Edwards v Retail Employees Superannuation Pty Ltd a trustee of the Retail Employees Superannuation Trust

Federal Court of Australia|2024-12-16|Before: Kerry J, Mr J, Charlesworth J

THE COURT ORDERS THAT:

The applicant is to pay the costs of the third and fourth respondents of and incidental to the originating application to be paid as follows:
1. the third and fourth respondents' costs of and incidental to the preparation of the appeal book index (including corresponding with the applicant and the Court and attendances before a registrar) are to be paid on an indemnity basis;
2. otherwise on a party-party basis.
The applicant is to pay 70% of the third and fourth respondents' costs of their interlocutory application dated 16 October 2024 on a party-party basis. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT CHARLESWORTH J
On 19 September 2024, the Court made an order dismissing this appeal and a further order requiring that any application for costs be made on or before 26 September 2024. In the absence of any such application, the parties were to bear their own costs. The Court has before it an application by the third and fourth respondents for an order that the applicant pay their costs on an indemnity basis or, alternatively, on a party-party basis.
No costs order is sought by the first and second respondents.
The applicant submits that the parties should bear their own costs.
Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a discretion on the Court to make an order for costs against a party or a non-party. The discretion must be exercised judicially and in accordance with the purpose for which it is conferred. That purpose is compensatory, not punitive. In the usual run of cases, the discretion is to be exercised so as to award costs in favour of a successful party, but that is not a hard and fast rule. As the High Court explained in Northern Territory v Sangare (2019) 265 CLR 164 (at [25]): A guiding principle by reference to which the discretion is to be exercised - indeed, 'one of the most, if not the most, important' principle - is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. … (footnote omitted)

The result in the proceedings

The appeal concerned a death benefit payable under a superannuation policy administered by the first respondent, the trustee of the Retail Employees Superannuation Trust on the death of Ms Jessie Murphy. The trustee originally determined that Ms Murphy was the spouse of the applicant, Mr James Edwards, and that the whole of the benefit should therefore be paid to him. It later changed that decision, concluding that Mr Edwards was not Ms Murphy's spouse and that he was not otherwise in an interdependency relationship with her. The trustee determined that the benefit should instead be shared between Ms Murphy's parents, the third and fourth respondents.
Mr Edwards lodged a complaint from that decision with the Australian Financial Complaints Authority (AFCA) under s 1054 of the Corporations Act 2001 (Cth). Ms Murphy's parents were joined as parties to that complaint by an order made by AFCA under s 1056A(3) of the Act. AFCA affirmed the trustee's decision to pay the death benefit to Ms Murphy's parents.
Shortly after commencing the appeal, Mr Edwards sought and obtained an order restraining the distribution of the death benefit to Ms Murphy's parents until the final determination of this appeal. Mr Edwards named Ms Murphy's parents as the third and fourth respondents. He did not at any time suggest that they were neither necessary nor proper parties to the appeal.
The appeal to this Court is confined to a question of law: Act, s 1057(1).
Mr Edwards argued that AFCA had erred in 12 respects giving rise to five questions of law. His principal contentions were that AFCA had erred in law by misconstruing and/or misapplying its discretionary powers to obtain materials that he claimed were necessary for the performance of its functions. Mr Edwards had requested the exercise of those powers both for the purpose of having AFCA obtain a medical report concerning Ms Murphy's borderline personality disorder as well as documents that he claimed would be necessary to (among other things) inform the medical opinion. Mr Edwards submitted that the only proper exercise of the discretion in all of the circumstances was to exercise the discretion in accordance with his requests. There were multiple arguments underpinning that aspect of the appeal. My reasons for rejecting each of them are set out at some length in Edwards v Retail Employees Superannuation Pty Ltd a trustee of the Retail Employees Superannuation Trust [2024] FCA 1091 (Reasons).

The costs application

Ms Murphy's parents seek an order for indemnity costs on the basis that the grounds of appeal were so unmeritorious that they ought never to have been advanced. In addition, they submit that the appeal itself was conducted in a manner that was "improper" in various respects discussed below.
Mr Edwards' primary submission is that Mr and Mrs Murphy are in the position analogous to that of an intervenor in a legal proceeding, such that they can not have the benefit of any presumption that they would have an order for costs in their favour in the event that the appeal was unsuccessful. He submits that they were not necessary parties, and that their submissions duplicated or overlapped significantly with those made by the trustee and (to a lesser extent) AFCA. Whilst he accepts that his grounds of appeal were ultimately unsuccessful, he submits that their failure should not warrant an order for indemnity costs. He otherwise denies that there was improper or unreasonable conduct warranting such an order.

Impecuniosity

Mr Edwards invites the Court to find that he was impecunious, at least as at the commencement of this appeal. Evidence adduced on an earlier security for costs application supports such a finding and his impecuniosity at that time was not disputed in any event. If it were necessary to make a finding as to impecuniosity at the time of the security for costs application, I would have no difficulty making that finding on the basis of the material now before me.
As Counsel for Mr Edwards acknowledged, the impecuniosity of an unsuccessful party is not ordinarily a relevant consideration in determining whether a costs order should be made (although it might inform other considerations such as the time in which there should be compliance). So much was emphasised by the High Court in Sangare (at [27]): … As a practical matter, difficulties arise in determining the level of impecuniosity at which it would become a relevant consideration. There would also be substantial practical difficulties in determining, after the conclusion of the litigation, the unsuccessful party's financial standing. In point of principle, it is basic justice that a successful party should be compensated for expenses it has incurred because it has been obliged to litigate by the unsuccessful party. That consideration of basic justice does not lose its compelling force simply because the successful party happens to be wealthy: the successful party, whether rich or poor, did not ask to be subjected to the expense of unmeritorious litigation. The statutory power to order costs affords the successful party necessary protection against unmeritorious litigation; and unmeritorious litigation is no less unmeritorious because it is pursued by a person who is poor or who is a litigant-in-person.
It is necessary to identify how the question of impecuniosity bears any relevance on the present application. The arguments advanced by Mr Edwards on that question had two aspects to them.
First, it was submitted that Mr Edwards was impecunious at the time of the complaint proceedings before AFCA. It is unclear how that asserted impecuniosity can assist him on questions relating to the costs of this appeal. The appeal failed in part because of my own finding that AFCA did not make an error of law by failing to proceed on the basis that Mr Edwards was impecunious at that time, having regard to the material before it: Reasons, [62]. The material before AFCA amounted to two credit union statements showing low balances and an assertion of impecuniosity in a written submission of Mr Edwards' solicitor.
Demonstrating that Mr Edwards was in fact impecunious at that time cannot assist him in answering the present application. The relevance of his financial position at the time of the complaint itself is otherwise unclear.
Secondly, it was submitted that Mr Edwards' impecuniosity informed the manner in which his solicitor prepared and prosecuted this appeal. More specifically, it was asserted that the solicitor named Ms Murphy's parents as parties to the appeal even though they were not "necessary" parties and even though, it was submitted, he could well have excluded them as parties and then resisted any application they might then have made to be joined.
In other words, impecuniosity was raised to support the contention that Mr and Mrs Murphy were in an analogous position to that of an intervenor and hence could have no legitimate expectation of having an award of costs even if the appeal were to be dismissed.
It was submitted that the choice to join Mr and Mrs Murphy was related to Mr Edwards' impecuniosity because his financial position was such that he was not able to conduct a case that involved chasing every rabbit down every burrow.
The difficulty with those submissions is that the affidavits upon which Mr Edwards relied simply do not support them. There is nothing in the affidavits to suggest that either Mr Edwards or his solicitor even turned their minds to the question of whether Mr and Mrs Murphy were necessary parties to the appeal at the time that it was commenced. There is nothing in the affidavits to support a finding that the solicitor was engaging in some form of pragmatism to avoid the expense of a dispute about the status of any person as a proper or necessary party. The contentions as to whether or not Mr and Mrs Murphy were necessary parties to the appeal are of little or no consequence in any event, as I will now explain.

The status of Mr and Mrs Murphy as parties to the appeal

It may be accepted that a person applying for leave to intervene on an appeal must demonstrate that he or she is not a proper or necessary party: Comcare v Martinez [2013] FCA 160.
Importantly, it does not appear to be contentious that Mr and Mrs Murphy were "proper" parties to the appeal, irrespective of whether the joinder was "necessary" in the narrower sense described in Mr Edwards' submissions. It is true that they had been joined as parties in the complaint before AFCA on their own application. However, their joinder in that context was entirely orthodox given that Mr Edwards was seeking to have AFCA set aside the decision of the trustee to pay the death benefit to them. The real contest before AFCA was between Mr Edwards on the one hand and Mr and Mrs Murphy on the other.
The decision Mr Edwards was seeking was obviously one that would have affected Mr and Mrs Murphy's interests. It is academic to describe them as somehow choosing to participate in the complaint process and so equating them with that of a non-party intervener for costs purposes on a later appeal. The submission ignores the legal reality that Mr and Mrs Murphy were persons who were entitled to be heard on a question that so obviously affected their interests. Their joinder as respondents on the appeal was just as orthodox, given that the relief sought on the notice of appeal included orders substituting AFCA's decision with a decision setting aside the trustee's decision and substituting it with a decision to pay the whole of the death benefit to Mr Edwards. The distinction between a "necessary" and a "proper" party is of little assistance in the exercise of the Court's discretion to make an order for costs in Mr and Mrs Murphy's favour upon their successful defence of the appeal.
I have not overlooked the legal context in which arguments on the appeal were limited to questions of law. However, I was taken to no legal principle to the effect that the beneficiary of an administrative decision could not or should not defend an appeal of that kind or that they would not ordinarily be entitled to a costs order in the event that their defence based on questions of law was successful. More importantly, in the present case the arguments advanced by Mr Edwards were of a kind that asserted that AFCA had erred in law in making mixed findings of fact and where he had made a serious and unmeritorious allegation of fact (including on the appeal itself) that Mr and Mrs Murphy had deliberately withheld relevant documents from AFCA. In addition, both in the complaint proceedings and on this appeal Mr Edwards pursued a case theory that Ms Murphy was "a liar and a fantasist", using those adjectives without restraint at the appellant stage. That further reinforces my view that the defence of the appeal by Mr and Mrs Murphy was entirely reasonable and orthodox.
Nor have I overlooked that the submissions advanced by Mr and Mrs Murphy were the same in many respects as the submissions made by the trustee and to a lesser extent AFCA. However, I consider that to be the consequence of the trustee and AFCA departing to varying degrees from the usual position that a decision-maker whose decision is challenged would ordinarily abide the event: R v Australian Broadcasting Tribunal; Ex Parte Hardiman (1980) 144 CLR 13 (at [35], [36]). At the case management stage of these proceedings, the Court made orders that the written submissions of Mr and Mrs Murphy be filed first, and Counsel for Mr and Mrs Murphy went first in presenting oral submissions in respect of all the grounds of appeal. To the extent that it was submitted that Mr and Mrs Murphy have unreasonably incurred costs in duplicating submissions of the trustee or AFCA, I reject the submission and for the purpose of any taxation I make it plain that there should be no deduction in the quantum of Mr and Mrs Murphy's costs referrable to any duplication across the respondents' submissions.
As parties to the appeal Mr and Mrs Murphy were entitled to advance all submissions reasonably necessary to protect their interests in defending the legality of AFCA's decision. The duplication arguments are of a kind that might have some relevance on any application for costs that might have been brought by the trustee or AFCA, but no such applications are before me.
It is conventional that costs should follow the event in a proceeding (including an appeal of this kind). There is no proper basis for departing from that convention here, Mr Edwards having failed on each ground of appeal.
It remains to consider whether costs should be awarded on an indemnity basis.

Indemnity costs

The principles guiding the Court's discretion to award costs on an indemnity basis are well established. They were usefully summarised by the Full Court in Melbourne City Investments Pty Ltd v Treasury Wines Estates Limited (No 2) [2017] FCAFC 116 (at [5]): In broad terms an order for indemnity costs requires that some special or unusual feature arises: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). Indemnity costs are not punitive but are designed for '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': Hamod v New South Wales (2002) 188 ALR 659 at 665 (Gray J, with whom Carr and Goldberg JJ agreed). Such circumstances may include where allegations are made 'which ought never to have been made', where the case is 'unduly prolonged by groundless contentions' (Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115 at [15], [17] (Davies J)), and where 'the applicant, properly advised, should have known that he had no chance of success' (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (Woodward J)) or 'persists in what should on proper consideration be seen to be a hopeless case' (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303 (French J)).
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, Woodward J said that it was appropriate to consider indemnity costs in cases where it appeared that an action had been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success (at 497). His Honour observed that in cases of that kind it may be presumed that the action was commenced or continued for some ulterior motive or because of a wilful disregard of the known facts or the clearly established law.
An order for indemnity costs may be made where a party engages in conduct deserving of criticism and the conduct resulted in a greater expense to another party: Clifton v Kerry J Investment Pty Ltd (No 2) (2020) 277 FCR 382 (at [30] - [31]).
Counsel for Mr and Mrs Murphy submitted that the grounds of appeal concerning the exercise of AFCA's discretionary powers were wholly unmeritorious and pursued with an agenda to embark upon a fishing expedition so as to obtain irrelevant documents of the kind Mr Edwards had sought at the complaint stage.
I have some difficulty understanding the suggestion there was a motive to embark on a fishing expedition in pursuing the appeal itself. Mr Edwards did not commence this appeal in order to invoke this Court's powers to obtain documents of the kind he had sought in the complaint proceedings. The circumstance that his success on the appeal might have resulted in AFCA ultimately exercising its own discretionary powers in a way that Mr Edwards favoured does not support a finding that his motivations in pursuing the appeal were improper. Remittal of the complaint to AFCA would have followed findings that there had been an error of law of the kind Mr Edwards had alleged, in which case his position with respect those errors would have been vindicated.
The Reasons explain why the grounds of appeal were rejected, at times in stern terms. The Court was critical of Mr Edwards persisting with an allegation that Mr and Mrs Muphy had deliberately withheld relevant documents from AFCA and emphasised that there was no proper evidentiary foundation for it. However, for the most part, I consider that part of the appeal to be a manifestation of Mr Edwards' apparently unshakeable conviction that each and every document relating to every aspect of Ms Murphy's medical condition and relationship was "relevant" and thus essential for the performance of AFCA's task. Among other things, I concluded that Mr Edwards' assertion about the existence of relevant documents arose no higher than speculation and that AFCA did not make an error of law in concluding that they were not necessary for the performance of its own task. I specifically criticised Mr Edwards' submission that Ms Murphy's gynaecological records would be relevant to the discharge of AFCA's functions. On the one hand Mr Edwards had argued that the content of the documents he had sought to be produced were unknown (as was the content of any medical report based on them), and yet at the same time he persisted with his case theory that the deceased was "a liar and a fantasist". I find that there was unreasonable conduct in the prosecution of that aspect of the appeal that was, to some extent, wasteful of costs.
Having said that, I observe that the costs expended by Mr and Mrs Murphy in dealing with the arguments would not have been significantly greater if the arguments were confined to questions of relevance rather than allegations of wrongdoing on their part, or if they were phrased more appropriately so as to confine them to the existence of a necessary enquiry as to whether Ms Murphy's communications toward the end of her life could be relied upon as reliable indications of her true state of mind or long term intentions. It is to be borne in mind that costs are awarded for a compensatory purpose, and not to punish inappropriate or improper conduct per se. Considered as a proportion of the whole of the issues arising on the appeal, I do not consider the criticisms I have made of Mr Edwards' conduct and his case more generally to justify an order that the costs of the appeal be awarded on an indemnity basis.
As I observed in the Reasons, AFCA's rejection of Mr Edwards' request that it exercise its compulsive powers to obtain a medical report was based on an implicit rejection of his assertion that he was impecunious and so unable to produce such a report himself. Whilst I have rejected Mr Edwards' argument that AFCA erred in that respect (and that it erred in giving inadequate reasons in relation to it), his arguments on that topic were not so unmeritorious so as to support an award of indemnity costs. I make the same observation of arguments concerning AFCA's conceptualisation of the complaint proceedings as adversarial, as well as arguments concerning the structure of AFCA's reasons as they related to the definition of a spousal relationship. The circumstance that those grounds were unsuccessful is not in itself a reason to award indemnity costs.

Preparation of the Appeal Book

Finally, Mr and Mrs Murphy made a discrete allegation of improper conduct on the part of Mr Edwards by his solicitor in the preparation of the appeal book. The complaint was that Mr Edwards' solicitor had prepared an index to the appeal book that was deficient in two respects: it did not contain relevant material that was before AFCA and the descriptions of some documents were expressed in words that went beyond an objective description and strayed into submissions or editorialising about the document itself. By way of illustration, the description in respect of one email apparently sent in Mr Edwards' name included an assertion that Mr Edwards had not in fact sent it (an issue raised before AFCA and rejected by it).
On the affidavit material before me I am satisfied that Mr Edwards' solicitor found the process of structuring the appeal book among its component parts to be particularly difficult. Prior to circulating the index, he sent an email to the respondents' solicitors proposing how the appeal book should be organised, but received no response. However, that email did not foreshadow any intention to omit documents that he subjectively considered to be irrelevant, nor did it foreshadow his intention to prepare an index that contained descriptions amounting to submissions, and so the lack of response is of little consequence.
Counsel for Mr Edwards invited the Court to find that the preparation of the appeal book was a consequence of Mr Edwards' solicitor being a busy professional faced with a difficult task and having no intention that could support a finding of deliberate impropriety. In my view, it is unnecessary to categorise conduct as amounting to "improper conduct" in a disciplinary sense in order for the conduct to justify an order for indemnity costs. To fix upon that label is to distract from the correct question as to whether there exists objectively unreasonable conduct that has caused a party to incur expenses that ought not to have been incurred.
In the present case, Mr Edwards' solicitor unreasonably persisted with arguments that the appeal book was adequate, resulting in a need for there to be a contested exchange before a Registrar on the question in order for the matter to be resolved. The conduct of omitting relevant material and including inappropriate submissions in the descriptions was unreasonable, as was the conduct in doubling down on his position resulting in the need for a Registrar to make orders. I find that the descriptions given for the documents particularly inappropriate, but for present purposes it is not necessary to find that the conduct was accompanied by an intention to improve Mr Edwards' position on the appeal or an intention to deliberately prepare the appeal book in a partisan way. The conduct was obviously wasteful of Mr and Mrs Murphy's resources.
To the extent that it was submitted that Mr Edwards should not be made to pay indemnity costs because of conduct referable to his solicitor, I reject the submission.
I am satisfied that Mr and Mrs Murphy's expenses relating to the appeal book were a consequence of unreasonable conduct and it is appropriate that they be compensated in full for the costs of considering the draft index, corresponding with parties about it, corresponding with the Court about it and dealing with the Registrar about it. There will be an order for indemnity costs in relation to those expenses. The costs of the remainder of the appeal should be quantified on a party-party basis. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Charlesworth.

Associate: Dated: 16 December 2024 SCHEDULE OF PARTIES SAD 84 of 2023 Respondents Fourth Respondent: JOANNE ROBERTA MURPHY

Corporations Act 2001(Cth)ss 1054, 1056A, 1057

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