Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd

Federal Court of Australia (Full Court)|2023-08-22|Before: Mr AM, Feutrill JJ

The application for leave to appeal is refused.
The appeal is dismissed with costs to be assessed by a registrar if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 Harvard Nominees Pty Ltd brought proceedings against five respondents, including Dimension Agriculture Pty Ltd, Mr Giovanni (John) Nicoletti and Mr Damian Bryce. The final determination of the proceedings involved two substantive hearings and two appeals. Ultimately, Harvard succeeded against Dimension but not against Mr Nicoletti and Mr Bryce. Harvard also succeeded against another respondent, Mr Simon Tiller. The fifth respondent took no active part in the proceedings. After judgment was entered against Dimension, it went into liquidation. 2 After the dismissal of the second appeal, the primary judge received submissions as to the appropriate orders as to the costs of the proceedings. As to the costs of Mr Nicoletti (who had effective control of Dimension throughout the conduct of the proceedings), Harvard contended that it was Dimension that should be required to pay any costs order made in his favour. In advancing that contention, Harvard relied upon authorities concerned with the making of what has been described as a Sanderson order. Harvard also raised a separate issue as to whether the indemnity principle was met in relation to costs claimed by Mr Bryce and contended that no costs order should be made in his favour. 3 In the result, Harvard was ordered to pay 10% of the respondents' costs of the proceedings to Mr Nicoletti and to pay 25% of those costs to Mr Bryce: Harvard Nominees Pty Ltd v Tiller (No 5) [2022] FCA 1510. 4 Harvard commenced an appeal against the making of those orders. The appeal was initially commenced as of right on the basis that leave was not required. Subsequently, an interlocutory application for leave to appeal was filed and orders were made for the question of leave and any appeal to be determined at the same hearing.

Outcome 5 For the following reasons, leave to appeal is required and leave to appeal should be refused. Given the manner in which the appeal was commenced, it is appropriate for orders to be made dismissing the appeal on the basis that the interlocutory application for leave is refused. It was accepted that if Dimension's application was wholly unsuccessful then it was appropriate for costs to follow the event. Therefore, there should be an order for costs in favour of Mr Nicoletti and Mr Bryce.

The need for leave to appeal 6 In ALDI Foods Pty Limited as General Partner of ALDI Stores (A Limited Partnership) v Transport Workers' Union of Australia [2020] FCAFC 231; (2020) 282 FCR 174 at [69] (Besanko, Bromberg and O'Bryan JJ) it was observed that the prevailing view has been that a cost order, even when made as part of the final disposition of a proceeding, is interlocutory in nature. However, it was also noted that two Full Courts had expressed the view that a costs order made at the conclusion of proceedings was a final order: at [70]. In circumstances where neither party addressed the question whether leave was required and their Honours, in any event, would have granted leave, it was determined that it would be inappropriate to express a concluded view: at [71]. 7 The two instances referred to in ALDI Foods where the view has been expressed that a costs order made at the conclusion of proceedings is a final order are Probiotec Limited v University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30 at [79]; and Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61 at [291]. 8 In Probiotec, Rares J (Finn and Besanko JJ agreeing) reasoned that the costs order was made as a final order to finally dispose of the controversy as to costs between the parties. However, his Honour determined that since it was a case where leave would have been granted, the case was 'not an appropriate matter in which to decide whether leave to appeal is necessary from a final order for costs': at [79]. 9 In Les Laboratoires Servier a Full Court (Bennett, Besanko and Beach JJ) said at [291]: In this case, the costs orders were made as part of the final orders determining the rights of the parties in each of the proceedings concerning applications for revocation and amendment. Leave to appeal is not required. [citing Probiotic] … Whether or not the order for costs was interlocutory, in our view sufficient doubt attends the decision and substantial injustice would be caused … if the decision were wrong and leave, if necessary, were refused. Accordingly, to the extent that leave is required, it is appropriate that it be granted, hence our decision to grant such leave as was necessary … 10 Therefore, the statements that run counter to that which was observed in ALDI Foods to be the 'prevailing view' are obiter and ALDI Foods itself did not determine whether leave was required in a case where a costs order was made at the conclusion of the proceedings. 11 In a subsequent decision in Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v MB [2021] FCAFC 194, Griffiths J (Thomas and Stewart JJ agreeing) acted on the basis of the 'prevailing view' (as described in ALDI) that leave to appeal was required: at [12]. 12 A similar issue appears to have arisen in the New South Wales Court of Appeal: CG Maloney Pty Ltd v Noon [2011] NSWCA 397 at [104] where Campbell JA (Handley and Tobias AJJA agreeing) referred to his Honour's earlier reasons in Arena Management Pty Ltd (Receiver & Manager Appointed) v Campbell Street Theatre Pty Ltd [2011] NSWCA 128; (2011) 80 NSWLR 652 in which the relevant authorities were collected, including those decisions in other Australian jurisdictions which support the requirement for leave. In consequence, in Coffs Harbour City Council v Polglase [2020] NSWCA 265 at [179] Leeming JA (Basten and Macfarlan JJA agreeing) adopted the course of granting leave 'if such leave be necessary'. 13 The 'prevailing view' as applied in MB should be followed. A costs order is interlocutory. For the reasons given by Colvin J in Caratti v Commissioner of the Australian Federal Police [2021] FCA 1067 at [11]-[12], leave is required where an appeal seeks to challenge a costs order unless the justification for the challenge is said to be that the making of a different cost order is a necessary consequence of a successful appeal in respect of a decision that does not require leave. This is so even where it might be said that the costs order is an exercise of the costs discretion that is undertaken as part of or following the making of final orders disposing of proceedings. Therefore, leave to appeal is required in the present case. 14 It follows that Harvard must satisfy the principles concerning leave to appeal. Generally, they require an applicant for leave to demonstrate that the decision in respect of which leave to appeal is sought was 'attended with sufficient doubt to warrant its being reconsidered' and that 'substantial injustice would result if leave were refused, supposing the decision to be wrong': Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398.

Relevant principles concerning the discretion to award costs 15 The award of costs is discretionary: s 43 of the Federal Court of Australia Act 1976 (Cth). While the width of the discretion cannot be narrowed by any legal rule, the formulation of principles to guide the exercise of the discretion 'avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power': Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164 at [24]. Therefore, settled principles guide the exercise of the discretion to award costs which is to be exercised judicially: Oshlack v Richmond River Council (1998) 193 CLR 72 at [65] (McHugh J, Brennan CJ agreeing), [134] (Kirby J). 16 The discretion extends to the making of an order that an unsuccessful respondent to a claim should be ordered to pay directly or indirectly the costs of a successful respondent: Gould v Vaggelas (1984) 157 CLR 215 at 230 (Gibbs CJ). There are two possibilities. An order may be made that the applicant bear the costs of the successful respondent but that those costs form part of the costs that may be recovered by the applicant from the unsuccessful respondent (sometimes termed a Bullock order). Alternatively, an order may be made directly as between the respondents (sometimes termed a Sanderson order). In circumstances where a Bullock or Sanderson order is appropriate and there is a risk that the unsuccessful respondent may be unable to meet any costs order then the Court considers whether it would be fairer for that risk to fall on the applicant or the successful respondent. The Court may make a Bullock or Sanderson order as to part only of the costs awarded: Tresize v National Australia Bank Ltd [1999] FCA 28 at [15]. 17 Common instances where such orders may be appropriate are where a respondent answers a claim by pointing to the conduct of another party as being the conduct for which any liability arises thereby resulting in the applicant joining that other party as an additional respondent or where the allocation of responsibility between respondents was uncertain by reason of the nature of the conduct giving rise to liability. The circumstance that may justify an order of that kind in such cases is the responsibility of the unsuccessful respondent for the inclusion of the successful respondent. The ambit of the principles as to when such an order may be made are in issue and are considered further below. 18 Costs are awarded by way of indemnity. Therefore, a party seeking a costs order must have incurred a liability to pay those costs. The indemnity principle is flexible and is designed to allow for a just and fair result: Noye v Robbins [2010] WASCA 83 at [332]-[338] (Owen JA, Pullin and Buss JJA agreeing). The onus of establishing that a party seeking a costs order had no liability to meet a costs order lies on the party alleging that there was no liability. Further, in the absence of proof of an agreement to the contrary, the solicitor on the record for a party is taken to be entitled to look to that party for costs: Marsh v Baxter [No 2] [2016] WASCA 51 at [37] (McLure P, Newnes and Murphy JJA).

Principles concerning appeals in respect of discretionary decisions 19 As Harvard correctly accepted, the principles in House v The King (1936) 55 CLR 499 apply where an appeal is brought in respect of the exercise of a discretion as to costs. Therefore, to demonstrate appellable error, Harvard must show that the primary judge acted upon a wrong principle, mistook the facts, failed to take into account a material consideration or was guided by extraneous or irrelevant matters. Error may be inferred from the overall result but no claim of that kind was advanced by Harvard in the present case.

Relevant findings as to Harvard's substantive case against Dimension and Mr Nicoletti 20 The following findings by the primary judge assume significance. 21 Harvard is controlled by Mr John Caratti. There is considerable animosity between Mr Caratti and Mr Nicoletti. In 2019, Harvard leased two farms near Esperance in Western Australia to Dimension. The leases were on terms that were favourable to Dimension compared to the market. Harvard claimed that it entered into the leases in reliance upon the truth of certain representations made by Dimension (by its then director Mr Tiller) to the effect that Mr Nicoletti was not involved in Dimension. After the grant of the leases, deeds were entered into to ensure that Mr Nicoletti through Dimension had sole control of the two farms. The deeds were referred to by the primary judge as the 15 February Deeds. Thereafter, the farms were operated for the benefit of Mr Nicoletti (or entities with which he is associated). 22 From the time of Dimension's incorporation, Mr Nicoletti was involved. He was involved for the purpose of obtaining control of the farms. He deliberately concealed his involvement in Dimension because he knew Harvard (by Mr Caratti) did not wish him to be involved. 23 Mr Tiller and Dimension were found to have engaged in misleading or deceptive conduct which induced Harvard to enter into the leases. Harvard was found to be entitled to orders rescinding the leases ab initio and damages. Mr Nicoletti was found to have been involved in the concealment of the 15 February Deeds but that conduct occurred after Harvard had entered into the leases. However, Mr Nicoletti was not proven to have knowingly participated in the conduct that induced Harvard to enter into the two leases. 24 For reasons that are not material for present purposes, Mr Nicoletti's conduct in respect of the 15 February Deeds, though misleading or deceptive, was not found to cause any loss or damage to Harvard.

Reasons of the primary judge concerning costs of Mr Nicoletti and Mr Bryce

The costs order concerning Mr Nicoletti 25 As to the claim that a Sanderson order should be made, the primary judge reasoned as follows: (1) To the extent that Mr Nicoletti had been found to have behaved in a deceptive way (by his conduct in relation to the 15 February Deeds), that is appropriately reflected in a reduction to 10% in the application of a rule of thumb which otherwise would have resulted in an award of 25% of the respondents' costs (at [50]-[52]). (2) There was no basis to enlist the allegations of misleading conduct against Mr Nicoletti that had been determined as part of the substantive claim (by rejecting the claim that Mr Nicoletti was knowingly concerned in the conduct that caused Harvard to lease the two farms to Dimension) as a basis to deprive Mr Nicoletti of a cost order (at [52]). (3) In order to obtain a Sanderson order, Harvard must show that it was reasonable to join Mr Nicoletti and that 'the circumstances must be such that it is reasonable for the unsuccessful respondent [Dimension] to pay two sets of costs (one to the applicant [Harvard], the other to the successful respondent [Mr Nicoletti])' (at [59]). (4) It will be reasonable for the unsuccessful respondent to pay two sets of costs when the conduct of the unsuccessful respondent has been such as to make it fair to impose some liability on it for the costs of the successful respondent (at [59]). (5) Conduct on the part of an unsuccessful respondent that has contributed to the applicant's proceedings against the successful respondent has been described as conduct that will make it fair to make a Sanderson order (at [60]). (6) However, the categories are not closed and the 'fundamental question is whether it is fair between the applicant and the unsuccessful respondent that the unsuccessful respondent should bear responsibility for the costs of the successful respondent' (at [61]). (7) It was reasonable and proper for Harvard to sue Mr Nicoletti (at [62(1)], [64]). (8) The successful causes of action against Dimension and the unsuccessful causes of action against Mr Nicoletti were connected and interdependent (at [62(2)], [64]). (9) Recognising that there are no closed categories, it was always going to be reasonable for Harvard to sue Mr Nicoletti and nothing that Dimension did contributed to that decision. Harvard made the decision to sue Dimension uninfluenced by anything Dimension did (at [64]). (10) The other matters relied upon by Harvard did not make it fair for Dimension to bear Mr Nicoletti's costs (at [65]). (11) As to a submission that Mr Nicoletti 'engineered' the situation in which Harvard's costs must be recovered from a company in liquidation, it was doubtful that conduct by which Mr Nicoletti caused Dimension to be placed in liquidation could be a foundation for a Sanderson order but, in any event any difficulty in recovery 'just follows from the fundamental fact that Dimension is a limited liability company, and it happens that Harvard succeeded against it, but failed against the natural person standing behind it, Mr Nicoletti' (at [66]). 26 The primary judge concluded with the following (at [67]): I also do not accept the relevance of Harvard's submission that it is fair to impose the risk of non-recovery of costs on Mr Nicoletti because he refused to procure Dimension to vacate the Farms or, focussing on Dimension's conduct, that it is fair to make it assume the costs liability because it refused to vacate. That merely repeats the complaints that were encompassed in Harvard's causes of action against Dimension and Mr Nicoletti, and which have been resolved by judgment in the proceeding in favour of Harvard against Dimension but not against Mr Nicoletti. It is not a proper basis for a Sanderson order.

The costs order concerning Mr Bryce 27 In rejecting a submission that the costs order should be in favour of Mr Nicoletti and Mr Bryce together, the primary judge reasoned as follows (at [55]): The basis of the decision I have reached as to the costs of Mr Nicoletti and Mr Bryce is that their respective positions in the litigation were different, and that Mr Nicoletti failed on some issues, while Mr Bryce did not. In light of that, it would not be appropriate to make an order which entitles Mr Nicoletti to Mr Bryce's proportion of the costs, as well as his own. It may be that there are arrangements between Mr Nicoletti and Mr Bryce which mean that one may nevertheless have to pay to the other some or all of his share of costs recovered from Harvard. But there is no evidence of any such arrangement and it is not a matter to which the Court can have regard in making costs orders. 28 The primary judge went on to conclude, in effect, that the costs orders would not displace the indemnity principle which could be addressed on the assessment of costs: at [56].

The proposed appeal grounds 29 Proposed appeal ground 1 concerns the costs order requiring Harvard to pay 10% of the respondents' costs to Mr Nicoletti. In substance, the principal contention as advanced orally was to the effect that the primary judge acted upon a wrong principle or misapplied the principle governing the circumstances in which a Sanderson order may be appropriate. The alleged error was to the effect that the primary judge failed to take account of the fact that Mr Nicoletti had been responsible for the conduct of the litigation by Dimension (particular its conduct in failing to vacate the farms and instead defending the proceedings brought by Harvard) as well as its subsequent insolvency in circumstances where Dimension had been used to conceal Mr Nicoletti's involvement. 30 A further contention to the effect that the primary judge adopted an incorrect approach to the state of the evidence concerning Mr Nicoletti's role in causing the liquidation of Dimension and should have found that Mr Nicoletti was the author of Dimension's insolvency was only relevant if that fact might be a basis for requiring Dimension to meet any costs liability to Mr Nicoletti. 31 Proposed ground 2 concerns the costs order requiring Harvard to pay 25% of the respondents' costs to Mr Bryce. It was to the effect that the primary judge erred as to his approach to the indemnity principle because there was evidence that there might be an agreement by which Mr Bryce would not be liable to pay any legal fees and in those circumstances it was incumbent upon Mr Bryce to prove that he had incurred that liability and he had not done so. It was said to be a necessary inference from the nature of the subject matter of the proceeding (namely the lease of the farms) that it was Harvard and Mr Nicoletti (and not Mr Bryce) that were paying for the joint representation of the respondents because they were the only ones who stood to gain from a successful defence.

Proposed ground 1 32 For the following reasons, Harvard has failed to demonstrate that the making of the costs order in favour of Mr Nicoletti was attended with sufficient doubt to justify leave being given to appeal. 33 Even though the category of instances in which a Sanderson order may be made are not closed, they must still be guided by principle. When it comes to a Bullock or Sanderson form of order, the relevant principle is that there is some aspect of the circumstances that arise as between a successful respondent and an unsuccessful respondent that justifies the cost burden of the successful respondent falling on the unsuccessful respondent. The principle was explained in those terms in Gould v Vaggelas at 230 (Gibbs CJ), 247 (Wilson J, Murphy J agreeing), 260 (Brennan J); and Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 at [15]-[22] (Beazley, Hodgson and McColl JJA) where there was a review of the relevant authorities. 34 The focus is upon 'conduct … or state of affairs' in which the unsuccessful defendant 'is an integral part', to use the language of Priestly JA in Almeida v Universal Dye Works Pty Ltd (No 2) [2001] NSWCA 156 at [8]. In McCracken & McCracken v Pippett (No 2) [2000] VSCA 20 at [11] Callaway JA (Batt and Chernov JJA agreeing) put the principle in the following way: It is easy to think of circumstances in which the reasonableness of bringing suit might be directly related to conduct on the part of the unsuccessful defendant. In truth there is a single question, namely whether it is fair, as between the plaintiff and the unsuccessful defendant, that the latter should pay the successful defendant's costs. Prima facie, the unsuccessful defendant should not have to do so. There must … be something about his or her conduct that makes it appropriate to shift the incidence of the successful defendant's costs. The plaintiff, after all, has been unsuccessful too. 35 In a case where a Sanderson order is sought (in preference to a Bullock order) the circumstances must also justify the exercise of a discretion to make an order whereby the risk of insolvency will fall on the unsuccessful respondent and not on the applicant: Bankamerica Finance Ltd v Nock [1988] AC 1002 at 1011-1012; and State of Victoria v Horvath (No 2) [2003] VSCA 24 at [15] (Winneke P, Chernov and Vincent JJA). 36 The insolvency of Dimension (however caused) is not, of itself, a reason for making a Sanderson order. Rather, the burden of the insolvency is a matter that the Court considers in deciding whether a Bullock or Sanderson order is appropriate having already determined that there is something in the conduct of the unsuccessful respondent that justifies an order that would require the unsuccessful respondent bearing directly or indirectly some or all of the costs of a successful respondent. It is at that point that the circumstances of the insolvency may be relevant. 37 Therefore, in order to succeed in the appeal, Harvard must demonstrate some error of principle by the primary judge as to when a Bullock or Sanderson order should be made or some other House v The King error as to the application of the principle. Only then does any issue about the circumstances of insolvency arise. 38 Reliance was placed by Harvard upon the reasons of Newnes JA (Wheeler and Buss JJA agreeing) in Coastal Hire Pty Ltd v Ewers [2009] WASCA 36 (S). In that decision, after reviewing the relevant authorities, his Honour concluded at [34] as follows: … In my view, therefore, where a Bullock or Sanderson order is sought ultimately the question must always be whether it is just that, as between the plaintiff and the unsuccessful defendant, the unsuccessful defendant should bear the burden of the successful defendant's costs. The exercise of the relevant discretion is not amenable to hard and fast rules, but, in my opinion, normally a Bullock or Sanderson order will be made only where: 1. the plaintiff's claims against two or more defendants are substantially connected or interdependent; 2. the plaintiff acted reasonably in suing the successful defendant; and 3. there is something in the conduct of the unsuccessful defendant which makes [it] just to move the burden of the successful defendant's costs from the plaintiff to the unsuccessful defendant. 39 The relevant principles were explained by the primary judge in terms that were entirely consistent with this and other authorities. 40 The submission by Harvard to the effect that the Court is guided by some general notion of fairness finds no support in the authorities. There is no arguable case of error by the primary judge as to the principles. 41 There are two problems with the balance of the contentions advanced by Harvard in support of proposed ground 1. The first is that they mostly articulate unfairness as between Harvard and Mr Nicoletti not as between Dimension and Mr Nicoletti. The second is that they focus upon the conduct of Mr Nicoletti and not upon the conduct of Dimension. 42 It may be in Harvard's interests for any cost order in favour of Mr Nicoletti to be confined to an order against Dimension, but the principle to be applied concerns whether there is some aspect of the conduct of the unsuccessful respondent that justifies the making of a costs order that operates directly or indirectly as between respondents. Otherwise, the discretion as to costs is exercised on the basis of the principle that costs follow the event; Harvard, having commenced proceedings against Mr Nicoletti and having been unsuccessful in those proceedings, ought to bear Mr Nicoletti's costs. 43 In any event, the matters now advanced were considered by the primary judge and rejected. They were considered in circumstances where his Honour approached the matter on the basis that the categories of case in which a Sanderson order might be made were not closed. There is no arguable case that the primary judge failed to consider the matters advanced. 44 The oral submissions for Harvard placed considerable reliance upon what was said by the primary judge at [67] of his Honour's reasons (quoted above). It concerned the relevance of a submission (also pressed on appeal) that there should be a Sanderson order because Mr Nicoletti was the person who caused Dimension not to vacate the farms when proceedings were commenced by Harvard against Dimension. The primary judge did not accept the relevance of the submission. 45 However, it was not suggested that Mr Nicoletti, as a third party, was involved in promoting and conducting Dimension's defence in his own interests. A third party who was involved in that way might be made liable by means of a third party costs order in respect of any cost liability of Dimension but it is not a basis for a Sanderson order. 46 Rather, the case for Harvard was to the effect that Mr Nicoletti's conduct as a director of Dimension was relevant to who should pay the costs of Mr Nicoletti's successful defence of the claim brought against him by Harvard. The fundamental problem with that case was that it was Harvard who brought about those costs by seeking to demonstrate independent personal liability on the part of Mr Nicoletti. It was not Mr Nicoletti's conduct as a director of Dimension that led to those costs. Harvard failed in its claim against Mr Nicoletti to a sufficient extent that the primary judge considered it was appropriate that Mr Nicoletti should be awarded 10% of the respondents' costs. There is no challenge to that aspect of the primary judge's decision. 47 It must be borne in mind that the costs that are in issue are the costs of Mr Nicoletti successfully defending the claim by Harvard. Those costs were the consequence of Harvard's independent actions in joining Mr Nicoletti as a respondent not any aspect of the circumstances as between Dimension and Mr Nicoletti. The principle that Harvard seeks to invoke must rest upon some aspect of the circumstances as between Dimension and Harvard. Those circumstances do not extend to include the consequences for Harvard of the way in which Mr Nicoletti as a director of Dimension conducted its defence of Harvard's claim. 48 It follows that there was no arguable error in the primary judge concluding at [67] that it was not relevant to impose the risk of non-recovery on Mr Nicoletti because, as director of Dimension, he did not procure Dimension to vacate the farms. 49 Leave should be refused as to ground 1 on the basis that the ground is not sufficiently arguable.

Proposed ground 2 50 It was submitted for Harvard that the primary judge had found (at [55] (quoted above)) that the arrangements between Mr Nicoletti and Mr Bryce as to sharing of costs were not a matter to which the Court can have regard in making cost orders and that such an approach was in error as a matter of principle. 51 The indemnity principle is to the effect that a costs order can only be made by way of indemnity. Where a party who has a liability to pay legal costs has entered into an arrangement whereby that liability may be discharged by another party, the indemnity principle is still met. Further, an arrangement by which any costs recovered from another party to the litigation is to be paid to another party is not, of itself, a matter that would mean that the indemnity principle is not satisfied. All depends upon whether the party in whose favour a cost order is to be made has a liability to pay legal costs incurred in the conduct of the proceedings for that party. There was no doubt as to the correctness of the finding by the primary judge at [55]. 52 It was then submitted that the primary judge had delegated the exercise of the discretion to the officer who would undertake the assessment, namely a registrar. Instead, the primary judge should have required any cost arrangement between Mr Nicoletti and Mr Bryce to be disclosed. Again, this submission proceeds on the false premise that an arrangement between Mr Nicoletti and Mr Bryce as to sharing of costs would mean that the indemnity principle would not be met. 53 The issue as to indemnity was whether Mr Bryce had a liability to the solicitors who had the joint conduct of the proceedings on behalf of all four respondents who actively participated in the defence of the proceedings. As has been noted, as to the existence of that liability, the Court proceeds on the basis that a party has a liability to meet the costs of the lawyer who is on the record for that party. If an issue is to be taken at the time of making an order as to whether that is the case then the onus is upon the party raising the issue to demonstrate that position. Harvard did not take on that burden before the primary judge. 54 Further, all costs orders are made on the basis that they are awarded by way of indemnity. Therefore, upon an assessment of costs, the party claiming costs is confined to claiming costs in respect of which the indemnity principle is met. 55 The Court's procedures require the existence of a liability to pay the costs claimed to be confirmed as part of the assessment process. The bill of costs must certify that the costs applicant is not claiming more than the costs applicant is liable to pay for costs and disbursements and the amounts claimed can be verified if required. The Costs Practice Note (GPN-Costs) states that there must be a verification that the costs claimed comply with the indemnity principle. 56 If there is a basis to do so, an issue may be raised before the registrar as to whether the indemnity has been met. There may be a question as to whether the proper course is for that issue to be determined by the registrar or by a judge (as to which see the recent decision by Colvin J in Frigger v Banning (No 13) [2023] FCA 923 (and authorities there considered); and the doubt expressed by Pritchard J in Hancock Prospecting Pty Ltd v Hancock [No 3] [2016] WASC 423 at [12]). However, what is clear is that the issue may be pursued at the stage of assessment if there is a basis to do so. Therefore, even if (contrary to the above) there was some arguable basis to challenge the costs order in favour of Mr Bryce, there is no practical injustice to Harvard because it can still raise the issue if there is a basis to do so at the time that Mr Bryce presents any bill of costs for taxation.

Conclusion and orders 57 For the reasons given, the application for leave to appeal should be refused and it follows that the appeal must be dismissed with costs. I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Colvin, Stewart and Feutrill.

Probiotec Limited v University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30 State of Victoria v Horvath (No 2) [2003] VSCA 24 Tresize v National Australia Bank Ltd [1999] FCA 28

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