Loyola v Cryeng Pty Ltd

Besanko and Perram JJ 2 On 18 May 2012 the Court delivered reasons and made orders in this appeal: Loyola v Cryeng Pty Ltd [2012] FCAFC 71. The orders made by the Court were as follows: 1. The appeal be allowed. 2. The first and third orders made on 23 August 2011 be set aside and, in lieu thereof, there be an order that the first and second respondents pay to the applicant damages in the amount of $50,000. 3. The first and second respondents file and serve within seven days submissions dealing with the costs of the application and the costs of the appeal. 4. The applicant file and serve within 14 days submissions dealing with the costs of the application and the costs of the appeal. 3 We delivered joint reasons ("the joint reasons"); Justice Jacobson delivered a separate judgment in which he indicated that he would have dismissed the appeal. 4 On 25 May 2012 the Court received a letter from the appellants' solicitors. In that letter they contended that the Court, in its reasons, had not dealt with an issue raised in their submissions on the appeal. They identified that issue as the second ground of appeal, which related to the successor representation. They referred to various paragraphs in their written outline of submissions and written submissions in reply. They submitted that the significance of the ground is that the trial judge's award of damages of $50,000 for damage to commercial reputation proceeded on the basis that the representations which were the subject of the respondent's case had been proved. They contended that a different outcome may have been reached if the successor representation was found not to have been made. In effect, they asked the Court to recall its orders and then consider the issue. They submitted that, should the Court consider it appropriate to do so, then they did not wish to be heard further beyond the written submissions filed in the appeal. 5 The appellants' solicitors also included in their letter some submissions made by the respondent to the appeal. In those submissions, the respondent asserted that the Court had addressed the second ground of appeal. It also asserted that if the Court considered it appropriate to entertain an application that it failed to determine the second ground of appeal, then the appellants should file and serve an application to recall the judgments and that application should be heard in open court. 6 We have reviewed the written and oral submissions of the appellants and our reasons for judgment. We think the appellants are correct and that the joint reasons do not address the appellants' contention that the trial judge erred in concluding that the successor representation had been made. We do not think that in those circumstances the appellants should be put to the cost of an application to recall the orders. At the same time, we think the appellant's application can be determined without further submissions from the respondent. 7 We would not recall the orders made by the Court for two independent reasons. First, we think that the trial judge's finding that the first appellant, both personally and on behalf of the second appellant, made the business cessation representation (Cryeng Pty Ltd v Loyola [2011] FCA 956 at [92]) should stand and is not affected by error. This conclusion is not inconsistent with the conclusion in the joint reasons. The conclusion in the joint reasons was that the business cessation representation (as pleaded) had not been made at the meeting on 8 April 2008, and that, therefore, the respondent could not show that the making of the business cessation representation had led to the cancellation by Air Liquide of the purchase order. It is a different question as to whether the business cessation representation was made by the first appellant during April and May 2008. The mosaic referred to in the joint reasons becomes relevant at this point. It seems to us that, leaving aside the meeting involving the first appellant, Mr Martin and others on 8 April 2008, there was evidence before the trial judge which supported her conclusion that the business cessation representation was made by the first appellant in April and May 2008. We refer to the trial judge's conclusions as to Mr Day's evidence (at [57]), Mr Gilchrist's evidence of conversations he had with Mr Singh of BOC Australia (at [74]) and the evidence of Mr Johnson and Mr Camilleri (at [75]-[76]). We also refer to the inference her Honour drew from the first appellant's diary (at [78]). The finding that the first appellant made the business cessation representation on his own behalf and on behalf of the second appellant supports the award of damages for damage to the respondent's commercial reputation. 8 Secondly, we are not persuaded that the trial judge's conclusion that the appellants made the successor representation in the letter from the first appellant addressed to "all customers" is erroneous. Her Honour concluded that the passage in the letter: With the full support of our troops we have incorporated Pioneer Cryogenics Pty Ltd and I hope we will continue to enjoy your trust and support. supported the inference that the second appellant was the successor of the respondent. The appellants argued that the reference to "troops" was a reference to staff and not a reference to (using counsel's words) "generals like Mr Gilchrist". The appellants also argued that her Honour failed to consider the evidence of Mr Martin that he knew there was never any connection between Pioneer and Cryeng. We are not persuaded by these arguments. Whilst the word "troops" may be interpreted in the way in which the appellant contends, the fact is that the letter refers to a hope that "we" will "continue" to enjoy your trust and support. In other words, there is a hope that the customer will support the business of the second appellant as it has supported the business in the past. Furthermore, Mr Martin's evidence cannot be decisive because the question of the representation conveyed is an objective one to be determined in all the circumstances. We would add that we do not think the reference in the letter to the first appellant resigning from the respondent to be an argument in favour of the appellants' contention. Such a statement is not inconsistent with the second appellant being the successor to the respondent's business and established with the approval and participation of the respondent and/or its employees. 9 For these reasons, the application by the appellants that the orders of the Court made on 18 May 2012 be recalled is refused. 10 We turn now to the question of the costs at first instance and on the appeal. 11 The appellants submit that there should be no order as to the costs at first instance and that the respondent should pay 90 per cent of their costs of the appeal. The respondent submits that it should have the costs at first instance and that there should be no order as to the costs of the appeal. 12 In relation to the costs at first instance, there is an issue as to whether the Federal Court Rules 2011 (Cth) or the earlier rules apply. The trial was held in September 2010 and judgment was delivered on 23 August 2011. The Federal Court Rules 2011 came into effect on 1 August 2011. They apply to a step taken in a proceeding after 1 August 2011, in the case of a proceeding started before 1 August 2011 (Rule 1.04(2)). The Court has power to order otherwise, that is to say, to order that the earlier rules apply to such a step (Rule 1.04(3)). 13 The relevant costs rule under the Federal Court Rules 2011 is Rule 40.08. It provides: A party other than in a proceeding under the Admiralty Act 1988 may apply to the Court for an order that any costs and disbursements payable to another party in the proceeding be reduced by an amount to be specified by the Court if: (a) the applicant has claimed a money sum or damages and has been awarded a sum of less than $100 000; or (b) the proceeding (including a cross-claim) could more suitably have been brought in another court or tribunal. 14 The relevant costs rule in the earlier rules is Order 62 Rule 36A. It provides: (1) Where a party is awarded judgment for less than $100,000 on a claim (not including a cross claim) for a money sum or damages any costs ordered to be paid, including disbursements, will be reduced by one third of the amount otherwise allowable under this Order unless the Court or a Judge otherwise orders. (2) If the Court or a Judge is of the opinion that a proceeding (including a cross claim for a money sum or damages) brought in this Court could more suitably have been brought in another court or in a tribunal and so declares, then any costs to be paid, including disbursements, will be reduced by one third of the amount otherwise allowable under this Order. (3) This rule does not apply to a proceeding under the Admiralty Act 1988. 15 The making of an order for costs is a step in the proceeding for the purposes of Rule 1.04(2) and, on the face of it, the Federal Court Rules 2011 apply in relation to the costs at first instance. However, we think that an order should be made under Rule 1.04(3) that the earlier rules apply to the determination of the costs of the trial. Plainly, the purpose of the two costs rules is to penalise parties who, through oversight or incompetence, bring and continue proceedings in an inappropriate Court in the judicial hierarchy. The qualifying factor for the operation of the rules is the decision to bring and maintain a case in a particular Court. In this case that occurred well before the Federal Court Rules 2011 commenced. In the circumstances, it is appropriate that the earlier rules apply. 16 The appellants' primary submission was that there should be no order as to the costs at first instance. This was an attempt to have the Court exercise its general discretion not to make an order for costs. We will not set out the matters relied on by the appellants other than to say that they relate in one way or the other to what is said to be a lack of proportion between the costs incurred and the degree of success achieved by the respondent at first instance (see paragraphs 7 and 8 of the appellants' outline of submissions dated 25 May 2012). While these matters will be important and must be considered in relation to whether we should otherwise order under Order 62 Rule 36A(1) so as to give the respondent greater than two-thirds of its costs at first instance, they are not sufficient to justify no order as to costs. The respondent had to come to Court to vindicate its rights and, as we made clear in our first judgment (at [112]) the result was in many respects an unsatisfactory one. We refer to our reasons for reaching that conclusion. We see no reason to reduce the respondent's costs at first instance below two-thirds. 17 The respondent submits that it should get all of its costs at first instance and the Court should otherwise order under Order 62 Rule 36A(1). Again, we will not set out all of the matters upon which it relies (see paragraphs 5-14 inclusive of the respondent's outline of submissions on costs dated 1 June 2012). 18 We have had regard to the submissions of both parties. It seems to us that the matter of most significance is that the claim against the appellants was connected with other claims properly brought in this Court against other parties, viz: (1) A claim by the respondent (applicant below) against Cryeng (Thailand) Co Limited (fifth respondent) where the respondent succeeded, in that, on 11 August 2010, it obtained by consent an order for judgment in the amount of $1,041,678 and orders for interests and costs. This consent judgment was obtained about one month before the trial commenced; and (2) The respondent sought a declaration against Malcolm Alexander De Silva and Bramer Holdings Pty Limited (third and fourth respondents below) that a certain agreement was null and void so that it could resist a claim for over $500,000 by them. 19 It is desirable that parties, to the extent they can, avoid a multiplicity of proceedings. That is what the respondent did in this case and, in our opinion, it is appropriate that the respondent have all its costs of the proceeding at first instance. 20 In relation to the costs of the appeal, the appellants were for the most part successful. However, they did not succeed in relation to the successor representation or their challenge to the trial judge's award for damage to commercial reputation. Those matters should be reflected in the order as to costs. We will order that the respondent pay 85 per cent of the appellants' costs of the appeal. 21 In addition to the orders we made on 18 May 2012, and, bearing in mind that the second order made by the trial judge on 23 August 2011 stands, we now make the following orders: 1. As to the costs at first instance: (a) Pursuant to Rule 1.04(3) of the Federal Court Rules 2011, the earlier Rules apply; and (b) The appellants pay the respondent's costs. 2. As to the costs of the appeal the respondent is to pay 85 per cent of the appellants' costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Besanko and Perram.