Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses

1. The respondent's interlocutory application dated 30 March 2015 (the Interlocutory Application) be dismissed.
2. The applicant pay 70% of the respondent's costs of the proceeding (including the costs of the Interlocutory Application and reserved costs), to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MOSHINSKY J: 1 On 3 February 2016, I handed down reasons for judgment in these proceedings: Director of Consumer Affairs Victoria v The Good Guys Discount Warehouses (Australia) Pty Ltd [2016] FCA 22. These reasons should be read together with those reasons for judgment (the Reasons). 2 As set out in paragraph [213] of the Reasons, I concluded that The Good Guys did not engage in misleading and deceptive conduct, or conduct likely to mislead or deceive, in relation to any of the five store visits. Accordingly, in each proceeding, there was an order that the proceeding be dismissed. In paragraph [214] of the Reasons, I said that, in relation to costs, I proposed to give each party the opportunity to file a short written submission, given that some of the time during the trial was devoted to the respondents' objections to evidence based on s 138 of the Evidence Act 1995 (Cth), which were determined adversely to the respondents. The parties have now filed written submissions and responding submissions on costs, and have indicated that they are content for the issue of costs to be dealt with on the papers. 3 The Director of Consumer Affairs Victoria (the Director) submits that in disposing of these proceedings, the Court should make formal orders as follows: (a) In proceeding VID 507 of 2014; (i) The Respondent's Interlocutory Application, dated 30 March [2015], be dismissed. (ii) The Respondent pay the Applicant's costs of and incidental to the Interlocutory Application, including reserved costs. (iii) The Application issued by the Director of Consumer Affairs Victoria, dated 1 September 2014, be dismissed. (iv) The Applicant pay 80% of the Respondent's costs of an incidental to the Director's Application, including reserved costs; (b) In proceeding VID 508 of 2014, orders that: (i) The Respondent's Interlocutory Application, dated 30 March 2015, be dismissed. (ii) The Respondent pay the Applicant's costs of and incidental to the Interlocutory Application, including reserved costs. (iii) The Application issued by the Director of Consumer Affairs Victoria, dated 1 September 2014, be dismissed. (iv) The Applicant pay 80% of the Respondent's costs of an incidental to the Director's Application, including reserved costs. 4 The respondents submit that the appropriate costs order is that the Director pays the respondent's costs in each proceeding. 5 The principles relating to the discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) are well established: see, eg, Latoudis v Casey (1990) 170 CLR 534 at 567 per McHugh J; Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11]-[12] per Black CJ and French J; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [3]-[5] per Finkelstein and Gordon JJ; Queensland North Australia Pty Ltd v Takeovers Panel (No 2) [2015] FCAFC 128 at [11], [16]-[18] per Dowsett, Middleton and Gilmour JJ. Although usually, in the exercise of the discretion, it is ordered that costs follow the event, there may be situations where the event of success is contestable, by reference to how separate issues have been determined: see Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs and Citizenship (2013) 251 CLR 322 at [241] per Kiefel and Keane JJ, cited by French CJ, Kiefel, Nettle and Gordon JJ in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53 at [6]. 6 In the present case, each proceeding was commenced on or about 1 September 2014. On or about 30 March 2015, the respondent in each proceeding filed an interlocutory application seeking the exclusion, pursuant to s 138 of the Evidence Act, of nearly all of the Director's evidence about the store visits: see paragraphs [40]-[41] of the Reasons. On 14 May 2015, orders were made setting down the interlocutory applications for hearing, and also fixing the trial date (which was some time later). On 12 June 2015, the interlocutory applications came on for hearing before another judge of this Court. As noted in paragraph [42] of the Reasons, on that occasion, the hearing of the applications needed to be adjourned because the Director's evidence was deficient in that it did not deal with the discretionary factors relevant to s 138(3). There was an order that the Director pay the costs of the adjournment, including the costs of that day, on an indemnity basis. With the agreement of both sides, the interlocutory applications were then listed for hearing on the same date as the trial. This was due to the overlap of issues between the interlocutory applications and the issues to be examined at trial. 7 As noted in paragraph [43] of the Reasons, it was common ground before me at trial that the issues raised by the interlocutory applications should be dealt with at the same time as the other issues in the trial, and dealt with in the trial judgment. 8 As set out in paragraph [7] of the Reasons, I concluded that: (a) in relation to the objections to evidence based on s 138 of the Evidence Act, that the evidence should be admitted; and (b) in relation to each of the five store visits, that The Good Guys' conduct was not misleading or deceptive or likely to mislead or deceive. 9 Thus, while The Good Guys were successful in the disposition of the proceeding as a whole, the Director was successful in relation to the objections to evidence based on s 138 (that is, the interlocutory applications). Although in my Reasons I generally referred to the issues raised by the interlocutory applications as objections to evidence based on s 138 of the Evidence Act, nothing turns on this mode of expression for the purposes of dealing with the issue of costs. 10 In my view, in the circumstances of this case, an order as sought by the respondents, namely that the Director pay their costs of the proceeding, would be inappropriate. This would, in my view, fail to recognise that the respondents raised a significant, separate issue (namely, the s 138 objections), which occupied a substantial amount of time, and upon which they were unsuccessful. Although there was an overlap of issues between the proceeding generally and the s 138 objections, it is clear in my view that these objections increased the length of the trial and the work involved. In these circumstances, a significant allowance should be made for the fact that the respondents raised and were unsuccessful on the objections. I should note that the s 138 objections were of a different character to an ordinary objection to evidence, which is part and parcel of a trial. The objections based on s 138 constituted a significant, separate part of the case, which is demonstrated by the fact that they were the subject of lengthy and substantial written and oral submissions. 11 On the other hand, I am not minded to make orders for costs as proposed by Director. The Director seeks an order that the respondents pay the Director's costs of the interlocutory applications and that the Director pay 80% of the respondents' costs of the proceedings. The Director submits that costs should follow the event in relation to the interlocutory applications, hence there should be an order in his favour on those applications. He also submits that the costs payable to the respondents should be reduced to 80% on account of the respondents' failure to succeed on two aspects of the misleading and deceptive conduct case, namely the 'characterisation' issue and the 'trade and commerce' issue discussed in paragraphs [211]-[212] of the Reasons. 12 In my view, a separate costs order in relation to the interlocutory applications would be inappropriate in the circumstances. There was a substantial overlap of issues between the interlocutory applications and the misleading and deceptive conduct case, which was the very reason for setting the applications down at the same time as the trial. While it may be possible to point to some items of legal work as being related solely to one aspect or the other, I think it likely that there would be many instances of legal work (for example, preparation for trial) that related to both. Unpicking what each item of work related to would be a very difficult process. It would also be time-consuming and costly for both parties. Moreover, in circumstances where the interlocutory applications were set down for hearing at the same time as trial, the issues they raised became, substantively, issues in the trial. It is not unlike a situation where a defendant raises two alternative defences to a claim, both of which occupy a considerable amount of time at trial, and the defendant is successful in relation to one defence but not the other. Here, the respondents in effect raised two alternative defences to the case that was brought: one was that the main body of evidence should be excluded pursuant to s 138; the other was that, in the event that the evidence was admitted, the conduct was not misleading or deceptive or likely to mislead or deceive. The respondents were successful in relation to one defence, but not the other. In these circumstances, I consider it appropriate to start from a position that the respondents are prima facie entitled to their costs, rather than starting from a position that the costs of the interlocutory applications should follow the outcome of those applications. 13 In my view, an appropriate percentage reduction in the costs payable to the respondents is 30 per cent. I think that this percentage appropriately recognises that, by the s 138 objections, the respondents raised a separate and significant set of issues which increased the time at trial and (it is to be inferred) increased the legal work before trial. I have not attempted to quantify the time at trial taken up by the s 138 objections, on the one hand, and the misleading and deceptive conduct case, on the other. In my view, a considerable part of the evidence related to both aspects. I think the Director's submissions underestimate the time the trial would have taken without the s 138 objections. In my view, a reduction of 30 per cent is a substantial reduction which reflects my assessment that the s 138 objections were a substantial issue in respect of which the respondents failed. 14 In adopting this percentage, I have not taken into account the respondents' lack of success on the 'characterisation' and 'trade or commerce' issues, which I consider to be merely sub-issues not justifying any departure for the usual approach to costs. 15 For these reasons, there will be an order in each proceeding that the Director pay 70 per cent of the respondent's costs of the proceeding (including the costs of the interlocutory applications and reserved costs). In order to provide context for the costs order, it is appropriate that there also be an order, as submitted by the Director, formally dismissing the interlocutory application in each proceeding. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.