Foster's Australia Limited v Cash's

AND: CASH'S (AUSTRALIA) PTY LTD ACN 004 275 183

JUDGE: KENNY J DATE: 25 JULY 2013 PLACE: MELBOURNE

INTRODUCTION 1 By its interlocutory application dated 26 April 2012, CUB Pty Ltd ('CUB') successfully sought orders that two separate questions ('Separate Questions') be determined prior to and separately from all of the questions in this proceeding. The Court determined the separate questions and delivered reasons for judgment on 29 May 2013. The Separate Questions were both determined in favour of CUB. 2 On 29 May 2013, the Court ordered that the parties file and serve written submissions on costs. In written submissions dated 7 June 2013, CUB seeks orders that the Cash's (Australia) Pty Ltd ('Cash's') pay CUB's taxed costs of and incidental to the Separate Questions forthwith. In written submissions also dated 7 June 2013, Cash's seeks an order that there be no order for costs or an order for costs in the cause. 3 It is convenient to note here that, in the interim, Cash's unsuccessfully sought leave to appeal from my judgment of 29 May 2013: see Cash's (Australia) Pty Ltd v Foster's Australia Ltd [2013] FCA 695.

COSTS - RULES AND PRINCIPLES 4 Under s 43(2) of the Federal Court of Australia Act 1976 (Cth), the award of costs is at the discretion of the Court. This discretion must be exercised judicially, but it is not otherwise fettered. Nonetheless, ordinarily, costs will follow the event. In the absence of special circumstances, a successful litigant will ordinarily be entitled to its costs. 5 Subject to the usual discretion to be exercised by the Court, the ordinary rule that costs should follow the event is applicable to the determination of separate questions. See Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] FCA 325 ('Baulderstone') at [5], where Finkelstein J observed: [I]n a case where there has been a split trial of disputed questions of fact or law and it is possible at each stage of the case to identify the successful party, the ordinary rule which is applied after a final hearing should also be applied to the split trial. That is, there is no justification for implying to the discretionary power to award costs a limitation to the effect that costs should only be ordered once the outcome of the whole action is known. 6 In Handberg v Chacmol Holdings Pty Ltd (No 2) [2005] FCA 680 ('Handberg') at [9], Heerey J adopted the same approach, observing: The trial of the separate questions determine substantive rights and obligations of the parties. These matters will not be the subject of further litigation. An order for costs in the cause is not appropriate. Heerey J ordered that costs should follow the event. 7 Once again, Gordon J adopted much the same approach in Andrews v Australia and New Zealand Banking Group Limited [2012] FCA 59 at [8] where her Honour rejected a submission that the assessment of "ultimate success" should await the resolution of all issues, citing Baulderstone at [5] (see above at [4]). 8 Furthermore, the Court may order that the costs of an interlocutory application be taxed and paid forthwith. Such an order is appropriate where the interests of justice require a departure from the general practice that the costs of interlocutory applications be taxed and paid at the conclusion of a proceeding: see Federal Court Rules 2011 (Cth), Rule 40.13 and the accompanying note; see also McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 at [14] - [20] and [38] (Weinberg J); Courtney v Medtel Pty Ltd [2004] FCA 347 at [20] - [22] (Sackville J); Handberg at [23] and [24]; and QS Holdings Sarl v Paul's Retail Pty Ltd (No 2) [2011] FCA 1038 at [32] - [37] (Kenny J). It is generally accepted that some reason must be shown to justify a departure from the general rule. 9 Different circumstances have been held to justify a departure from the general rule. For example, where substantive rights are determined by a trial of separate questions, the Court has held that the successful party should not be required to wait for the remaining issues to be determined before recovering its costs: see, for example, Handberg at [24]. Further, where an interlocutory proceeding has involved the resolution of a discrete issue and the principal proceeding is not likely to be resolved for some time, then too an order may be made that the costs of the interlocutory proceeding be taxed and paid forthworth: see, for example, Life Airbag Co of Australia Pty Ltd v Life Airbag Co (New Zealand) Ltd [1998] FCA 545 (Branson J) and Allstate Life Insurance Co & Ors v Australia and New Zealand Banking Group Ltd (No 13) [1995] FCA 626 (Lockhart, Lindgren and Tamberlin JJ).

APPLICATION OF THE RULES AND PRINCIPLES 10 In this case, the parties have chosen to litigate, in a separate hearing, the Separate Questions. Although the principal proceeding has not concluded, judgment on the Separate Questions can be regarded as having dealt with discrete issues and determining substantive rights. 11 CUB has been entirely successful in relation to the Separate Questions. CUB would necessarily have incurred substantial costs in connection with the determination of the Separate Questions. It appears unlikely that the proceeding will be entirely resolved before late 2014. The proceeding is not presently listed for trial; and there remain substantial interlocutory steps to be completed. 12 In the circumstances, it would be contrary to the interests of justice to deny CUB the opportunity to have its costs taxed, without delay. 13 Of course, if Cash's succeed in the future part of the litigation, it might expect to obtain the benefit of a costs order. The possibility that Cash's may succeed on some aspects of the litigation in the future, however, does not warrant deferring the making of a costs order or declining to make the order in the form CUB now seeks. 14 Cash's argued that the conduct of CUB had been such that "its shortcomings, even if not characterized [sic] as misconduct, has been responsible for and has caused the litigation of the issues on the separate questions and constitutes special reason why it should not receive its costs". By way of argument, I was referred to a number of authorities where special circumstances had resulted in a court withholding the payment of costs to a successful defendant, or plaintiff. Broadly speaking, the special circumstances warranting such an exercise of discretion are, as Mahoney J described in Jamal v Secretary, Department of Health & Anor (1988) 14 NSWLR 252 at 271: …of two general kinds. First, if the costs of the appeal have been increased by an issue on which the successful parties failed and those costs are of sufficient significance … And, secondly … if the conduct of the successful respondent may have justified the [action] being brought … or his conduct in relation to the matter may be discreditable to an extent warranting his being deprived on costs. 15 There are no circumstances of the first kind relevant to this case. On each of the significant issues within the Separate Questions proceeding, CUB was successful. Further, there is no argument before me, and I would not accept, that CUB's conduct of the proceeding itself was discreditable or "occasioned unnecessary litigation and expense": Ritter v Godfrey [1920] 2 KB 47 ('Ritter') at 56 and 60 (Atkin LJ); IFTC Broking Services Ltd v Commissioner of Taxation [2010] FCAFC 22 at [17] (Stone, Edmonds and Jagott JJ); see also, Sunday Times Newspaper Company Ltd v McIntosh & Ors (1933) 33 NSWSR 371 at 374. 16 Finally, I do not accept that CUB's conduct in relation to the patents and designs applications "justified" the cross-claim (which informed the Separate Questions), in the sense that Cash's became entitled to its costs in any event, or that CUB's conduct made it "responsible" for the Separate Questions proceeding, in the same sense. The cases of this nature centre on circumstances where a successful party has, by their misconduct prior to litigation, "brought the whole thing on" (Hartnett v Vise and Wife (1880) 5 Ex D 307 at 308) or where their conduct has otherwise substantially induced the litigation (Ritter at 53 (Lord Sterndale MR)). Examples in the cases to which I was referred include conduct giving rise to a reasonable suspicion that a man had committed adultery (Trenerry v Trenerry [1966] 2 NSWR 221), or alternatively, to circumstances in which a liquidator was said to have been "forced" in his duty as liquidator to recommence litigation on behalf of a company because the successful respondent compromised the accuracy of the company's books (Donald Campbell and Company Ltd v Pollak [1927] AC 732 at 739). 17 What is reinforced in every case, however, is that that the question is ultimately one left to the exercise of judicial discretion, taking into account all the circumstances of the litigation and its relevant antecedents. The current case is not, in all the circumstances, one which requires me to respond to CUB's conduct in the manner urged by Cash's. The conduct of CUB at issue in the Separate Questions is not misconduct, nor could it be said to have induced the Separate Questions litigation in the required way.

DISPOSITION 18 For the reasons stated I would order that: 1. The respondent/cross-claimant pay the costs of the applicant/cross-respondent of and incidental to the determination of the Separate Questions the subject of the orders made by the Court on 29 May 2013. 2. The respondent/cross-claimant pay the costs referred to in Order 1 forthwith, to be taxed in default of agreement. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.