Generate Group Pty Ltd v Sea-Tech Automation Pty Ltd

Legal framework 4 In the absence of a costs order, the party who is successful on an interlocutory application is entitled to the costs of the application: r 40.04 of the Federal Court Rules 2011. Contrary to Sea-Tech's submissions, there is no general principle that costs of interlocutory applications are "resolved" when the proceeding has been concluded. 5 By r 40.13, if an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. However, the Court may order that the costs of an interlocutory application be taxed immediately in the exercise of the general power to make orders inconsistent with the Rules provided by r 1.35. 6 By s 43(3)(d) of the Federal Court of Australia Act 1976 (Cth), the Court may award a party costs in a specified sum. Although the Court's general preference, expressed in Costs Practice Note (GPN-COSTS) is in favour of making lump sum costs orders, the lump sum costs procedure is not intended to apply generally to interlocutory costs orders unless otherwise ordered: footnote 13 to the Practice Note. 7 Recognising that the circumstances in which a lump sum costs order may be made are not closed, in Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd [2016] FCA 37 at [9] to [10], Perram J identified the following matters that may justify such an order: (1) the avoidance of the delay, expenses and aggravation arising out of taxation;; (2) where the proceedings are complex and it may be more efficient for a trial judge to determine the issue of costs than to condemn the parties to a taxation; (3) where there is a basis to think that the costs of the taxation themselves may turn out to be irrecoverable; (4) where one party has been particularly truculent so that it may be thought just to spare the other from the inconvenience of further engagement over the process of taxation; and (5) where a party has failed to appear. 8 Having declined to make a lump sum costs order in that case, at [12], Perram J also declined to grant the applicants leave to proceed to a taxation of the relevant costs orders for the following reasons: (a) I do not think it would be desirable to make the parties go through two processes of taxation, which they will do if leave is granted and the trial costs are taxed; (b) there was nothing before me to suggest that the applicants were in particular need of the money or that the behaviour of the respondents might be criticised as being intended to draw out the proceedings to drain the applicants financially; (c) I do not accept that the conduct of the respondents was so unreasonable that the cost of their folly should be immediately visited upon them as a deterrent to such behaviour in the future; and, (d) it may be that the respondents will succeed at trial and obtain costs orders greater than those which the applicants have present secured.

Consideration 9 There is no reason to depart from the usual rule, reflected in r 40.04, that the costs of the interlocutory application should follow the event. 10 The documents in issue were prima facie privileged: main judgment at [9] to [11]. 11 I accept Generate's submission that there was no reasonable basis after about 26 July 2017 (when Ms Pettit, Generate's Operations Officer, swore an affidavit in support of the privilege claims and a claim that the crime/fraud exception applied was abandoned) for Sea-Tech to continue to dispute the claims. I also accept that Sea-Tech never had a good reason to doubt Ms Pettit's reliability as to the matters addressed in her affidavit verifying the claims. Accordingly, I also accept Generate's submissions that the hearing on 12 September 2017 was unnecessary. 12 Even so, I am not persuaded that this is an appropriate case either for a lump sum costs order. As in Clipsal, the prospect of a taxation of costs at the end of the trial means that there is no significant efficiency to be gained by a lump sum costs order. I do not accept that the unreasonableness of Sea-Tech's conduct provides a sufficient basis to depart from the ordinary position that the lump sum costs procedure does not apply separately to interlocutory costs orders. 13 For the same reasons given by Perram J in Clipsal, I do not think that the circumstances warrant an order that the costs order be made payable forthwith. In reaching this conclusion, I acknowledge that Sea-Tech put Generate to unnecessary expense in disputing the privilege claims but I do not accept that, without more, this conduct justifies permitting Generate to put Sea-Tech to the additional expense of a separate taxation of the costs order. I also am not satisfied that the resolution of the privilege dispute substantially delayed the progress of the main proceeding. 14 Accordingly, I will simply order Sea-Tech to pay Generate's costs of the interlocutory application. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.