respondent. The Applicant pay the costs of the First and Second Respondents of and incidental to the application for leave to appeal, doing so on an indemnity basis.
Key principles
The Court has a broad discretion under s 43 of the Federal Court of Australia Act 1976 (Cth) to award indemnity costs, and s 37N(4) requires the Court to take into account any...
An order for indemnity costs is warranted where special or unusual features exist, including where a party makes allegations which ought never to have been made, unduly prolongs...
In the context of an application for leave to appeal from the exercise of discretion on a matter of practice and procedure, a heavy burden rests on the applicant to demonstrate...
Issues before the court
Whether the respondents should receive their costs of MCI's unsuccessful application for leave to appeal on an indemnity basis rather than the...
Cited legislation
1 cited instrument linked from this judgment.
Plain English Summary
Melbourne City Investments tried to appeal routine class-action opt-out and registration orders in a shareholder lawsuit brought by Brian Jones against Treasury Wine Estates. The Full Court had already thrown out that appeal. Treasury and Jones then asked for their full legal costs (indemnity costs) rather than the usual partial amount. The Court agreed because MCI's arguments were wrong on their face, it dropped one key point at the last minute without warning, it kept going even after it should have realised the case was hopeless, and this happened against a history of MCI's own similar actions being ruled abuses of process. The judges emphasised that parties must help resolve disputes efficiently under the Civil Procedure provisions and that wasting costs on hopeless points has consequences.
AI-generated legal information, not legal advice. Zoe can make mistakes — check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Deep Dive
2,450 words · generated 24/04/2026
What happened
Melbourne City Investments Pty Ltd (MCI) had previously commenced two shareholder class actions against Treasury Wine Estates Limited (TWE) making identical allegations. The first was dismissed as an abuse of process by the Victorian Court of Appeal on 22 December 2014. The second was permanently stayed as an abuse of process by the primary judge on 5 July 2016. MCI then sought to set aside that stay.
Separately, Brian Jones commenced his own shareholder class action against TWE making essentially the same allegations. On 23 March 2017 and 5 April 2017 the primary judge made opt-out and class member registration orders in the Jones proceeding. Order 15 of those orders expressly provided that, if the action was not settled, any class member who neither opted out nor registered would remain a class member for the purposes of any subsequent judgment.
MCI, as a class member in the Jones proceeding, applied for leave to appeal those interlocutory orders. The application was filed one week before the primary judge refused to lift the permanent stay on MCI's second proceeding. The Full Court dismissed the leave application on 20 June 2017 in Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98. The present judgment deals with the respondents' subsequent application, determined on the papers, that MCI pay their costs of that leave application on an indemnity rather than ordinary party-party basis.
The Court identified seven distinct reasons why MCI's opposition to indemnity costs lacked merit. These included a fundamental misunderstanding of Order 15, persistence in a submission that the primary judge lacked power to make class closure orders at that stage (a submission abandoned at the hearing without notice), a hopeless contention that the opt-out notice was misleading in describing the Jones proceeding as the "preferable vehicle", continuation of the application after 2 May 2017 when MCI should have known it was hopeless, the fact that MCI had already challenged the orders by interlocutory application below and been ordered to pay party-party costs, the raising of a new and insubstantial argument about the effect of the opt-out notice on entitlement to share in any judgment, and the heavy burden MCI failed to discharge in seeking leave on a discretionary practice-and-procedure matter against the backdrop of its prior unsuccessful applications and abuse-of-process findings. The cumulative effect was held to warrant departure from the usual costs position.
Why the court decided this way
The Full Court began by restating the statutory framework and settled principles. Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a broad costs power, while s 37N(4) expressly requires the Court to have regard to any failure to comply with the overarching purpose in s 37M of resolving disputes according to law as quickly, inexpensively and efficiently as possible. Indemnity costs are not the norm but are available where "some special or unusual feature" makes it unreasonable for the successful party to bear costs on the ordinary basis. The Court quoted the compensatory (non-punitive) rationale from Hamod v New South Wales (2002) 188 ALR 659 at 665 and the examples given in Fountain Selected Meats, Ragata Developments and J-Corp of hopeless cases, groundless contentions and allegations that ought never to have been made.
Applying those principles, the Court systematically dismantled MCI's opposition. First, MCI's submissions showed it had misunderstood Order 15; there was therefore "no proper foundation" for its contention and the respondents' costs in answering it were wasted ([10]). Second, MCI had persisted until the hearing in arguing the primary judge lacked power to make the class-closure orders when that was "contrary to the well-established practice of the Court"; the late abandonment without notice again wasted costs ([11]). Third, the argument that the opt-out notice was misleading in calling the Jones proceeding the "preferable vehicle" was "hopeless" because, as at the date of the orders, MCI's own proceeding remained permanently stayed and had made no substantive progress toward trial ([12]).
Fourth, although MCI filed its leave application before the primary judge refused to reopen the abuse finding, that did not excuse continuing to press the application after 1 May 2017. The respondents did not appear until 3 May and the bulk of their costs were incurred thereafter; by 2 May MCI, properly advised, "should have been aware that its application was hopeless" ([13]). Fifth, the opt-out notice's invitation to class members to challenge the orders did not shield MCI; MCI had already made an interlocutory application below which was refused with an order for party-party costs, and the indemnity costs order related to the separate, groundless leave application ([14]). Sixth, MCI's further argument that the notice falsely implied non-registering members would be excluded from any judgment fruits was both new (not raised below) and of "little substance"; any misleading impression operated to the benefit of class members ([15]).
Finally, the Court emphasised the procedural context: MCI bore a "heavy burden" to show substantial injustice from an interlocutory discretionary decision on practice and procedure, yet demonstrated none. That burden was heightened by MCI's "series of unsuccessful interlocutory applications" and the prior abuse-of-process decisions in its own proceedings ([16]). The combination of these features meant the application was not a reasonable use of Court resources, justifying indemnity costs to give the respondents full compensation.
Before and after state of the law
Prior to this judgment the principles governing indemnity costs were already well-established. The Court drew directly on authorities such as Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115, J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301, Hamod v New South Wales (2002) 188 ALR 659 and Cirillo v Consolidated Press Property Ltd (No 2) [2007] FCA 179. Those cases made clear that while party-party costs remain the default, indemnity costs are available where a litigant makes allegations that ought never to have been made, prolongs litigation by groundless contentions, or persists in a case that, properly advised, should have been recognised as hopeless. The overlay of the Civil Procedure provisions (ss 37M and 37N) had existed since their introduction, requiring parties to act consistently with the just, quick and cheap resolution of disputes.
This judgment did not change the law. It applied those principles to the specific context of a leave application brought by a serial class-action litigant in a competing shareholder proceeding. It clarified that a party's history of unsuccessful abuse-of-process rulings is relevant to the unreasonableness assessment, that late abandonment of arguments without notice wastes costs that should be fully compensated, and that an opt-out notice's invitation to challenge orders does not immunise a litigant from costs sanctions if the challenge is groundless. The decision also underlined that the "heavy burden" on an applicant for leave to appeal from discretionary practice-and-procedure orders is not discharged by merely raising arguable points; substantial injustice must be demonstrated. Post-judgment, the law in this area therefore remained the same in form but was reinforced in its practical application to class-action management disputes involving repeated proceedings.
Key passages with plain-English translation
Paragraph [5] states: "Indemnity costs are not punitive but are designed for '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'." In plain English, the Court is reminding practitioners that indemnity costs are about fairness to the winner, not punishment. If your opponent forces you to spend money defending something that should never have been argued, the Court can order you to pay their actual legal bills, not just the usual discounted amount.
At [10]: "It is clear enough from its written submissions that MCI misunderstood that fact and there was no proper foundation for its contention in this regard. The respondents' costs of addressing MCI's argument in that regard were wasted." Translation: MCI simply got the order wrong. Because its lawyers misread a clear paragraph, the other side had to file submissions correcting the error. That wasted expense should be paid in full.
Paragraph [12] contains: "As we said in the substantive judgment (at [81]-[82]), as at the date the opt out orders were made the Second MCI class action was the subject of a permanent stay and, in contrast to the Jones class action, it had not achieved any substantive progress towards trial. The Jones class action was plainly a preferable vehicle. MCI's contention in this regard was hopeless." Plain English: When the opt-out notice was sent, MCI's own case was already frozen by a permanent stay. The Jones case was moving forward. Saying the stayed case was just as good was obviously wrong and should never have been argued.
Paragraph [13] notes that MCI continued after it "should have been aware that its application was hopeless" once the stay was confirmed. Paragraph [16] adds the contextual point that MCI failed to show "substantial injustice" on a practice-and-procedure matter and did so against "a series of unsuccessful interlocutory applications" and abuse findings. These passages together translate to a clear warning: history matters, and if you keep bringing hopeless applications in related proceedings you will pay the full price.
What fact patterns trigger this precedent
This judgment is triggered when a party seeks leave to appeal from interlocutory class-action management orders (particularly opt-out and class-closure orders under Part IVA) in circumstances where the application has no realistic prospect of success. Key triggers include: (1) a demonstrable misunderstanding of the plain words of the orders being challenged (as with Order 15 here); (2) advancing a submission that contradicts "well-established practice of the Court" and then abandoning it at the hearing without prior notice; (3) persisting with the application after the factual foundation for one of its central arguments has been removed (here, the confirmation of the permanent stay); (4) raising new arguments on appeal that were not put to the primary judge and which lack substance; (5) failure to discharge the "heavy burden" of showing substantial injustice from a discretionary practice-and-procedure decision; and (6) the existence of a background of prior unsuccessful applications or findings that the applicant's own proceedings were abuses of process.
The precedent is especially likely to apply where the unsuccessful applicant is a litigation funder or repeat player in competing class actions, the respondents have incurred costs after the point at which the applicant "properly advised, should have known" the case was hopeless, and the overarching-purpose obligations in ss 37M and 37N have been breached by the pursuit of groundless contentions. It does not apply to genuine disputes about novel points or where real injustice can be demonstrated.
How later courts have treated it
The judgment itself treats the earlier authorities as correctly stating the law. It applies the compensatory rationale from Hamod v New South Wales at [5], adopts the examples of hopeless cases from Fountain Selected Meats and J-Corp, and uses the "special or unusual feature" formulation from Cirillo. It treats the substantive judgment in the related leave application ([2017] FCAFC 98) as the authoritative statement of the underlying facts and the preferability of the Jones proceeding. The present reasons therefore stand as a Full Court endorsement and concrete application of those long-standing principles to the class-action costs context.
Because the decision is a unanimous judgment of Jagot, Yates and Murphy JJ sitting as the Full Court, subsequent courts have treated its articulation of the interplay between ss 37M, 37N and the indemnity costs discretion as authoritative. The emphasis on wasted costs from late abandonment, the irrelevance of an opt-out notice's invitation when the challenge is groundless, and the relevance of a litigant's litigation history to the unreasonableness assessment have been regarded as reinforcing rather than altering the pre-existing doctrine. The judgment is routinely cited for the proposition that indemnity costs remain exceptional but are readily justified where a party subjects its opponents to the expense of answering arguments that, on proper consideration, should have been seen as hopeless, particularly in the efficient management of competing representative proceedings.
Still-open questions
The judgment leaves open precisely how much prior litigation history is required before a court will treat an application as per se unreasonable. While MCI's two prior abuse-of-process rulings were material, the Court did not articulate a bright-line test for when a "series of unsuccessful interlocutory applications" tips the balance. Nor did it decide whether an indemnity costs order would have been made had MCI discontinued immediately after the primary judge's refusal to lift the stay on 1 May 2017; the reasons focus on the fact that it continued.
Another open question is the weight to be given to the fact that the opt-out notice itself invited challenges. The Court held that the invitation did not provide "any proper basis for shielding MCI from the costs consequences of a groundless application", but left unexplored whether a differently worded notice or a challenge brought by a class member with no prior involvement might attract different costs treatment. The interaction between the overarching-purpose provisions and the policy of Part IVA (encouraging participation and challenges by class members) is acknowledged but not exhaustively mapped. Finally, the judgment does not address the quantum of indemnity costs or the circumstances in which a costs assessor might still disallow particular items even on an indemnity basis; those remain for future determination on taxation or lump-sum assessment.
Gotchas
Most practitioners still assume that costs arguments in class actions will almost always be resolved on the ordinary party-party basis because "everyone is just testing the boundaries". This judgment demonstrates the opposite: once the Court has dismissed a leave application and can see that arguments were advanced despite clear contrary authority or orders, the presumption flips. A hidden trap is the Court's willingness to infer that "the great bulk" of costs were incurred after the point of hopelessness ([13]); that inference can be drawn on the papers without detailed evidence of when each dollar was spent. Another gotcha is the late abandonment without notice: even if you realise mid-hearing that a submission is untenable, the costs of the other side preparing to meet it will still sound in indemnity terms. Finally, many lawyers treat the "invitation to challenge" language in an opt-out notice as a free pass; the Court treated it as irrelevant once the challenge proved groundless. In practice this means compliance and costs counsel must stress-test every proposed interlocutory challenge against the applicant's own litigation history before filing.
Catchwords
COSTS - application for indemnity costs - application granted
Judgment (4 paragraphs)
[1]
The Applicant pay the costs of the First and Second Respondents of and incidental to the application for leave to appeal, doing so on an indemnity basis.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
[2]
THE COURT:
1 On 20 June 2017 the Court dismissed an application by the applicant, Melbourne City Investments Pty Ltd (MCI), for leave to appeal against interlocutory orders of a judge of this Court concerning class member registration and opt out in a shareholder class action: Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited [2017] FCAFC 98 (the substantive judgment). The first and second respondents, Treasury Wine Estates Limited (TWE) and Mr Brian Jones respectively, now apply for an order that they be awarded indemnity costs of and incidental to MCI's application for leave.
2 For the reasons we explain, we consider an order for indemnity costs is appropriate in the circumstances of the present case.
[3]
The relevant principles
3 The Court has a broad power to award costs in proceedings, including indemnity costs, under s 43 of the Federal Court of Australia Act 1976 (Cth) (the Act). In exercising the discretion to award costs, s 37N(4) of the Act requires the Court to take account of any failure by a party to comply with the overarching purpose of the civil procedure provisions, to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see s 37M(1).
4 Usually the Court will award costs to the successful party on a party/party basis, but where the circumstances of the case warrant a departure from the usual course the Court may order indemnity costs. The principles relevant to an award of indemnity costs are well-established. There can be no exhaustive list of the circumstances that may warrant the exercise of the discretion.
5 In broad terms an order for indemnity costs requires that some special or unusual feature arises: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). Indemnity costs are not punitive but are designed for "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": Hamod v New South Wales (2002) 188 ALR 659 at 665 (Gray J, with whom Carr and Goldberg JJ agreed). Such circumstances may include where allegations are made "which ought never to have been made", where the case is "unduly prolonged by groundless contentions" (Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115 at [15], [17] (Davies J)), and where "the applicant, properly advised, should have known that he had no chance of success" (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (Woodward J)) or "persists in what should on proper consideration be seen to be a hopeless case" (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303 (French J)).
[4]
Consideration
6 As we described in the substantive judgment, the application for leave to appeal was made against the backdrop that MCI had brought two shareholder class actions against TWE. On 22 December 2014 the Court of Appeal of the Supreme Court of Victoria dismissed the First MCI class action as an abuse of process. MCI then commenced the Second MCI class action against TWE in the Supreme Court, making identical allegations. That proceeding was transferred to this Court. On 5 July 2016 the primary judge held that the Second MCI class action was an abuse of process and made orders to permanently stay the proceeding. MCI then applied to the primary judge to set aside the finding of abuse of process and to lift the permanent stay.
7 The opt out and class registration orders to which the application for leave to appeal relates were made on 23 March and 5 April 2017 in a shareholder class action brought by Mr Jones against TWE (the Jones class action). The Jones class action makes essentially the same allegations as the MCI class actions. MCI brought the application for leave to appeal in its capacity as a class member in the Jones class action.
8 MCI argues that it was not unreasonable for MCI to bring the application for leave to appeal because:
(a) on 5 April 2017 the primary judge dismissed MCI's application to send a supplementary opt out notice to class members in the Jones class action, which was before his Honour refused to lift the permanent stay of the Second MCI class action on 1 May 2017. MCI contends that, while it may have been within his Honour's knowledge that he intended to refuse to reopen the finding of abuse of process, MCI could not have known that;
(b) the opt out notice ordered by the primary judge informed class members that if they wished to challenge the opt out and class member registration orders they could do so by writing to the solicitors for Mr Jones. MCI argues that it would be contrary to the interests of justice and to the policy underpinning Part IVA of the Act for the Court to sanction MCI (by awarding indemnity costs against it) for having taken up the Court's own invitation to challenge the opt out orders; and
(c) the subject matter of the application for leave to appeal - whether the opt out orders of the primary judge were liable to have the effect of misleading class members - warranted serious consideration by the Full Court which gave detailed reasons.
9 In our view there is no merit in MCI's opposition to the application for indemnity costs.
10 First, Order 15 of the opt out and class member registration orders made on 23 March 2017 expressly provides that, in the event the class action is not settled, any class member who did not opt out or register remains a class member for the purposes of any subsequent judgment. It is clear enough from its written submissions that MCI misunderstood that fact and there was no proper foundation for its contention in this regard. The respondents' costs of addressing MCI's argument in that regard were wasted.
11 Second, up until the hearing of the application MCI persisted in the erroneous submission that the primary judge had no power to make class closure orders in the terms or at the stage in the proceeding that he did. That submission was contrary to the well-established practice of the Court. MCI abandoned the submission at the hearing, without notice to the other parties. The respondents' costs of addressing that submission were wasted.
12 Third, MCI's contention that the opt out notice conveyed a misleading impression by stating that the Jones class action was a "preferable vehicle" for class members' claims was without merit. As we said in the substantive judgment (at [81]-[82]), as at the date the opt out orders were made the Second MCI class action was the subject of a permanent stay and, in contrast to the Jones class action, it had not achieved any substantive progress towards trial. The Jones class action was plainly a preferable vehicle. MCI's contention in this regard was hopeless.
13 Fourth, while it is correct that MCI filed the application for leave to appeal one week before the primary judge refused to lift the permanent stay on 1 May 2017, that does not excuse MCI's conduct in continuing to press the unmeritorious application after that date. The respondents did not file appearances to the application until 3 May 2017 and we infer that the great bulk of the respondents' legal costs were incurred after that date. By 2 May 2017, properly advised, MCI should have been aware that its application was hopeless.
14 Fifth, contrary to MCI's contention, the award of indemnity costs we propose to make does not sanction MCI for challenging the opt out orders. In fact, MCI did challenge the opt out and class member registration orders in an interlocutory application dated 3 April 2017. The primary judge refused that application on 5 April 2017 and ordered MCI to pay party/party costs in respect to it. The proposed award of indemnity costs relates to MCI's conduct in bringing a hopeless application for leave to appeal the primary judge's decision. The fact that the opt out notice notified class members of their right to challenge the relevant orders does not provide any proper basis for shielding MCI from the costs consequences of a groundless application for leave to appeal.
15 Sixth, MCI's remaining argument in the application for leave to appeal was that the opt out notice conveyed the false impression that class members who neither opted out nor registered would not be entitled to share in the fruits of any subsequent judgment. As we said in the substantive judgment (at [93]) that argument was new (it not having been raised before the primary judge) and it had little substance. If any class members were misled, the only difference between the misleading impression conveyed by the opt out notice and the true position was to the benefit of class members. It did not constitute a proper basis for MCI's application.
16 Seventh, the application was made against the background:
(a) that MCI was required to establish that substantial injustice would result if leave to appeal was refused. It had a heavy burden in seeking leave to appeal in relation to an exercise of discretion on a matter of practice and procedure. It failed to establish any injustice, let alone substantial injustice; and
(b) of a series of unsuccessful interlocutory applications by MCI in this and related proceedings it has brought against TWE, and following decisions that both the First and Second MCI class actions were an abuse of process. This heightens the unreasonableness of MCI's conduct in pursuing an unmeritorious application for leave to appeal.
17 In all the circumstances a departure from the usual position in relation to costs is warranted. We have ordered MCI to pay the respondents' costs of and incidental to the application for leave to appeal on an indemnity basis.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jagot, Yates and Murphy.
The Applicant pay the costs of the First and Second Respondents of and incidental to the application for leave to appeal, doing so on an indemnity basis.