Legal Principles
10In Lai Qin , McHugh J (as his Honour then was) said (from p 624):
"In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action.
...
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80% of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.
The critical question in this case then is whether or not the prosecutrix acted reasonably in bringing these proceedings and whether the respondents acted so unreasonably in not informing the prosecutor that an application to review the decision to refuse a visa was being considered that it would be proper for the minister to pay the whole or part of the cost of the proceedings." (my emphasis)
11For Mr Wily it is said that it was reasonable for him to commence proceedings seeking to have orders made for the payment of the judgment debt on instalments having regard to his personal financial situation and the impact on his practice as a professional if he were to be made bankrupt. (In substance, the criticism made against him in this regard seems that he put forward an unreasonable time period in which to pay the instalments, namely over a five-year period.)
12It is said by Counsel for the Nauruan parties (Mr Dowdy) that the instalment applications were always going to fail and ought never to have been made; and thus an indemnity costs order is appropriate in this case. Reliance was placed by Mr Dowdy on what was said by the Court of Appeal in East West Airlines Ltd v Turner (No 2) [2010] NSWCA 159 at para 17:
"In the exercise of its general discretion the court can award costs on an indemnity basis if it appears that proceedings have been commenced or continued in circumstances where a party should have known that there was no real prospect of success ( Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 400-1; Re: Bond Corp Holdings Ltd (1990) 1 WAR 465 at 478; ((1990) 1 ACSR 350 at 363-4) ... "
13Reference was also made to what was said by Hill J in ASC v Aust-Home Investments Ltd (1993) 44 FCR 194. In that case, his Honour said:
"These cases [including R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13, Liddle v Kooralbyn Pty Ltd (unreported) Supreme Court Queensland 9 October 1987 per Ryan J, Austcorp Finance and Leasing Pty Ltd v Thomas (unreported) Supreme Court Queensland Master White 23 August 1991 and J T Stratford & Son v Lindley (No 2) [1969] 1 WLR 1547; [1969] 3 AllER 1122, seem to me to support the following propositions being made:
(1) where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a costs order: Stratford and the SEQEB case. (emphasis as placed by Mr Dowdy).
(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford . This will particularly be the case were a trial on the merits would involve complex factual matters where credit could be an issue.
(3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB).
(4) In a particular case it might be appropriate to the Court in its discretion to consider the conduct of a respondent prior to the commencement of proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v McIntosh (1993) 33 SR (NSW) 371.
(5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd [1973] 1 NSWLR 603 at 605, a case, however, which depended on the specific wording of the statute under consideration."
14In East West Airlines , the court was considering the import of a Calderbank offer to compromise the appeal and said that it could award costs on an indemnity basis if it appeared that the proceedings had been commenced or continued in circumstances where the parties should have known there was no real prospect of success, noting, however, what was said in Dean v Stockland Property Management Ltd (No 2) [2010] NSWCA 141 a [43]; namely that:
care must be taken, however, lest parties be unduly deterred from bringing or defending proceedings for fear that they will retrospectively be found to have not been justified in doing so. Uncertainty in outcome is not enough, and what appears certain at the time of judgment does not necessarily have that character at an earlier time.)
15There, the Court of Appeal did not consider that on a proper appreciation of the circumstances of the appeal it could be said that the submissions were so untenable that indemnity costs should be ordered. Their Honours noted that, while ultimately the applicant's appellant's submissions did not carry the day, there was an arguable basis for supporting its position.
16In relation to the present application, it is submitted by Mr Baird that Mr Wily's conduct in filing the instalment applications at the time that he did was reasonable; that the applications had reasonable prospects of success; and that Mr Wily's conduct in connection with the applications had been reasonable throughout until the settlement of this aspect of the litigation. Reliance was placed in this regard on Hellier Capital Pty Ltd v Richard Albarran [2009] NSWSC 403 and Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 1064.
- Was the instalment application doomed to failure?
17In Hellier, McDougall J considered the principles applicable where there was an application by a liquidator to pay a judgment debt by instalments pursuant to rule 37.2. In that case the liquidator had been held liable for a sum exceeding $1.6 million and McDougall J noted that the exercise of discretion in such a case required close attention to the facts of the case. His Honour noted that a perusal of the authorities indicated that
- at least some of the matters referred to in the Queensland rules were of more general application, such as: the principle that an instalment order ought not be made if the judgment debtor's means are sufficient to enable him or her to pay the judgment debt immediately and in full ( Leondaris v KGB design & Construction Pty Ltd [1998] FCA 1354; Chint ;
- an instalment order ought not be made if it is obvious that it would be futile because the judgment debtor could not meet his or her obligations under it: Cahill v Howe [1986] VR 630;
- the period of time for payment under the instalment order must be reasonable ( Cahill) ; Lewis v Leslie [2001[ VSC 110 and GFT Australia Pty Ltd v Moore (Supreme Court of Victoria; 2 November 1992, unreported). [What is "reasonable" is a matter of fact in each case, and requires attention to the amount of the judgment debt and the time for which it will be outstanding, or more accurately the time it will be satisfied, if the proposed release order is made.]
- it will not ordinarily be a proper exercise of the discretion to make an instalment order if the amount proposed to be paid would not enable some reduction to be made in the amount of the judgment debt. That is an irrelevant circumstance because of course judgment debts carry interest; an instalment order which chipped away at part only of the interest obligation, but did not permit any reduction of the principal amount of the judgment, would be inefficacious (citing Red Lea Chickens Pty Ltd v Tansey (Court of Appeal, 17 July 1995, unreported; BC 9505123).
18For Mr Wily it is said that the application to pay the judgment debt by instalments could not be said to have had no reasonable prospect of success.
19There was evidence before the court as to Mr Wily's personal assets (as there was in the Hellier case). That evidence revealed that while there was a net surplus of assets over liabilities that was in part comprised of a contingent asset (namely a contingent claim by Mr Wily against his solicitor apparently for alleged negligent advice); and that the assets were ones that one might infer would not be readily saleable (a half share in the matrimonial home, for example, and a half share in Mr Wily's partnership). It was said that even though there was no evidence as to the making of applications for finance to enable Mr Wily to pay out the judgment debt (as there had been the Hellier case), it could be inferred from the fact that ultimately the judgment debts were paid, that such conduct was being entered into by him.
20Mr Baird (for Mr Wily) thus contends that the evidence establishes a reasonably arguable case for an instalment order on the basis that the judgment debt would not readily be available from Mr Wily's own resources; that if the instalment order were not granted then it was likely that Mr Wily would be made bankrupt and would then be unable to practise his profession and support his dependents and would be unable to make any significant contribution to the judgment debt. It was also noted that in Hellier (although his Honour said he did not consider it to be of dispositive significance), there was some basis for concluding that the interest of the creditor in bankrupting Mr Albarran, was an interest of a more vindictive nature. In the present case, it is submitted by Mr Dowdy, and I accept, that it cannot suggested that there is any element of vindictiveness. Rather, the position seems to be that the Nauruan parties, through their lawyers, have made very clear that they intended to take every legal avenue open to them in order to enforce (as they are entitled to do) the judgment debt they obtained and to recoup moneys that have now been owing to them for a substantial period.
21In Hellier it was noted that there was a legitimate public interest in having trained people, who perform important work, remaining available to perform that work and it is said that this is equally applicable in Mr Wily's case.
22As adverted to earlier, the principal basis on which Mr Dowdy submitted that the instalment application was not reasonable and that it did not have reasonable prospects of success seemed to be the fact that it had proposed the payment of the judgment debts over a five-year period with quarterly instalments of $25,000 each quarter. (Mr Baird noted that in Hellier the instalment period was allowed for a period of a little less than four years, with payments of under $23,000 per month, initially but increasing thereafter.)
23It was Nauruan parties should wait a period of five years for the full payment of the judgment debt for costs entered in their favour and that the instalment applications in making that request for such a time period would have clearly failed.
24I am not satisfied that the instalment applications were doomed to failure. Yes, there were points of distinction between the present case and that before the court in Hellier . Nevertheless it seems to me that there was an arguable prospect that an instalment plan of some kind would be permitted (even if not to the degree sought in the applications). The quantum of the costs orders was large; there was a basis for concluding that Mr Wily would not immediately be able to realise sufficient assets to meet the costs orders and there was a public interest in a person in his position being able to continue to conduct his practice as a liquidator.