Keynes v Rural Directions Pty Ltd

COSTS RULING 1 Glencore Grain Pty Ltd ("Glencore Grain"), the fourth defendant in a proceeding brought by the plaintiffs, has been successful in obtaining summary judgment pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"). Glencore Grain applies for its costs of the proceeding to be paid by the plaintiffs. It applies for those costs to be paid on an indemnity basis. The plaintiffs do not oppose an order for costs being made against them, but they do oppose those costs being paid on an indemnity basis. 2 The basis of Glencore Grain's application for costs to be assessed on an indemnity basis is that the plaintiffs brought and persisted with a claim against Glencore Grain where, properly advised, they should have known that the claim was hopeless. 3 The relevant principles are not in doubt. Section 43 of the Federal Court Act is the relevant section and O 62 is the relevant rule of Court. In terms of authorities, it is sufficient to refer to Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 400-401 per Woodward J; Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 230-234 per Sheppard J. 4 My reasons for concluding that Glencore Grain was entitled to summary judgment are set out in Keynes v Rural Directions Pty Ltd (No 2) [2009] FCA 567. The present reasons should be read in conjunction with those reasons. In my view, none of the grounds upon which Glencore Grain succeeded are grounds which justify an order that costs be paid by the plaintiffs on an indemnity basis. 5 Glencore Grain tendered an affidavit of Mr Maurice John Thompson, who is an Australian legal practitioner and partner of HWL Ebsworth Lawyers, the solicitors acting for it. Mr Thompson exhibited to his affidavit correspondence passing between his firm and the plaintiffs' solicitors, both before the proceeding was commenced and after it had been commenced. I have read the affidavit and the correspondence. Glencore Grain also relied on written and oral submissions made by its counsel. 6 Glencore Grain made two particular submissions which I will address. First, it submitted that the plaintiffs, through their solicitor, knew that their proceeding against it could not succeed. Glencore Grain referred to correspondence from the plaintiffs' solicitor at about the time the proceeding was commenced. The application and statement of claim included a claim against Glencore Grain. However, the plaintiffs' solicitor asked Glencore Grain if the plaintiffs could withhold service of the proceeding on it. The plaintiffs' solicitor provided the following explanation for this proposal: "As a consequence of all of those breaches by Rural Directions our clients have been exposed to the potential of very substantial losses to both your company and other grain companies. We have been instructed by our clients to commence proceedings against Rural Directions in the Federal Court of Australia to seek to recover damages from them. Counsel advised our clients that your company should also be joined as a respondent in the action because of the failure to deliver a Product Disclosure Statement and a correct Statement of Advice to our clients. However, our clients have always regarded Rural Directions as the party primarily responsible for the position in which they have been placed and would rather not have to proceed against your company as a party to the action provided that you are prepared to await the outcome of the action against Rural Directions. Our clients are prepared to agree that a proportionate part of the damages recovered in the action, referable to the contract with your company, will be paid to you upon recovery from Rural Directions. This would avoid your company taking proceedings against our clients in State courts and also minimise legal costs. A copy of the Statement of Claim is enclosed. This is provided to you for your information and is not by way of service." 7 The proposal was not accepted by Glencore Grain and the company was served with the proceeding by the plaintiffs. Glencore Grain submitted that I should infer from the fact that this proposal was put forward that the plaintiffs knew that they did not have a claim against it and were simply attempting to avoid their clear obligation under the washout contract to make the payment due under that contract. 8 I do not think that the fact that the proposal was put forward indicates that the plaintiffs knew they did not have a claim against Glencore Grain. I do not consider the plaintiffs' conduct in putting forward the proposal they did as unreasonable, or at least unreasonable to the point that the plaintiffs should pay costs on an indemnity basis. 9 Secondly, Glencore Grain submitted that the plaintiffs' claim could not succeed because they were complaining about their obligations under the washout contract and they did not assert any failure to comply with the provisions of the Corporations Act 2001 (Cth) in relation to that contract. There were a number of other related points advanced by Glencore Grain about the scope of s 1022B(2) and s 1022C, some of which were referred to in my reasons on the summary judgment application (at [101]-[102]). Glencore Grain made submissions on these points during the hearings which have been held, but I have refrained from deciding them. It is not appropriate that I now attempt to do so. I say that because, even if I decided the various points in favour of Glencore Grain, I do not think their resolution is so clear that an award of costs on an indemnity basis is justified. 10 I refuse Glencore Grain's application for costs to be awarded on an indemnity basis. I will make no order as to the costs of the hearing on 16 June 2009. 11 I make the following orders as to costs as between Glencore Grain and the plaintiffs: 1. The plaintiffs pay the costs of the fourth defendant to be assessed on a party and party basis in relation to -