(b) Double representation
36 Bellamy's contends that courts do not usually award costs in a way which accepts double representation. It is said that this is because courts are concerned about costs being incurred unnecessarily by the over-representation of parties with common interests. In its generality, Bellamy's contentions are unremarkable. But let me elaborate further.
37 The general rule is that separate representation of applicants is not permitted without leave. And where multiple applicants with the same interest are separately represented, it will generally be proper for the unsuccessful respondent to be burdened with only one set of adverse costs.
38 And if successful parties with the same interests elect to be separately represented, they bear the onus of demonstrating that a sufficient reason exists for the unsuccessful party to be burdened with more than one set of costs. The burden may be discharged, and multiple applicants will be permitted separate representation, where they have a conflict of interest. But once there is no conflict and if there is separate representation, only one set of costs may be recoverable.
39 In Ex parte McCay; Re Consolidated Press Ltd (1936) 36 SR (NSW) 592 when considering costs in contempt proceedings, Jordan CJ said (at 595):
There are two applications before us, both arising out of the same paragraph, by two of the persons whose actions may be prejudicially affected. Each of these persons was, of course, entitled to bring the matter to the notice of the Court. But it does not follow that, if an order for costs should be made against the respondent, it should necessarily include the costs of both applications. … In the present case, it must have been manifest by the time that the rules nisi were granted that there was no possible cleavage between the two applicants, and no reason why they should not thenceforth join forces in presenting their applications to the Court, apart, of course, from a natural desire to be represented each by counsel of his own choice. But this is a desire that they are not entitled to indulge at another person's expense, in the absence of some good reason.
40 Ex parte McCay involved the question of costs where two applications for contempt of court had been brought by two separate applicants in two libel actions arising out of the same publication. Jordan CJ accepted that both applicants were entitled to bring their own application but noted that "it is most important that contempt applications not be used … as instruments of oppression" (at 595). He further noted that it was manifest by the time the rules nisi were granted in the proceedings that there was "was no possible cleavage between the two applicants". Accordingly, there was no reason why they should not from that time onwards have joined forces. As a result, the order made was that the respondent pay the costs of both applicants in full up to and including the time of the grant of the rules nisi, but that from that time onwards the respondent pay one half of the subsequent costs of each applicant. What is also of note is that a retrospective analysis was made, once the court was appraised of all the relevant facts, of the costs question to deal with an instance of over representation or unnecessary duplication.
41 Now both parties accept that the rule against double representation does not apply where separate representation is necessary because of an actual or potential conflict of interest.
42 Moreover, the applicants seek to characterise the circumstances of the present proceedings as ones where there is such a conflict of interest or potential conflict of interest justifying the separate representation of the McKay applicant and the Basil applicant.
43 But in my view this characterisation is wrong. It is apparent from the latest form of statement of claim filed in each proceeding that the Basil applicant and the McKay applicant are advancing identical claims and seeking identical relief against Bellamy's. There does not appear to be a potential conflict of interest between them. Now the applicants identify certain so-called divergences of interest which to the extent that they can be properly characterised as divergences of interest have resulted from their separate representation. But it is arguable that none of such concerns would exist if the common claims made against Bellamy's were advanced in the one proceeding brought by the one law firm.
44 Perhaps there are divergences such that the two applicants will give different discovery, will have different lay evidence and will have different particulars of loss and damage. Further, there may be other divergences, for example, issues in relation to the opt-out process and class closure, the resolution of the residual overlap of group members in the two proceedings, the content of notices to group members and the common fund application made by the McKay applicant. In addition, there will be separate issues which arise on any settlement, given the dynamics of compromising the McKay open class proceeding, as opposed to the closed Basil class. But these are not divergences of interest, let alone questions of actual conflict of interest. In a sense these divergences are an artefact of having two proceedings. If there had been only one group proceeding, such divergences may have been minimised, eliminated or indeed may have been easily handled in the one proceeding.
45 But to reject the applicants' conflict of interest argument does not entail that I should make the orders sought by Bellamy's. I will return to this later, but for the moment let me delve further into the cases.
46 Ex parte McCay dealt with co-applicants but the principles have been more developed in a line of cases involving multiple defendants in relation to disentitling over representation, although there exists no inflexible rule. In Statham v Shephard and Anor (No 2) (1974) 23 FLR 244 Woodward J said (at 246 to 247):
[T]he court will not normally allow two sets of costs to defendants where there is no possible conflict of interest between them in the presentation of their cases. I would add to this basic proposition three provisos. In the first place, if a conflict of interest appears possible but unlikely, the defendants should make any necessary inquiries from the plaintiff as to the way in which his case is to be put if this would resolve the possibility of conflict between defendants.
Secondly, there could be circumstances in which, although the defendants were united in their opposition to the plaintiff, their relationship to each other might be such that they would be acting reasonably in remaining at arm's length during the general course of litigation.
Thirdly, even if defendants are acting reasonably in maintaining separate representation for some time or for some purposes, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time.
47 Woodward J concluded that it was reasonable for the two defendants to maintain separate representation (at 248). Again, an important aspect of Statham was whether there was any possible conflict of interest.
48 In Taylor v Owners - Strata Plan No 11564 (No 2) [2013] NSWCA 153, an appellant was ordered to pay only one set of costs with respect to some of the respondents. The application by the appellant was made in reliance upon UCPR rule 51.4(5), which expressly provided that an applicant who considered that respondents need not be separately represented could notify them that objection would be taken to more than one set of costs being allowed between them. The circumstances in that case included that the requisite notice under rule 51.4(5) had been given and there was no conflict between the respondents. It was said by McColl, Basten and Hoeben JJA at [6]:
In Statham v Shephard (No 2) (1974) 23 FLR 244 at 246, Woodward J stated the general principle that, subject to three provisos, "the court will not normally allow two sets of costs to defendants where there is no possible conflict of interest between them in the presentation of their cases". The first proviso reduced the severity of the "no possible conflict" test, saying that the defendants should make enquiries from the plaintiff if a conflict appeared possible but unlikely. The second proviso was that the defendants might be acting reasonably in remaining at arm's length despite their united opposition to the plaintiff, even, apparently, in the case of "no possible conflict of interest". Whether that proviso was added from an abundance of caution and would generally have no operation need not be determined. It was limited by the third proviso which stated that even if the defendants were acting reasonably in maintaining separate representation "for some time or for some purposes, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time". It might be added that, even if they did not duplicate costs, they would not necessarily obtain separate costs orders if the expense incurred was not one which should reasonably have been borne by the plaintiff.
49 In HP Mercantile Pty Ltd v Hartnett [2017] NSWCA 79 an application was also made in reliance upon UCPR rule 51.4(5). In that case multiple respondents were not permitted to recover all the costs associated with two sets of legal representatives. It was noted that by reason of the fact that the only question before the court was a narrow one of construction, there arose no possible risk of conflict between the respondents (at [13] and [16(2)]). In those circumstances, it was found to be unreasonable that the appellant bear the costs of both sets of representation (at [14] to [16] per Bathurst CJ, Leeming and Payne JJA).
50 Both Taylor and HP Mercantile concerned respondents with common interests on the relevant appeal and with respect to which no possible conflict arose. But I would note that in those cases orders were made retrospectively and on the basis of evidence which demonstrated over representation and unnecessary duplication in the past conduct of the proceedings. Accordingly, those cases do not address the making of a forward looking cost capping order against two lead applicants in class actions in which I have already permitted separate representation.
51 At this point it is convenient to refer to Bristol-Myers Squibb Co v Baker Norton Pharmaceuticals Inc [2001] RPC 1. The English Court of Appeal overturned the primary judge's order that from a specified date "the first and second defendants shall recover only 1 set of costs between them, to be taxed as if only one firm of solicitors were acting for both parties and the parties were represented by one leading and one junior counsel". Aldous LJ observed that the governing principle was that the losing party should only be required to pay the costs reasonably incurred by the other party. Aldous LJ said (at [72]):
… A losing claimant should ordinarily pay the costs reasonably incurred by the parties that he takes proceedings against. What costs are reasonably incurred by one or more defendants should be ascertained by the costs judge who carries out the assessment. Upon such an assessment duplication and failure to co-operate can be seen and adjustments made accordingly. To decide what costs were reasonably incurred by defendants by considering what costs a losing client should pay, amounts to pre-judging the results of a detailed assessment without considering the facts.
52 Holman J added (at [116]):
… The proper target of the judge should not have been separate representation as such, but any unreasonable duplication of expense by the two sets of representatives. The proper point at which to consider that is on detailed assessment by the costs officer, and not by the arbitrary order which the judge made.
53 Now the observations in Bristol-Myers Squibb support the notion that the relevant inquiry on costs is whether there are unreasonably duplicated costs. But I agree with Bellamy's that one must be careful in how one approaches Bristol-Myers Squibb.
54 That case concerned the position of co-defendants and not co-plaintiffs. So in that context Aldous LJ said (at [71]):
The complaint upheld by the judge was that sometime in February, before the trial in July 1998, that position changed and it became unreasonable for the defendants to be represented by their own solicitors and counsel. That being so, it was not reasonable for the appellants to pay both sets of costs. What was it that meant that it was unreasonable for one of the parties to continue to be separately represented? The judge did not answer that question, except to say that he was not saying that the solicitors acted improperly. His conclusion depended upon what he thought was reasonable for the losing party to pay, not upon an assessment as to whether one of the respondents had acted unreasonably.
55 Aldous LJ went on to say (at [72]) that a "losing claimant should ordinarily pay the costs reasonably incurred by the parties that he takes proceedings against" (my emphasis).
56 Holman J said (at [116]):
Further, I applaud the judge's aim which was to discourage multiple representation by parties fighting, as he put it, a common enemy on a common cause… Further, I was persuaded by Mr Whittle, on behalf of Baker Norton, that in heavy pharmaceutical patent actions of this kind the fact that two large drug companies are facing a common enemy does not, as he put it, "make them friends." Many important commercial decisions, and the consequential effect upon other potential litigation, may lurk just below the surface of a case like this, thereby justifying that each party has its own legal advisers in the fray. The proper target of the judge should not have been separate representation as such, but any unreasonable duplication of expense by the two sets of representatives.
57 Further, in that case the co-defendants with double representation were commercial competitors and "[m]any important commercial decisions, and the consequential effect upon other potential litigation, may lurk just below the surface of a case like this, thereby justifying that each party has its own legal advisers in the fray". So the existence of trade rivalry between co-defendants or co-plaintiffs may justify separate representation. But that is not the present case.
58 In Ong v Ping [2015] EWHC 3258 (Ch), Morgan J said that "if the court considers that the costs of separate representation exceeded what was reasonably necessary to present the Claimants' case and protect their interests, then the court will conclude that the additional costs (in excess of the costs that would have been incurred if the Claimants had instructed a single set of solicitors) were not reasonably incurred and those costs will be disallowed" (at [60(5)]). He held that after a certain point in the litigation before him, it was not reasonably necessary for the two Claimants to have separate representation, and ordered that as and from that point in time the unsuccessful defendant was only liable for the costs which would have been incurred if the Claimants had used one firm of solicitors rather than two. So he focused on whether the costs of multiple parties bringing (or defending) claims against a single defendant (or plaintiff) were reasonably incurred.
59 Bellamy's contends that to the extent that Bristol-Myers Squibb and Ong stand for the proposition that where there is double representation the relevant inquiry on costs is whether there is unreasonable duplication of costs or whether successful litigants have acted unreasonably, such an approach is inconsistent with Australian authority. It prays in aid what Bathurst CJ, Leeming and Payne JJA explained in analogous circumstances that "the ultimate question is not … whether [successful litigants with double representation] … have acted reasonably, nor whether there has shown to be duplication" but rather "whether it is reasonable for the unsuccessful litigant to bear more than one set of costs" (HP Mercantile Pty Ltd at [14]).
60 So, according to Bellamy's, the prism to be looked through from the perspective of the unsuccessful litigant (on this hypothesis, Bellamy's) is whether it is reasonable for it to bear more than one set of costs, rather than whether the co-plaintiffs (on this hypothesis, the applicants before me) had unnecessarily or unreasonably duplicated costs.
61 Alternatively, Bellamy's says that even if the relevant inquiry is whether there is an unreasonable duplication of costs and whether successful litigants have acted reasonably, where there are two or more applicants making the same claims and seeking the same relief against a respondent and there is no conflict or possible conflict of interest between them, separate representation giving rise to duplication of costs is not justified, and the respondent (if unsuccessful) should only be liable for one set of costs. It is said that this is because in those circumstances the duplicated costs are necessarily unreasonable irrespective of the standpoint.
62 Given that I have allowed both proceedings to go forward, in my view the English approach is more suitable in the present context. Further, the practical differences between the formulations may be more perceived than real. It may be reasonable for Bellamy's to pay more than one set of costs in circumstances where I have allowed two class actions to go forward, as a result Bellamy's is not at great risk of yet further fragmentation and multiplicity, and where there has been no unnecessary or unreasonable duplication of costs from the applicants' perspective.
63 Now Bellamy's says that the applicants, not Bellamy's and the unfunded group members in the McKay proceeding, should in any event bear the financial burden of the duplicated costs inevitably arising as a result of the exercise of their "presumptive entitlement", whether those costs are necessary or unnecessary. It says that to the extent they are labelled "necessary", the so-called necessity only arises as a result of the decision by the applicants (or perhaps their respective litigation funders) to have separate representation. It says that once this is appreciated, the necessary/unnecessary duplicated costs distinction relied upon by the applicants is a diversion.
64 I disagree. Even accepting the general proposition consistent with the s 37M over-arching purpose that co-applicants or applicants in separate proceedings raising the same issues where there is no actual or potential conflict of interest ought not be entitled to two sets of costs (for example, the approach that has long applied to co-trustees), nevertheless on the foundation where I have allowed two class actions to go forward, in my view the necessary/unnecessary discriminant is appropriate. Moreover, this can only be properly assessed retrospectively rather than prospectively. But I would say that the co-operation protocol that I have ordered be put in place is designed to minimise any so called duplicated work and expenditure.
65 At all events, on any view Bellamy's will have an opportunity if needed one day to deal with the matter retrospectively. But perhaps such an occasion may never arise. Bellamy's may win at trial or the proceedings may settle such that Bellamy's exposure to an adverse costs order may never arise.