Nagpal v Global Cars Aus Pty Ltd

Background 8 The relevant facts are contained in Nagpal v Global Cars Aus Pty Ltd [2021] FCA 1226. 9 By their Originating Application, the Applicants sought certain declaratory and other relief, as set out above. 10 The jurisdiction of the Federal Court to grant the relief sought in the Originating Application was challenged by the Respondents prior to the first case management hearing which was held on 9 September 2021, as well as at that hearing itself (and later in their Defence filed on 23 September 2021). 11 On 21 September 2021, following the filing of a Statement of Claim, the Respondents filed an Interlocutory Application seeking orders setting aside the Originating Application and dismissal of the proceedings on the basis that the jurisdiction of the Federal Court had not been enlivened. It was this Interlocutory Application that the judgment in Nagpal v Global Cars Aus Pty Ltd [2021] FCA 1226 determined. The Respondents were wholly successful.

Indemnity costs 12 In Stefanovski v Digital Central Australia (Assets) Pty Ltd (No 2) [2018] FCAFC 113, the Full Court of this Court said: The principles upon which the discretion to award costs are to be exercised in this Court are not in doubt. They were recently referred to by the Full Court in GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2) [2018] FCAFC 100 where their Honours, Middleton, Nicholas and Burley JJ said at [5] - [7]: [5] The discretion of the Court in relation to costs is well established. As the Full Court recently observed in Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 (Idenix) at [3]: …Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a wide discretion in awarding costs. The exercise of the Court's discretion is not without principles or practices; it must be exercised judicially (Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [305] per Bennett, Besanko and Beach JJ). The ordinary rule is that costs follow the event, although a successful party may be awarded less than its costs, or costs may be apportioned, based upon success on the issues (Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192; [2015] HCA 53 at [6] per French CJ, Kiefel, Nettle and Gordon JJ; Les Laboratoires Servier at [297] to [298] and [303]). [6] Every case must be decided on its own facts. There is no doubt that this Court could address the costs of the appeals and the cross appeals compendiously. In Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 3) (Sanofi-Aventis) the Full Court addressed the costs of the appeal and cross-appeal together at [26], despite Apotex failing in its challenge to validity on various grounds (see at [8]). In Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) (Tramanco) the Full Court similarly dealt with costs compendiously (at [13]), and noted the difficulties with disentangling the costs of different issues (at [12]). [7] Further, a percentage reduction approach may also be appropriate in some cases. Such an approach was adopted in Idenix and in Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158. 13 The ordinary rule is that an award of costs is on the party-party basis: Re Wilcox; Ex Parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, 153, 158; [1996] FCA 1132, 3 (Black CJ), 9 (Cooper and Merkel JJ). 14 However, an order for costs on an indemnity basis may be made where the proceeding exhibits "some special or unusual feature" (Re Wilcox (1996) 72 FCR 151, 152, 156) or "special circumstances" (Australian Electoral Commission v Towney (No 2) (1994) 54 FCR 383, 388). 15 In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801, Sheppard J, at 233-234, identified a non-exhaustive list of circumstances which have previously justified an exercise of discretion to award indemnity costs, including relevantly: (a) the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law; and, (b) the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions. 16 An award of indemnity costs has been justified where an application is brought in the Federal Court, but where the applicant, if properly advised, should have known that the proceeding should not be commenced in the Federal Court: Randjelovic v Threlfall [2012] FCA 1331, [35].

Lump sum costs 17 Rule 40.02(b) of the Federal Court Rules 2011 (Cth) provides that a party who is entitled to costs may apply to the Court for an order that costs "be awarded in a lump sum, instead of, or in addition to, any taxed costs". 18 The Court's Costs Practice Note (GPN-COSTS) provides at paragraph 4.1 that "[t]he Court's preference, wherever it is practicable and appropriate to do so, is for the making of a lump sum costs order". 19 The principles in relation to the appropriate circumstances for the making of a lump sum order were summarised by Markovic J in Fewin Pty Ltd v Burke (No 3) [2017] FCA 693 at [10]-[13]. 20 Relevantly, Markovic J stated at [12]: 12. The Court has also recognised that it is appropriate to use the lump sum costs order procedure in cases which are simple and in which "there would be utility in the [C]ourt cutting the Gordian knot of protracted fights about costs": Keen v Telstra Corporation Limited (No 2) [2006] FCA 930 at [6] (per Rares J). In that case, Rares J also observed that the purpose of a lump sum costs order is to save the parties the time, trouble, delay, expense and aggravation in having to proceed to a taxation of costs.

Indemnity costs 21 The Respondents provided the Applicants with early and explicit notice of the deficiencies in the Originating Application, namely, that the Federal Court did not have jurisdiction to grant the relief sought. 22 The Applicants attempted to remedy the position by filing a Statement of Claim and amending the relief sought, which included claims which were found to be hypothetical and outside the jurisdiction of the Federal Court and, in relation to two of the declarations sought, were also found to be "colourable" in the sense that they were "made for the improper purpose of fabricating jurisdiction" such that they were not made bona fide. 23 The proceeding was commenced and pursued in disregard of well-established principles relating to the jurisdiction of the Court. Properly advised, the Applicants ought not to have commenced these proceedings in the Federal Court of Australia. 24 As a result, the Respondents were put to the expense of filing a pleading and preparing to defend a misconceived claim which lacked any jurisdictional basis. Prior to the proceeding being dismissed, it had been set down for an urgent trial commencing on 30 November 2021 and a timetable was in place for the delivery of the Respondents' evidence. At the same time, the Respondents were put to the expense of bringing their application to have the proceedings dismissed, and were successful. 25 In these circumstances, it is appropriate that an order be made that the Respondents' costs of and incidental to the proceedings be paid by the Applicants on an indemnity basis.

Lump sum costs 26 These proceedings were relatively simple and were terminated at an early stage. The task of assessing a lump sum is therefore straight-forward. 27 As such it is a proceeding which lends itself to the making of a lump sum cost order so as to "[cut] the Gordian knot of protracted fights about costs": Keen v Telstra Corporation Limited (No 2) [2006] FCA 930. 28 In these circumstances, it is appropriate that an order be made that the Respondents' costs are to be fixed by lump sum. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Downes.