Martinero v Comiskey Management Services Pty Ltd

SUBMISSIONS 14 The applicants submit that in the circumstances, each party should bear their own costs. 15 The respondent submits that the applicants should pay the respondents costs with costs payable on an indemnity basis from 7 February 2023.

Applicants' submissions 16 The Court should take into account the parties' duty to conduct proceedings in a manner consistent with the overarching purposes outlined in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (the Act). 17 Relevantly, after the Consolidation Application was dismissed, the applicants had sought to have the proceedings stayed and when the proceedings were next heard, had sought leave to discontinue the proceedings. There was no delay in the applicants' decision to seek leave to discontinue once the matter was no longer stayed. The respondent has conducted itself in an unnecessarily litigious manner. 18 In Low v Australian Tax Office (unreported, Federal Magistrates Court of Australia, 23 October 2000) (Low), Driver FM refused to grant costs in a matter which had been dismissed as it did not disclose an arguable case: In my view the Court should be slow to award costs at an early stage of human rights proceedings so that applicants have a reasonable opportunity to get their case in order, to take advice and to assess their position. It would, in my view, be undesirable for costs to be awarded commonly at an early stage, as that would provide a deterrent to applicants taking action under what is remedial legislation in a jurisdiction where costs have historically not been an issue. 19 The applicants noted that Driver FM had taken a different position than in Low a few years later in Drury v Andreco-Hurll Refractory Services Pty Ltd [2004] FMCA 398 and awarded costs.

Respondent's submissions 20 The respondent relied on the decision of McElwaine J in Zhao v Ausin Group (Australia) Pty Ltd (No 2) [2023] FCA 498 (Zhao) at [15] and [18]: 15. Rule 26.12(7) [of the Federal Court Rules 2011 (Cth)] "creates a presumption that the discontinuing party will pay the costs of the other side, unless for a good reason shown, the Court orders otherwise": Dalian Huarui Heavy Industry International Co Ltd v Duro Felguera Australia Pty Ltd [2018] FCA 905 at [7] per Barker J. … 18. The circumstances which led to the filing of the notice of discontinuance are also relevant to my discretion where a distinction has been drawn in some cases in which one party effectively surrenders, choosing not to proceed with the litigation, and cases in which a supervening event renders the matter inutile. In the former case it may be appropriate to make an award of costs in favour of the party receiving the effective surrender, whilst in the latter it may not be: ONE.TEL Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6]-[7] per Burchett J; Travaglini v Raccuia [2012] FCA 620 at [13] per McKerracher J. 21 The applicants have not pointed to any supervening event which would justify a departure from the presumption that the discontinuing party pay the other party's costs contained in r 26.12(7) of the Federal Court Rules 2011 (Cth) (Rules). Although the applicants have submitted that they had sought to discontinue the proceedings once the "stay" had been lifted on 17 May 2023, the applicants did not indicate an intention to discontinue the proceedings until the case management hearing on 2 August 2023. 22 The applicants' correspondence of 2 February 2023 acknowledged that the damages sought by the applicants would likely be less than the costs the respondent had already incurred at that point in time, but that they would nevertheless persist with the proceedings. 23 The applicants unreasonably rejected the respondent's offer of 7 February 2023 and maintained that the respondent would have to pay compensation and costs, despite not providing any explanation or evidence in reply to the respondent's defence. 24 The election to unilaterally discontinue the proceedings demonstrated that the proceedings had been brought unreasonably and caused the respondent to incur costs. The respondent did not conduct itself litigiously during the proceedings and was not required to consent to the applicants' discontinuance and abandon its right to costs, when it had already incurred costs.

COSTS 25 The Court has the discretion to award costs pursuant to s 43(2) of the Act. 26 Where a party has discontinued the proceedings, the underlying principle of r 26.12 of the Rules is that the discontinuing party - in this case, the applicants - would be liable for the other party's - in this case, the respondent's - costs unless there was good reason to order otherwise (FAIRA Aboriginal Corp v Minister for Aboriginal and Torres Strait Island Affairs [2002] FCA 9 at [7] per Cooper J; Dalian Huarui Heavy Industry International Co Ltd v Duro Felguera Australia Pty Ltd [2018] FCA 905 at [7] per Barker J; and Zhao at [15]). A distinction has been made between cases where the discontinuing party chooses not to proceed with the proceedings and where some supervening event has resulted in the proceedings being futile (ONE.TEL Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6]-[7] per Burchett J and Travaglini v Raccuia [2012] FCA 620 at [13] per McKerracher J). 27 The applicants have not identified any supervening event which have rendered the proceedings futile, nor are any apparent from the history of the proceeding. The illness of the applicants' instructing solicitor is not a supervening event which has an impact on the dispute between the parties. The applicants should pay the respondent's costs.

INDEMNITY COSTS 28 The respondent has sought indemnity costs from 7 February 2023, being the date the Calderbank offer was made. Indemnity costs may be awarded at the Court's discretion pursuant to s 43(3)(g) of the Act. 29 The principles surrounding indemnity costs were summarised by Wigney J in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) (2021) 151 ACSR 26; [2021] FCA 246 (Colgate-Palmolive) at [7]-[9]: [7] The discretion to award costs on a basis other than as between party and party, including on an indemnity basis, is "unfettered, save that it must be exercised judicially and not arbitrarily or capriciously" … The discretion must also be exercised in light of the requirement that the Court consider any failure by a party to comply with the overarching purpose of the civil practice and procedure provisions to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible … [8] The discretion to depart from an order for party and party costs will not be exercised unless there is some special or unusual feature or the justice of the case so requires … [9] The purpose of a costs order is to compensate the successful party, not to punish the unsuccessful one … An award of indemnity costs is to "serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs" … (citations omitted) 30 In exercising the discretion, the Court must take account of conduct which departs from the norm as compared with the way the Court expects litigation to be conducted to achieve the overarching purpose. 31 As Mortimer J (as her Honour then was) observed in Ryan v Primesafe (2015) 323 ALR 107; [2015] FCA 8 (Ryan) at [104], a common theme of the factors identified by the authorities, such as Colgate-Palmolive, was a "level of blameworthiness which involves conscious or deliberate choices to flout the norms by which litigation is usually conducted, and courts expect it to be conducted". 32 There is no automatic entitlement to indemnity costs arising from the making of a Calderbank offer which was not accepted. In MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236, Lindgren J concluded (at 239) that "the mere making of an offer by a Calderbank letter and its non-acceptance followed by a result more favourable to the offeror … will not automatically lead to the making of an order for payment of costs on an indemnity basis". In Brookfield Multiplex Limited v International Litigation Funding Partners Pte Ltd (No 4) [2009] FCA 803, Finkelstein J observed (at [10]) that awarding indemnity costs would depend on the circumstances of the case. A non-exhaustive list of factors was summarised by the Full Court in Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 (at [6]-[7]): 6 A well-established circumstance justifying an award of indemnity costs is an imprudent refusal of an offer to compromise (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233 per Sheppard J). In such cases, a key question is whether the offeree's refusal of the offer was "unreasonable" when viewed in light of the circumstances existing at the time the offer was rejected (Black v Lipovac (1998) 217 ALR 386 at 432 per Miles, Heerey and Madgwick JJ; CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] per Moore, Finn and Jessup JJ). 7 The circumstances to be taken into account in determining whether rejection of an offer was "unreasonable" cannot be stated exhaustively but may include, for example: (a) the stage of the proceedings at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree rejecting it. (Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Beling v Sixty International S.A. (No 2) [2015] FCA 355 at [25] per Mortimer J). 33 In the present matter, the Calderbank offer was received early in the proceedings, before the parties had given discovery, filed evidence or filed written submissions. The offer required the abandonment of the applicants' position before steps in the proceedings had been taken. The respondent did not foreshadow in the Calderbank offer that it would seek indemnity costs if the offer was not accepted. Had the applicants accepted the Calderbank offer, they would have been liable for the respondent's costs in the proceedings except for the costs arising from the Consolidation Application. 34 The respondent indicated that it did not consider the applicants to have good prospects of success at that stage and provided a brief explanation for that position. The applicants had 14 days to accept the offer, which is a reasonable amount of time to consider the offer and the minimum time prescribed for an offer under r 25.05(3) of the Rules (noting that the Calderbank offer was not made under Part 25 of the Rules). The terms of the offer were clearly communicated, namely that the respondent would forgo the right to recover costs from the Consolidation Application and that the offer would be confidential, with no admission of liability, a full mutual release and mutual non-disparagement with a view to resolving the proceedings. 35 In the present case, the applicants have discontinued the proceedings and there has been no evaluation of the strength of the applicants' case. The parties conducted themselves as though the proceedings had been stayed, pending the outcome of the Muradian proceeding; no additional substantive steps were taken and the action did not progress towards a hearing. Ultimately leave was sought to discontinue the proceedings on 2 August 2023. At this stage neither party has had an opportunity to develop their position through evidence and submissions. 36 The solicitors for the applicants asked whether the respondent would be willing to re-open the Calderbank offer and subsequently offered that the proceedings be discontinued and each party bear their own costs. This offer was rejected and a counter offer made. The only event which happened after the refusal was that the Muradian proceeding before Logan J had been discontinued. The parties had conducted themselves as though the proceedings were stayed until the Muradian proceeding had been determined. No such determination occurred so the expectation would be for the present proceedings to move towards determination; instead, the applicants sought to discontinue the proceeding. 37 The respondent's contention that discontinuance of the proceedings demonstrated that the proceedings had been brought unreasonably is not accepted. There may be many reasons for discontinuing proceedings which do not involve the proceedings being brought unreasonably. 38 In this case: (a) On 1 February 2023, Logan J heard the Consolidation Application. (b) On 2 February 2023, the applicants sought a stay of the proceedings until the Muradian proceeding was determined. (c) The parties seemed to proceed on the basis that the proceedings were stayed. (d) The parties exchanged offers to resolve the proceedings in February 2023. (e) On 17 May 2023, the Muradian proceeding was discontinued. (f) On 25 June 2023, the applicants' solicitors explained that the solicitor with carriage of the matter was ill and would not soon return to work and asked whether the respondent would re-open the Calderbank offer. (g) On 20 July 2023, the applicants offered to resolve the proceedings on the basis that each party bears their own costs. (h) On 27 July 2023, the respondent's rejected the applicants' offer and made a counteroffer that the applicants pay the respondent's costs of each proceeding. (i) On 2 August 2023, the applicants discontinued the proceedings. 39 From the events it does not appear that the applicants unduly delayed the proceedings. The applicants have not conducted themselves in these proceedings in a manner that has been described in Ryan as consciously or deliberately "flout[ing] the norm by which litigation is usually conducted". The applicants should not pay costs on an indemnity basis. 40 I will order that the applicants pay the respondent's costs on a party and party basis, to be agreed or taxed. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thomas.