(d) The ground on which the proceeding was dismissed as incompetent
55 Cases to which I referred in my reasons for judgment of 12 May 2000 establish that the accrued jurisdiction of the Court will be attracted only if the federal claims are "genuinely made and not merely colourable" (Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 498-499 (Gibbs J)) and that the accrued jurisdiction is not attracted where the federal claims are "colourable" and are made for the purpose of "fabricating jurisdiction" (Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 (FC) at 219). I said I would conclude that the federal claims were not "genuinely made" and were "colourable" and "fabricated" if they were obviously doomed to fail, unless there was evidence to the contrary. There was no evidence to the contrary. The Solicitors did not, for example, adduce testimony of a belief that the federal claims had a chance of succeeding or that in commencing the proceeding they acted on the favourable advice of counsel. Rather, the Solicitors relied on three matters: the fact that ss 75AD and 75AG had not previously been judicially construed; the fact that the sections provided a régime of strict liability; and the fact that the applicants, through counsel, did in fact resist Pasminco's motion and make submissions in support of the existence of the causes of action under the sections. But I did not find those considerations of any cogency.
56 I concluded that the federal claims were indeed "doomed to fail", "quite hopeless" and "clearly untenable". In the absence of evidence suggesting otherwise, on that basis I also concluded that they merited the descriptions of "colourable", "not genuine" and "fabricated", with the result that the accrued jurisdiction was not attracted.
57 The relationship between the "doomed to fail" ("quite hopeless", "clearly untenable") test and the "not genuine" ("colourable", "fabricated") test had been discussed by Wilcox J in Fitzroy Motors Pty Ltd v Hyundai Automotive Distributors Australia Pty Ltd (1995) 133 ALR 445 (IRCA) at 450, and by Finkelstein J in WG & B Manufacturing Pty Ltd v Tesla Farad Pty Ltd [1999] FCA 1776, to both of which I referred in my earlier reasons (at [12]). In Fitzroy, Wilcox J stated (at 450):
"I think that the test adopted in Burgundy Royale was simply a test of genuineness; the primary claim must not be a sham claim for the purpose of fabricating a jurisdiction that would not otherwise exist. If the claim was unarguable, this would tend to suggest that it was not being genuinely made and that the purpose of the claim was to fabricate jurisdiction… [I]t is at least theoretically possible for there to be a case where the primary claim is unarguable, but the applicant persuades the court that the claim was not fabricated. In such a case, the court will not lack jurisdiction to determine the associated claim." (my emphasis)
58 In WG & B Manufacturing, Finkelstein J stated (at [11]):
"If the federal claim is colourable in the sense that it was made for the purpose of fabricating jurisdiction, of course the jurisdiction of the court is not enlivened: [his Honour referred to Fitzroy]. How is the genuineness of the claim to be determined? One way is to ask whether the federal claim is bound to fail, that is to say, to ask whether the claim is unarguable. If the federal claim is hopeless then it is difficult to see how an applicant could contend that it was pursuing the claim bona fide." (my emphasis)
59 Although they knew that by the present motion a costs order was being sought against them, the Solicitors still did not adduce evidence as to their state of mind in relation to the federal claims or as to the course of events which led to the inclusion of them. Again they did not lead evidence that any of them believed that the federal claims had a chance of succeeding or that they had obtained counsel's advice in favour of propounding them. I have no doubt that the federal claims were chosen and formulated by the Solicitors or by counsel or by both. Yet the TP Act remedies against the manufacturers of defective products would not naturally occur to the mind of a lawyer who was contemplating injury to health caused by exposure over a long period to smelter emissions: the natural legal home of facts of that kind is the tort of negligence or of nuisance.
60 I can see no alternative to adhering to my conclusion on Pasminco's earlier motion for summary dismissal: that the federal claims were "colourable" and designed to "fabricate" jurisdiction. Relevantly for present purposes, I would add that they were so designed "by the Solicitors".
61 Against the above factual background, I turn to apply the relevant legal principles governing the circumstances in which a non-party may be ordered to pay costs. The discretion has been discussed in Knight v FP Special Assets Ltd (1992) 174 CLR 178 ("Knight"); White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 (FCA/Goldberg J) ("White Industries") at 229-231 (aff'd (1999) 87 FCR 134); and Levick v Deputy Commissioner of Taxation (2000) 44 ATR 315 (FCA/FC) ("Levick") at pars 43, 44, 45, 50.
62 In Knight, orders for costs were made against the receivers and managers of two companies. They had been appointed by two banks that held mortgage debentures. In causing the companies to litigate, the receivers and managers had, obviously, been acting for the benefit of the banks. The case was concerned with the jurisdiction of the court to order the receivers and managers, as distinct from the company and parties, to pay costs. Mason CJ and Deane J stated (at 192-193):
"For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made."
In the same case Dawson J stated (at 202):
"The cases therefore establish a long-asserted jurisdiction to award costs in appropriate cases against a person who is not a party to the proceedings where that person is the effective litigant standing behind an actual party or where there has been a contempt or abuse of the process of the court."
63 In White Industries, Goldberg J reviewed the authorities on the jurisdiction to order non-parties to pay costs. His Honour emphasised that in accordance with the authorities, something more than the hopelessness of a case is required. His Honour made this point as follows (at 231):
"I consider there are limitations on the proposition that commencing or maintaining proceedings which have no or substantially no prospects of success may result in a costs order being made against a practitioner. Something more must be added to the equation such as, for example, an ulterior purpose, abuse of process or a serious dereliction of duty." (my emphasis)
Later his Honour referred to De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544 in which French J ordered the applicant's solicitor to pay three-quarters of the respondent's costs on the basis that the application lodged by the solicitor on behalf of the applicant for a temporary entry permit
"Ľreflected a serious failure to give reasonable attention to the relevant law and facts as did the proceedings instituted in this court."
Again, Goldberg J thought that French J had founded upon unreasonableness in the initiation or continuance of an action which had no, or substantially no, chance of success, as conduct which attracted the exercise of the jurisdiction. His Honour continued (at 236):
"The authorities do not support the proposition that simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will invoke the jurisdiction. There must be something more namely, carrying on that conduct unreasonably. It is not clear what is encompassed by 'unreasonably' initiating or continuing proceedings if they have no or substantially no chance of success. It seems to me that it involves some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success with either a recognition that there is no chance of success but an intention to use the proceeding for an ulterior purpose or with a disregard of any proper consideration of the prospects of success.
Expressing the principle this way accommodates the competing principle that a party is entitled to have a practitioner act for him or her even in an unmeritorious case." (my emphasis)
Goldberg J ordered Flower and Hart, the solicitors for the applicant in the proceeding, to pay the costs of the respondent (except those on its cross-claim) on an indemnity basis, characterising the commencement of the proceeding as "an unreasonable institution of a proceeding with no prospects of success" (at 251).
64 In Levick, a solicitor had, on behalf of a client presented with a creditor's petition by the Deputy Commissioner of Taxation, opposed the petition on various Constitutional grounds. On the hearing of the petition, counsel for the debtor was unable to advance any coherent argument to support those grounds and the primary Judge made an order for costs against the solicitor. A Full Court of this Court cautioned against a too ready making of orders that solicitors pay costs because of the importance in the administration of justice that lawyers be available to serve the interests of persons with weak cases. Wilcox, Burchett and Tamberlin JJ stated (at [44]):
"Ľunreasonable conduct must be more than acting on behalf of a client who has little or no prospect of success. There must be something akin to abuse of process; that is, using the proceeding for an ulterior purpose or without any, or any proper, consideration of the prospects of success." (my emphasis)
Their Honours noted that the primary Judge had inferred that the spurious arguments which had occupied the Court "clearly originated with the lawyers". Their Honours distinguished situations in which a difficult case is taken to a lawyer by a client who wishes it to be pursued in court and in which a lawyer must present, on instructions, a case which the lawyer regards as bound to fail. Their Honours said (at [45]):
"This is a case where the lawyers themselves thought up the 'legal' points and advanced them on behalf of the client. It is unreasonable, in the sense of a dereliction of duty (to both the client and the court) for any lawyer to take that course without first being satisfied that the points are, at least, seriously arguable. We agree it was not necessary in the present case that the lawyers be satisfied that the points would succeed; but it was necessary they be satisfied there was a rational basis upon which they might succeed."
The Court concluded that while the jurisdiction to order costs against a solicitor in respect of an unsuccessful issue held to have been pursued in serious dereliction of the solicitor's duty ought to be exercised sparingly and with great caution, nonetheless it had been open to the primary Judge to take that course in the instant case. Whether he should do so was a question committed to the primary Judge's discretion and it was not demonstrated that the discretion had miscarried when he had ordered the solicitor to pay costs.
65 Unfortunately, in my opinion the conduct of the Solicitors in the present case warrants the award of an order that they pay Pasminco's costs on an indemnity basis. The reason is that on the evidence, including the lack of relevant evidence from them explaining the position, I infer that they commenced the proceeding in this Court based on the TP Act claims, without any or any proper consideration of the prospects of success of those claims. If the Solicitors had believed that those claims had had some prospects of success, they could not have been criticised for having launched the proceeding in this Court in order to obtain the advantages they apparently perceived in litigating here. But they were not entitled to commence the proceeding in this Court irresponsibly, recklessly as to whether the federal claims had any prospect of success. Yet it seems to me that this is precisely what they did. If they had responsibly considered the matter, they would have appreciated that the federal claims had no prospect of success at all.
66 In substance, the reasons I have given above for concluding that the Solicitors should pay Pasminco's costs are also my reasons for ordering that the costs be paid on an indemnity basis. In so far as it was brought under Part VA of the TP Act, the proceeding was not only untenable, but was brought irresponsibly without any, or any proper, consideration of the question whether it had any prospect of success; cf Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 400-401; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 232-234; Re Wilcox; ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151.
67 By "indemnity costs", I mean all of the costs actually incurred by Pasminco excepting costs unreasonably incurred or unreasonable in amount. This formula is to be applied in context. The context here was the limited one of establishing absence of jurisdiction on the basis of the applicants' pleading.
68 There are some unusual features of this case. In all the other cases concerning orders for costs against non-parties of which I am aware, what has been in issue is "litigating at all", whereas the present case is a "wrong court case". Pasminco acted properly in promptly bringing to the Court's attention what I have found to be its lack of jurisdiction. Yet Pasminco's position perhaps involves an inconsistency. It submitted that upon reading the applicants' pleading one sees immediately that the federal claims were "hopeless", "untenable" and "colourable". Yet in order to convince me of this, detailed written submissions were prepared, senior counsel from Sydney and junior counsel from Melbourne appeared, at least one representative of Pasminco's Melbourne solicitors attended court to instruct counsel, and three lever arch files of photocopied cases were provided to the Court. All this suggests that the TP Act claims were not obviously and necessarily doomed to fail, or at least that Pasminco thought that they were not. Yet it was plain to me on a mere reading of the statement of claim that they were.
69 In the context mentioned, the notion of indemnity costs may well exclude as excessive some of Pasminco's costs to which I referred. In the circumstances, I will keep the question of costs before me rather than make the usual order which would allow Pasminco to tax its costs at this stage in the usual way. If the parties cannot agree on the amount of the costs to be paid by the Solicitors, the matter may be restored on 24 hours' notice.
70 I turn next to the question of the costs of Pasminco's motion. Pasminco obtained the order it sought but the issue was arguable, and in fact the Solicitors succeeded, that is, Pasminco failed, on three of the four grounds argued. There will be the usual order for party and party costs on the motion. Because the costs of Pasminco's earlier motion for summary dismissal and of its present motion are interrelated, the same restraint on taxation will apply.