Marshall v Sheahan

Federal Court of Australia|1996-09-02|Before: Lehane J, Lindgren J, Branson J, Goldberg J, Heerey J, O'Loughlin J, Cooper J, Doussa J, Mansfield J

REASONS FOR DECISION 1 This motion under O 62 r 3(3) of the Federal Court Rules ("the Rules") raises the interesting question whether the Court can, and should, make an order giving a party leave to tax costs prior to the completion of the action because the interlocutory order that costs be taxed and paid was made against non-parties. 2 The application was commenced on 25 February 1999 by three bankrupts. They seek to have the respondent removed as their trustee under s 179 of the Bankruptcy Act 1966 (Cth). 3 The respondent had contracted to sell certain land known as Rothmore Farm ("the farm") in which the applicants have a partial interest. In May 1999, the applicants applied for interlocutory orders to restrain the settlement of the contract for the sale of the farm. They alleged that the respondent was not acting in their best interests. 4 On 4 June 1999, I dismissed that claim for interlocutory relief. I will not repeat my reasons for that ruling. The respondent sought costs of that application against the applicants, against Andrew Charles Cooper ("Andrew Cooper"), who was not a party to the proceedings, and against the solicitors for the applicants ("the solicitors"), also not parties to the proceedings. On 17 June 1999, I ordered that the costs of the respondent on the application be taxed and paid by the applicants, by Andrew Cooper, and by the solicitors. Andrew Cooper and the solicitors sought leave to appeal from that decision. On 22 July 1999, von Doussa J refused leave to appeal from that decision. 5 The respondent now seeks an order under O 62 r 3(3) of the Rules that, in respect of the orders that costs be paid by Andrew Cooper and by the solicitors, he be permitted to tax those costs forthwith and to recover them. He does not seek that order against the applicants. He does not contend that, as against the applicants, the circumstances are such as to justify such an order. 6 Order 62 r 3 governs the time at which costs shall be paid. It provides: "(1) The Court may in any proceeding exercise its powers and discretions as to costs at any stage of the proceeding or after the conclusion of the proceeding. (2) Where the Court makes an order in any proceeding for the payment of costs the Court may require that the costs be paid forthwith notwithstanding that the proceeding is not concluded. (3) An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order."

7 The power to make an order under O 62 r 3(3) is clearly discretionary. There is no indication within the order as to the matters to which the Court is to have regard in determining whether to order that costs be paid forthwith where a proceeding is not concluded, or the circumstances in which the costs of an interlocutory proceeding should be permitted to be taxed forthwith. Order 62 r 3 does not have analogues in the Rules of the Supreme Courts of the States, with the exception of New South Wales: (Supreme Court Rules (NSW)Pt 52 r 9A).

The exercise of the discretion 8 In Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312 Olney J expressed the view that:

"the discretion should be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule, namely, that an order for costs of an interlocutory proceeding shall not entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded."

9 Despite describing the provision as "one which has been rarely used" in Vasyli v AOL International Pty Limited ("Vasyli") (Lehane J, 2 September 1996, unreported) (cf Lindgren J in Allstate Life Insurance Co v Australia & New Zealand Banking Group Limited (No 14) ("Allstate No 14") (18 August 1995, unreported): "possibly under utilised") Lehane J said that:

"The fact nevertheless remains that the ordinary rule is usually applied; and even where there is a discrete interlocutory proceeding in respect of which a costs order is made, the taxation and payment of those costs are normally deferred until the proceedings are concluded."

10 Lehane J described the justification for the usual rule as follows:

"The justification for the general rule is clear enough, particularly in proceedings in which there are a substantial number of interlocutory applications. Plainly in such circumstances it can be highly inconvenient and may be oppressive if before proceedings are finally concluded there is a series of taxations of costs of a series of interlocutory applications." 11 Lindgren J in Allstate No 14 noted that one circumstance in which the orders sought may be warranted, is where the final determination of a proceeding was "far away". In the case of Allstate No 14, orders were made under O 62 r 3, partly for that reason. In Allstate Life Insurance Co v Australia & New Zealand Banking Group Limited (No 13) (Full Court, Federal Court, 17 August 1995, unreported), the Full Court had noted in considering the costs of an interlocutory appeal:

"It would be wrong if the successful parties do not enjoy the fruits of their order for costs for such a long time. The parties entitled to the benefit of the order for costs which this Court has made in appeals from interlocutory orders should not be deprived of that benefit until the case has been finally disposed of." The current case is not one in which such a delay is likely. 12 Kiefel J noted the significance of a delay caused by "the pursuit of an ill-considered and perhaps unnecessary claim" in Harris v Cigna Insurance Australia Limited (1995) 17 ATPR 41-445. Her Honour ordered that certain costs be taxed and paid forthwith. 13 In Life Airbag Company of Australia v Life Airbag Company (New Zealand) ("Life Airbag") (22 May 1998, unreported) Branson J commented on Kiefel J's orders in the following way:

"Her Honour's approach appears to reflect a view, with which I am in agreement, that the demands of justice may well require a departure from the ordinary rule that costs are to be paid after the completion of proceedings, where a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in the handling of the proceeding with competence and diligence." 14 In Life Airbag the applicants had filed and served five different versions of a statement of claim. The applicants' counsel conceded that the first four versions were unsatisfactory and required to be redrawn, but only after the respondents incurred the costs of instructing counsel to attend at Court on strike out applications. Branson J described costs incurred in those circumstances as:

"not costs which, in the ordinary course, a party should be expected to bear until a proceeding is concluded. They are costs in reality thrown away and in respect of which, in my view, the demands of justice may require a departure from the general practice envisaged by O 62 r 3." 15 Lehane J also described the costs ordered to be paid forthwith as "thrown away" in Vasyli. Vasyli concerned costs ordered to be paid before the completion of the proceedings, where a party had obtained an order to strike out a statement of claim. His Honour considered that, if the proceeding continued, it would be in large measure a new proceeding, because of the extensive amendments. Goldberg J in Mitanis v Pioneer Concrete (Vic) Pty Ltd (25 February 1998, unreported), made an order in similar circumstances where there had been substantial amendment to pleadings. 16 In Warne v Genex Corporation Pty Limited (4 July 1996, unreported) Heerey J made an order for costs to be taxed forthwith under O 62 r 3(2) because he considered that the application "had no merit and was doomed to failure." He noted: "If parties who have to pursue substantial litigation, which creates costs and difficulties enough in itself, are to be burdened with applications of this sort, they should be entitled to have their costs reimbursed and not have to await the outcome of the case, which may be some time hence." 17 Drummond J also noted the hortatory function of the rule in Stack v Brisbane City Council (1996) 71 FCR 523 at 534 where his Honour described it as providing a "brake upon unrestrained interlocutory litigation." 18 Where the primary issue in the proceedings is separate and apart from the relief sought in the interlocutory proceedings, it may warrant an order being made. In Australian Flight Test Services v Minister for Industry, Science & Technology (O'Loughlin J, 26 April 1996, unreported), although Lehane J in Vasyli expressed the view that the fact that the interlocutory application related to a discrete issue was not sufficient to depart from the application of the general rule. It may also be that an order is appropriately made under O 62 r 3(3) when the party has no real interest in the outcome of the proceeding. Cooper J made an order for costs to be paid forthwith where certain parties had "no interest in the outcome of the principal proceedings"in Grundy v Lewis (28 May 1998, unreported) ("Grundy"). In Grundy the applicants sought a Mareva order against the respondents, and against third parties. The third parties were the potential transferees of the assets over which the order was sought, but not otherwise involved in the proceeding. The applicants did not pursue the application for a Mareva order. Cooper J compared the position of the applicant in those circumstances to a party who discontinues proceedings. Such a party, his Honour said, "is to be held liable for the costs of the other parties, or costs occasioned by that part of the proceedings which is discontinued, unless the court otherwise orders…". Cooper J found that "the delay on the part of the applicants led the respondents to incur costs and prepare to defend the notice of motion in the erroneous belief that it was to proceed." In these circumstances, Cooper J made an order that the third parties were at liberty to tax and recover forthwith their costs of and incidental to the claim for a Mareva order notwithstanding that the proceeding was not concluded.

Consideration of the application 19 Clearly, the Court's discretion is unfettered. It should be shown that some circumstances exist which warrant the departure from the general practice which O 62 r 3 embodies, but it is not appropriate to lay down any principle which indicates when those circumstances will exist or what matters the Court may then have regard to in determining whether to make an order for costs of an interlocutory application to be taxed forthwith. It will need to be a decision made in the interests of justice in all the circumstances of the case.

20 The fact that the costs order is against non-parties is not, in my view, a sufficient reason to exercise the discretion to make the order sought. It is a consideration, but one to be addressed in conjunction with other relevant factors. 21 In the present circumstances, there is nothing to indicate that the proceedings will be prolonged. Nor is there anything to indicate that the respondent, in whose favour the costs order was made, will be disadvantaged by having to await the outcome of the proceedings before having his costs. No other matter was identified as causing injustice to the respondent if the rule operates in the normal way. 22 There is in addition the practical consideration arising from the fact that the order for costs was jointly made against the applicants, Andrew Cooper and the solicitors. I think it is undesirable for costs to be required to be taxed in respect of the same application on two separate occasions, but that may be the consequence of the present application as no order under O 62 r 3(3) is sought against the applicants. Also, it must be one reason for the rule that the process of taxing costs should only be undertaken at the completion of a matter, when the taxation can be carried out at the one time, in relation to the costs orders including all costs orders made on interlocutory applications. 23 I do not think the factors which might be urged on behalf of the respondent are, in the circumstances, sufficient to warrant departure from the general rule. Although the costs order was made against non-parties, I do not think that matter of itself tilts the scales the other way. I have also considered the reasons for the interlocutory application being unsuccessful; they are identified in my reasons for making the costs order against Andrew Cooper and the solicitors. I do not think that the interlocutory issue being a discrete one weighs heavily in this matter: the contract for the sale of the farm was, presumably, settled by the allegations that the respondents acted wrongly in entering into that contract remain to be explored. 24 Finally, I note that the making of such an order, as a disincentive to unnecessary interlocutory applications, does not carry such significance where is it not sought against the parties who brought the application. 25 Accordingly, I decline to make the order sought. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield.

Associate: Dated: 10 September 1999 Counsel for the Applicants: Mr G Davis

Solicitors for the Respondents: Alderman Consultant Solicitors

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