 on an indemnity basis. 4The principles applicable to an order for indemnity costs are well-established. Section 98 of the Civil Procedure Act 2005 (NSW) relevantly provides that: "Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis." Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") provides that, if an order is made as to costs, the Court is to order that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. UCPR r 42.2 states the general rule that costs payable to a person under an order of the Court or these rules are to be assessed on the ordinary basis. 5The principles applicable to an order for indemnity costs were summarised by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225; 118 ALR 248 at 256-257, where his Honour observed that: "It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred: ... 2. The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. ... In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity. 3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it. ... 4. In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require''. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: "the categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata. 5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152); evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. 6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice." 6In Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20], the Full Court of the Federal Court noted that: "Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs." 7In White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 303 at [5]-[11], in a passage subsequently quoted in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 at [24], McDougall J noted that: "The basis upon which the discretion to award indemnity costs should be exercised has been examined in a very great number of cases. But, as those cases make clear, the discretion is not confined or limited except to the extent that it is required to be exercised judicially: see for example Harrison v Schipp [2001] NSWCA 13 at [139] (Giles JA, with whom Handley and Fitzgerald JJA concurred); see also Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248 at 256-257. What is required, in any case, is that the Court examine the facts of that case in the light of such statements of principle as may be relevant. In the ordinary way, the Court will take into account, as offering guidance, statements of principle made by those to whom the particular judicial officer should have regard. At the most basic level, the statements of principle indicate - not unsurprisingly - that there must be some sufficient special or unusual feature to justify departure from the ordinary rule. I take the basic principle to be as stated by Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72 at 9. Their Honours said at [44] (I omit citations). It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs, but for costs on a 'solicitor and client' basis, or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what would otherwise have been the position of the unsuccessful party in the absence of such delinquency on its part. I read what their Honours said on the basis that "some relevant delinquency" does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case: see for example Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412 at 415; NMFM Property Pty Limited v Citibank Limited (No 2) (2000) 109 FCR 77." 8The summary of principles in Colgate-Palmolive Co v Cussons Pty Ltd above was in turn applied in Lahoud v Lahoud [2006] NSWSC 126 at [11] and in Ng v Chong [2010] NSWSC 127 at [18]. In Liverpool City Council v Estephan [2009] NSWCA 161 at [100], Giles JA observed that s 56 of the Civil Procedure Act adds emphasis to the occasion to depart from costs on an ordinary basis where a failure to properly conduct the proceedings has caused costs to be incurred unnecessarily, but does not override the need for a rational connection between the reason for that departure and the extent of that departure. 9First, the Interested Parties rely on a letter dated 28 November 2013 written by their solicitors to the Active Defendants' solicitors which invited the Active Defendants to withdraw the subpoena and advised that the Interested Parties would seek an order that their costs be paid on an indemnity basis if the subpoena were set aside. That letter referred to the evidence filed by the Interested Parties in support of the Interlocutory Process and contended that that evidence established that the documents sought to be produced were irrelevant or of no probative value and also that the information contained in those documents was highly confidential and commercially sensitive. The Interested Parties were substantially successful in establishing the lack of relevance or probative value of the documents in their application to set aside the subpoena. The Active Defendants contend, with substantial force, that that letter repeated the submissions made on behalf of the Interested Parties and invited the Active Defendants to capitulate, rather than involving any element of compromise. The Active Defendants in turn advance a counterattack in respect of that letter, contending that the Interested Parties should be ordered to pay their own costs of and incidental to the preparation of the letter regardless of the other costs orders that the Court makes. I do not consider that that letter was without useful purpose, and I do not accept the Active Defendants' submission in that regard. 10The Interested Parties contend that the rejection of a settlement offer and the unnecessary prolongation of litigation may give rise to special circumstances warranting an order for indemnity costs, and also note that indemnity costs may be awarded against a party which has maintained proceedings that they should have known had no real prospects of success. I do not consider that the Interested Parties' letter was in the nature of a settlement offer, as distinct from a reiteration of the strength of their perceived position; and it does not seem to me that the Active Defendants' position is properly characterised as either the unnecessary prolongation of litigation or the maintenance of proceedings that they would have known had no real prospects of success. I dealt with the issues at some length in my earlier judgment and, although the Active Defendants were ultimately unsuccessful, it seems to me that the issues raised involved a degree of complexity. I do not accept that the Active Defendants should have known that their position had no real prospect of success, either before or after 2 December 2013, so as to warrant an order for indemnity costs against them. 11Second, the Interested Parties criticised the Active Defendants' conduct at the application for the hearing to set aside the subpoena on 2 December 2013, when the Active Defendants sought an adjournment and the opportunity to lead further evidence and make further submissions, when the question of whether the contents of the four contracts sought by the subpoena would be available to other participants in the market was the subject of particular focus in oral submissions. The Active Defendants ultimately did not seek to lead such further evidence and made written submissions addressed to that issue and further submissions that were prima facie outside the scope of the leave for further submissions that the Court had granted. The Interested Parties contend that those further submissions required them to incur further costs, including the costs of obtaining their clients' instructions as to the matters raised in them, conferring with Counsel and their accounting expert about the submissions and preparing submissions in response. I accept that those further costs were necessarily and properly incurred in respect of the further submissions; however, an order for costs on the ordinary basis would be the usual means of addressing such costs. I do not consider that this matter warrants an order for indemnity costs. 12Third, the Interested Parties contend that they "led the way" in responding to the Active Defendants' further submissions, and that their submissions were adopted by Transit Liverpool and TfNSW, and that they were the only parties moving to set aside the subpoena which retained an expert. It seems to me, however, that it is commonplace in multi-party applications that one party may take a more active role and other parties may take advantage of that party's activity. It does not follow that the opponent in such an application should be visited with an order for indemnity costs in favour of that more active party. 13Fourth, the Interested Parties submit that their claim for indemnity costs involves an element of compromise, so far as they could have sought such an order from 29 November 2013, the day after their letter to the Active Defendants to which I referred above. No doubt, the Interested Parties seeking indemnity costs from that later date involves a greater degree of compromise than seeking indemnity costs from an earlier date, and a lesser degree of compromise than not seeking indemnity costs at all. The fact that indemnity costs are not sought for the whole of the period does not seem to me to suggest that they should be ordered for any part of that period, unless such an order were otherwise justified. 14The Active Defendants contend that none of the matters raised by the Interested Parties amount to circumstances of the kind discussed in cases that would or might justify the award of costs on an indemnity basis. The Interested Parties respond, and I accept, that the categories in which indemnity costs may be ordered are not rigid and that each case should be considered on its particular facts, but having regard to the general principle that the usual order of costs on an ordinary basis should be made unless the circumstances justify the making of a different order: Ragata Developments Pty Ltd v Westpac (1993) 217 ALR 175 at 177. I am not, for the reasons that I noted above in respect of the matters on which the Interested Parties relied, satisfied that an order for costs should be made on an indemnity basis in favour of the Interested Parties, for the period after 2 December 2013 or at all. 15The Active Defendants also noted the preliminary view expressed in paragraphs 45-50 of my reasons for judgment that the Active Defendants should have leave to file their further submissions dated 9 December 2013 and proposed an order that they be granted such leave, and contended that such an order should be made for the reasons identified at paragraph 45 of my judgment, namely, that the other parties would suffer no prejudice if such leave was granted and that further submissions could readily be and were addressed in reply. That order can be made by consent as between the Active Defendants on the one hand and Transit Liverpool and TfNSW on the other. The Interested Parties neither consent nor object to the grant of leave to the Active Defendants to rely on their further submissions and indicate that they do not seek to be heard further as to that question. I am satisfied that that order should be made, consistent with the views which I expressed in the earlier judgment. 16Costs should follow the event in respect of the Interested Parties' application for indemnity costs. 17I make the following orders, which reflect the orders agreed between the Active Defendants and Transit Liverpool and TfNSW on the one hand, and the determination in this judgment as between the Active Defendants and the Interested Parties:

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