Johnson Tiles Pty Ltd v Esso Australia Ltd

THE COURT: 1 On 8 November 2000, the Court made orders on appeals from interlocutory orders of Merkel J made on 3 December 1999 and 3 March 2000. The Court's judgment and reasons for judgment are set out in Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572. 2 The disposition of the appeals involved the following substantive outcomes: 1. The cause of action in misleading or deceptive conduct alleged against Esso in the statement of claim (as amended by the order of the learned primary judge) was found to be untenable and disallowed, with no further opportunity afforded to amend the statement of claim in relation to that aspect. 2. The cause of action in negligence alleged against Esso in the statement of claim was found to be arguable and permitted to stand. 3. The cause of action in negligence lay within the accrued federal jurisdiction of the Court. 4. The Court ought, as a matter of discretion, to exercise the jurisdiction it had to decide the negligence claim. The Court allowed the parties time to file written submissions as to the costs orders that ought to be made and such submissions have been filed. 3 The submissions filed raise the question whether the costs orders made should, as between applicants and respondents, be awarded to one party or the other, or apportioned to reflect their success or failure on the substantive questions to which reference has been made. There is a separate question as to the costs orders that should be made in relation to the cross-respondents and, in particular, whether orders should be made that the applicants indemnify Esso, or other parties, against any costs orders made in favour of successful cross-respondents, or directly pay the costs of those cross-respondents themselves. 4 Esso submitted that, having been successful in its challenge to the s 52 claim it should have the costs of its motions against the applicants subject to, firstly, any reduction the Court may see fit to allow in respect of its challenge to the negligence claim, and secondly, the jurisdiction of the Court to entertain it. As to the latter question, it was submitted that the jurisdictional issue was consequential upon the s 52 claim being struck out. The viability of the s 52 claim was an important aspect of the appeals brought by Esso. But its failure to strike out the negligence claim and to make good its challenge to the jurisdiction of the Court, both important matters affecting the future of the action, leads to the conclusion that the outcome was something of a "draw". 5 The appeals against the orders made on 3 December 1999 were formally dismissed. While costs would ordinarily follow that event, there was a substantial overlap between the issues raised in those appeals and those relating to the orders made on 3 March 2000. The utility of the appeals relating to the orders of 3 December 1999 is questionable. In the circumstances there should be no order as to the costs of those appeals. It follows from their dismissal that the costs orders made at the time also stand. 6 Given the mixed fortunes of both sides in the appeal against the orders of 3 March 2000 in these, essentially interlocutory, proceedings it is not appropriate to make an order that one side should pay all the costs of the other. On the other hand, the costs have been incurred against the background of defective pleadings stretching back to the very rapid initiation of this process which was the subject of comment in the Court's reasons for judgment. It is inappropriate against that background to regard the costs of the appeal as simply an overhead of the action to be borne equally by the parties or to be costs in the cause. In our opinion, an appropriate disposition in this case is that half the costs of the appeal as between the applicants and Esso, be Esso's costs in the proceedings. That is to say, if Esso succeeds in its defence of the action, the applicants will be liable to pay to it half of the costs of the appeal. In the event that the applicants are successful there will be no recovery against Esso in respect of the appeal. 7 The question then arises as to the orders that should be made in respect of the appeals brought by the various cross-respondents. Consistently with the position already indicated in relation to Esso's appeals against the orders of 24 December 1999, there will be no order as to the costs of appeals by cross-respondents against those orders. The position of the cross-respondents in relation to the appeals against the orders of 3 March 2000 is similar to that of Esso in respect of those orders. They should be entitled to half their costs of the appeals in the proceedings as between themselves and their respective cross-claimants. This relates to the State entities' appeals in connection with Esso's cross-claim against them and the appeal by BHP Petroleum (Bass Strait) Pty Ltd in connection with the cross-claim against it by the State entities. 8 The next issue is whether any costs recoverable pursuant to the orders so foreshadowed should be recoverable directly from the applicants, or from the cross-claimants; and if the latter, whether the cross-claimants should be indemnified by the applicants. Esso and the State entities are substantial parties who have brought cross-claims for their own benefit. The ability of the applicants to meet the costs orders foreshadowed, if they should eventuate, may be questionable. Nevertheless there is no doubt that the difficulties in the statement of claim have flowed through to the pleading of the cross-claims, and ultimately the applicants are responsible for those difficulties. In the circumstances, they should indemnify the relevant cross-claimants in respect of such costs as are recovered by the cross-respondents by reason of the appeals against the orders made on 3 March 2000. 9 There is a remaining question whether any, and if so, what costs order should be made in respect of the applicants' motion of 24 December 1999. The orders made on that date in respect of the costs of the motion of 24 December 1999 were not in terms set aside by this Court. It is however a necessary consequence of the orders made by this Court that they should be set aside and indeed it may be said that that was implicit in par 4 of the orders made by this Court. The twenty-first to twenty-third cross-respondents have submitted that in lieu of the orders made by Merkel J the following orders should be made: "1. The costs of the parties of the Applicants' motion dated 24 December 1999 be paid by the Applicants. 2. All questions in respect of costs thrown away by the parties as a consequence of the Orders made by the Full Court on November 2000 be reserved to be determined by Merkel J at a date to be fixed." 10 The applicants' motion was confined to amendments necessary to keep the s 52 claim alive although argument was raised canvassing the viability of the negligence claim. In the circumstances, the suggestion advanced by the twenty-first to twenty-third respondents should be adopted, provided that the reservation for future determination of costs thrown away should be by Merkel J or a Judge of the Supreme Court of Victoria at a date to be fixed. This has regard to the recent decision of Merkel J to transfer the proceedings to the Supreme Court of Victoria under the provisions of the cross vesting legislation. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.