MasterCard International Incorporated v Reserve Bank of Australia

REASONS FOR JUDGMENT 1 There is a dispute between the parties as to costs with respect to my judgment of 10 November 2003 (see [2003] FCA 1260), which arose from an application by MasterCard International Incorporated ("MasterCard") against the Reserve Bank of Australia ("RBA"), and involved a cross-claim filed by RBA against MasterCard and Edgar, Dunn & Company Pty Limited ("Edgar Dunn"). That application and cross-claim concerned the RBA's interpretation of delegated legislation entitled the "Setting of Wholesale ('Interchange') Fees" Standard ("the Standard"), and the determination of the benchmark for the purposes of that Standard that the RBA made on 20 August 2002. In those proceedings, the RBA was successful as against Edgar Dunn on the cross-claim. No sound reasons have been advanced before me as to why an order for costs should not be made as against Edgar Dunn. It was suggested that Edgar Dunn made submissions that were helpful to the Court. However, in my view Edgar Dunn was in no different position, with respect to costs, to any respondent seeking to uphold its position by way of defence which proves to be unsuccessful. 2 As between the RBA and MasterCard, in relation to the application filed by MasterCard, I am satisfied that there are special circumstances which make it appropriate that the ordinary rule should not apply. The RBA relies on the fact that MasterCard was unsuccessful in persuading me to make any of the declarations that it sought, and upon the fact that, prior to the hearing, MasterCard withdrew the claim for injunctive relief that it had originally sought. In my view, the first declaration sought by MasterCard was too wide and hypothetical. The second declaration sought by MasterCard was superseded by the declaration sought by RBA in the cross-claim on which RBA was successful. 3 MasterCard, however, has submitted that it was compelled to commence proceedings seeking declaratory relief as a direct consequence of the position that RBA took when it claimed that, as a consequence of the calculation of the benchmark that Edgar Dunn set out in its letter of 15 September 2003, MasterCard was in breach of its obligations under the Standard. 4 Prior to the filing of the application by MasterCard, the RBA took steps to inform participants in the MasterCard credit card scheme in Australia ("the Scheme") of the position that it had taken, with respect to the Standard, and it also took the issue up with MasterCard itself. The assertion made by the senior RBA officer, Ms Michele Bullock, in her letter to MasterCard of 13 October 2003, was that: "… EDC [Edgar Dunn] has not calculated the cost-based benchmark for the MasterCard scheme in compliance with Standard No 1. Consequently, neither MasterCard nor its members in Australia have complied with the Standard. Mr Naffah has indicated that the participants in the scheme are not aware of this. The Bank requests that you confirm as soon as possible that MasterCard has informed each of its participants in Australia of this situation." 5 Ms Bullock was the Acting Head of the Payments Policy Department of the RBA. 6 A letter from the RBA to Edgar Dunn of 13 October, a copy of which was sent to MasterCard, makes assertions to the effect that neither MasterCard nor the Scheme participants had complied with their obligations under the Standard. 7 These assertions were both premature and wrong because the time for compliance had not arrived. MasterCard considered it appropriate in these circumstances to seek clarification of its position, and to bring the matter to a head. On 17 October 2003, MasterCard commenced the proceedings which resulted in the judgment of 10 November. At the hearing, MasterCard made no submissions as to the correctness of the approach that Edgar Dunn had taken in calculating the benchmark. 8 It was not until Mr Bathurst QC for the RBA made submissions at the hearing of the MasterCard application and the RBA cross-claim, that the RBA indicated that it would not take any steps, pending judgment, towards the application of sanctions in respect of any alleged breach of the Standard which may have occurred when the Scheme came into operation. This constituted a substantial, and late, change in direction by the RBA, which occurred after MasterCard explained to the Court that it reasonably perceived itself to have been placed in a dilemma. I agree with MasterCard's position on this point. If it did not apply the benchmark, as determined by the independent expert, it would be at risk of non-compliance according to a literal reading of the Standard. On the other hand, if it applied the figure and it turned out to be incorrect as alleged by the RBA, it would also risk non-compliance with consequent exposure to sanctions. The dilemma called for resolution. 9 Having regard to the incorrect assertions made by RBA as to non-compliance by MasterCard and the Scheme participants, as well as the late clarification by RBA of its position, and taking into account the fact that MasterCard was unsuccessful in the final outcome, I consider that there should be no order as to costs as between RBA and MasterCard on either the application or the cross-claim. The circumstances are unusual enough to warrant a departure form the normal rules that costs follow the outcome. The fact that MasterCard adopted a neutral position on the cross-claim in relation to the way in which the benchmark should be calculated so far as "on us" transactions are concerned is a significant consideration. 10 Both the application and the cross-claim arose largely as a result of the error found to have been made by Edgar Dunn but I note that MasterCard does not seek any order for costs against that company. 11 I therefore order that the costs of RBA on the cross-claim and of this hearing in relation to the costs of the cross-claim be paid by Edgar Dunn. As between MasterCard and RBA, I make no order as to the costs of the original application and cross-claim, nor as to the costs of this hearing. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.