Grey v Mango Pre Paid Calling Cards Pty Ltd

introduction 1 These reasons relate to costs arising out of the judgment of 17 December 2004 (Grey v Mango Pre Paid Calling Cards Pty Ltd [2004] FCA 1664), whereby the first respondent successfully set aside a judgment in default of appearance against it obtained by the applicants. 2 The applicants submit this is an instance in which costs should not follow the event and seek costs of the motion to set aside the default judgment in any event. The first respondent seeks the usual costs order; that is, the applicants pay the first respondent's costs of the motion. 3 The circumstances which resulted in the default judgment being entered against the first respondent are set out in my reasons of 17 December 2004 at [7]-[21]. 4 The parties do not dispute that the Court's discretion to order costs is at large: Federal Court of Australia Act 1976 (Cth), s 43(2). The discretion is unfettered, save only that it be exercised judicially and not be exercised against the successful party except for some reason connected with the case: Donald Campbell & Co Ltd v Pollack [1927] AC 732 at 811-812; Ruddock v Vadarlis (2001) 115 FCR 229 at 234. The discretion may be exercised not only to deprive a successful party of costs but also to make an order that the successful party pay the other party's costs: Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129; Hifu Electronics Pty Ltd v Fujian Pacific Pty Ltd [1998] FCA 1730. 5 The applicants concede that costs normally follow the event in the absence of special circumstances justifying some other order. The first respondent submits it was wholly successful in its application to set aside the orders of 29 April 2004 and there is nothing in the circumstances to justify a departure from the general rule. 6 Having regard to the history of this proceeding and to the submissions, I do not consider that the usual order that the costs follow event should be adhered to in this case. 7 First, regard must be had to the respondent's conduct. The first respondent's conduct prior to its filing of the notice of appearance evidences repeated disregard for, and frustration of, the court process which led to the default judgment being sought and to the application to set aside. Further, the explanation for the first respondent's repeated failure to appear as proffered by Mr McConnell for the first respondent was inadequate. In par [13] of the reasons of 17 December 2004 the Court observed that the first respondent 'has ignored the real seriousness of the orders sought on the part of the applicants'. 8 In addition, the first respondent could have avoided the judgment being entered against it by make a payment into court. It did not choose to do so and instead sought subsequently to set aside the default judgment. 9 In this respect, conduct of the first respondent, and that of its solicitors, left much to be desired. Evidence shows that the first respondent was aware of the proceedings at least from 1 April 2004, if not before that. Despite being advised of the directions hearings on 6 April and on 29 April and of the applicants' intention to seek orders against it, the first respondent failed to take steps to file a notice of appearance or to appear at the directions hearings. In my view, the conduct of the first respondent, and that of its solicitors, count adversely in the exercise of the discretion. 10 Second, the argument relating to irregularity of the judgment in default, which turned out to be the decisive issue, was not raised by the first respondent until the hearing of the application to set the judgment aside on 22 July 2004. 11 Third, I consider that it is relevant to have regard to the relative prejudice. If the default judgment had not been set aside, the first respondent would have been foreclosed from contesting the applicants claim and would have suffered irreversible prejudice. On the other hand, had the default judgment not been set aside, the applicants would have enjoyed the fruits of their application without having to argue the merits of their claim. The consequence of setting aside of the default judgment on 17 December is that the applicants have had to endure substantial delay and expense. Furthermore, in the circumstances of this proceeding, it was reasonable for the applicants to seek to obtain orders leading to the default judgment even though it was later found to have been made irregularly. 12 In conclusion, in the present case, I consider that it would be fair to order that: (1) the first respondent pay the applicant's up to but not including the hearing of the application to set aside; (2) the applicants pay the first respondent's costs of the hearing of 22 July 2004 and subsequently to and including the date of judgment on the application to set aside. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.