O'Neill v Mann

REASONS FOR JUDGMENT 1 Though in form an application for leave to discontinue a defamation proceeding of over eleven years standing the present matter is in substance one about costs. The applicant, James Joseph O'Neill, had a costs order made in his favour by the Full Court of this Court against the respondent, Arnold Mann, in an interlocutory hearing in this proceeding on a preliminary question of law: O'Neill v Mann (1994) 54 FCR 212. No order has, as yet, been made for the taxation of those costs: see Federal Court Rules O62 r 3(3) ("the Rules"). The substantial issue between the parties is whether Mr O'Neill should enjoy the dual advantages of discontinuing for no given reason a proceeding he initiated and of being permitted to enjoy the benefits of his costs award. Factual Background 2 In November 1989 Mr O'Neill commenced a defamation action against Dr Mann. Dr Mann, a medical practitioner, had been a defendant in two cases that had come before Mr O'Neill in his then capacity as a Special Magistrate of the Australian Capital Territory (ACT). The alleged defamation related to several letters written by Dr Mann to public officials that reflected on Mr O'Neill's competence. 3 The Supreme Court proceeding was cross-vested to this Court by consent on 18 February 1994 under the provisions of s 5 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). In O'Neill v Mann [2000] FCA 1180 I held that there was no constitutional impediment to this Court's jurisdiction to entertain that matter. 4 In the defamation action Dr Mann raised defences both of absolute and of qualified privilege. Whether the former of these was available was tried by Heerey J as a separate question, seemingly, by consent. It was decided favourably to Dr Mann: O'Neill v Mann (1994) 49 FCR 370. The Full Court by majority reversed that decision in O'Neill v Mann (1994) 54 FCR 212. It ordered that the absolute privilege plea be struck out and, of present significance, that Dr Mann pay the costs of the appeal and Mr O'Neill's costs of the separate question at first instance. Dr Mann appealed to the High Court against these orders. By a majority (4:1), the appeal was disallowed: Mann v O'Neill (1997) 191 CLR 204. 5 On 5 February 1998 Mr O'Neill through his solicitors purported to discontinue the proceeding by filing a notice to that effect in the ACT District Registry of the Court. The notice was ineffective, the required leave of the Court not having been obtained: O 22 r 2 of the Rules. Nonetheless Mr O'Neill's solicitors proceeded on the assumption that it had achieved its object and on 15 December 1998 filed a bill of costs for taxation in respect of the Full Court's costs order to which I have referred, again without the required order of the Court: O 62 r 3(3) of the Rules. That action spawned further litigation between the parties. 6 Dr Mann challenged on constitutional grounds the jurisdiction of this Court to entertain the cross-vested defamation action. He was unsuccessful: O'Neill v Mann [2000] FCA 1180. It was that proceeding that brought to light the ineffective notice to discontinue. 7 Mr O'Neill's legal representatives foreshadowed that if he was successful in resisting the constitutional challenge, he would seek the leave of the Court to the discontinuance of the defamation proceeding. Though no motion to that effect has been filed and no evidence put on to support the grant of leave, the parties have proceeded on the assumption, as have I, that the present hearing was for such leave. Submissions and Conclusions 8 Put shortly, the position taken by Mr O'Neill is that he concedes he should pay Dr Mann's costs thrown away by reason of the discontinuance. That concession, though, is without prejudice to Mr O'Neill's entitlement to seek the benefit of the Full Court's costs award. 9 Dr Mann, while wishing to have the proceeding discontinued, contends that the price of it should be that each party should bear his own costs including the costs of the hearing of the preliminary question. 10 Before expressing my own view on the matter I would make the following preliminary observations. 11 (1) Order 22 r 2 of the Rules specifies the circumstances in which a party making a claim for relief may discontinue the whole or any part of that claim (a) without the leave of the Court or the consent of any other party; (b) with the consent of any or all of the parties; and (c) with the leave of the Court. Subject to a qualification I will note below, where the leave of the Court is sought: "the court will, normally, at any rate, allow a plaintiff to discontinue if he wants to, provided no injustice will be caused to the defendant. It is not desirable that a plaintiff should be compelled to litigate against his will. The court should therefore grant leave, if it can, without injustice to the defendant, but in doing so should be careful to see that the defendant is not deprived of some advantage which he has already gained in the litigation and should be ready to grant him adequate protection to ensure that any advantage he has gained is preserved": Covell Matthews & Partners v French Wools Ltd [1977] 1 WLR 876 at 879. The qualification is that inability completely to protect a respondent will not in all circumstances result in leave being refused. The matter remains one for the exercise of the Court's discretion in each case: SCI Operations Pty Ltd v Trade Practices Commission (1984) 53 ALR 283. The common device employed to protect a respondent is the imposition of terms on an applicant as a condition of the grant of leave: see eg Young, Austen & Young Ltd v British Medical Association [1977] 1 WLR 881. Those terms may be so onerous that an applicant for leave may not wish to accept them: Covell Matthews & Partners v French Wools Ltd [1978] 1 WLR 1477 at 1485. 12 (2) In relation to the incidence of costs on discontinuance, in the first two of the three categories referred to above (ie discontinuance without leave or consent and discontinuance with consent), it has been held that, unless the Court otherwise orders, the discontinuing party is liable to pay the costs occasioned by the discontinued claim of the person(s) against whom that claim was made and which were incurred before service of the notice of discontinuance: see Ahmed v Minister for Immigration and Multicultural Affairs [2000] FCA 1436. This conclusion is a consequence of the combined effect of O 22 rr 2 and 3 and O 62 r 26(1) of the Rules. The costs consequences to a discontinuing party where leave is required and granted is somewhat more complex. Unlike with the previous two categories, the Rules do not provide expressly for the incidence of costs on discontinuance with leave, the Court's power to award costs being that general one provided by s 43(1) of the Federal Court of Australia Act 1976 (Cth) and O 62 r 3(1) of the Rules. It is a discretionary power to be exercised judicially: Mineralogy Pty Ltd v National Native Title Tribunal (Full Court of the Federal Court, 23 December 1998, unreported). 13 (3) It properly can be said that there is an "underlying policy" in the Rules that the discontinuing party should be liable for the other party's costs unless the court orders otherwise: Grundy v Lewis (Cooper J, 28 May 1998, unreported). But so various can be the reasons for, and circumstances of, discontinuance that that policy cannot safely be said to have hardened into a "usual rule" where leave is granted such as exists where there has been a determination of a claim on its merits: as to the latter see Re Wilcox; Ex Parte Venture Industries Pty Ltd (1996) 141 ALR 727. The conduct of the parties in the matter and the reasons for the discontinuance can bear heavily on the exercise of the discretion as to costs. As McHugh J observed in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Qin (1997) 186 CLR 622 at 625 of one common category of case: "[i]f 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." In applying this approach it is not the function of a court to make a prediction as to the outcome of a hypothetical case. And so in Mineralogy Pty Ltd v National Native Title Tribunal, above, no order as to costs was made where an appeal was discontinued in consequence of an amendment to the Native Title Act 1993 (Cth) that arguably altered the effect on the discontinuing appellant of the judgment appealed against: see also Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194. By way of contrast, where the discontinuance can be said to be an acknowledgment by an applicant of likely defeat or where no objective circumstance provides reason for the discontinuance, a costs order in favour of the other party will ordinarily be made. 14 (4) Order 62 r 3(3) of the Rules provides: "An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order." It is well accepted that the terms "interlocutory" and "final" may mean different things in different contexts: Malouf v Malouf (1999) 167 ALR 383 at 390. For the purposes of the above rule, it is clear that the determination of the separate question giving rise to the Full Court's costs award involved an interlocutory proceeding even though it resolved a discrete issue in the litigation: Stack v Brisbane City Council (1996) 71 FCR 523. It was not a proceeding in which "the entire action [was] concluded by a judgment or order that authoritatively determine[d] [the] rights and obligations of the parties": ibid, at 535. Mr O'Neill not having sought an order to the contrary when the Full Court order was made, he would require leave before proceeding to tax those costs. For reasons I give below I do not find it necessary to consider (a) whether the effect of a grant of leave to Mr O'Neill would so "kill [the] action": Covell Matthews & Partners v French Wools Ltd [1978] 1 WLR 1477 at 1487; as of itself to preclude his later seeking to enforce a costs order in that action: cf the position of the party against whom the discontinuance is made: Newcomen v Coulson (1876) 7 Ch D 764; or (b) whether the application for leave itself should be treated as an election to forego the benefit of the earlier costs award if leave is given. 15 (5) While the written submissions put in by both parties are laced with factual materials and allegations of fact, I have no evidence in appropriate form before me relating to the application for leave. Importantly, there is no evidence indicating such reasons as may have existed for Mr O'Neill's seeking leave to discontinue, although one can readily speculate as to what those reasons might be. Without suggesting that any of the following were Mr O'Neill's actual reasons, possible reasons could range, for example, from acceptance that the further prosecution of a proceeding of this type by a judicial officer was inappropriate in the circumstances irrespective of any defence of absolute privilege: cf O'Neill v Mann (1997) 191 CLR 204 at 236; to a view entertained as to the likelihood of success in the proceeding particularly in light of the defence of qualified privilege; or simply to litigation exhaustion: cf J T Stratford Ltd v Lindley [1969] 1 WLR 1547. The point to be emphasised is that the absence of explanation by Mr O'Neill has some real bearing, as will be seen, on the discretion I am to exercise in the matter. 16 It is in my view clear that it is in the interests both of the parties and of the justice system itself that this protracted litigation be terminated and that Mr O'Neill be given leave to discontinue it. This said, the case is one that warrants the imposition of terms as a condition of the grant of leave. 17 While there may be a real question as to the seemliness of a judicial officer instituting defamation proceedings in respect of complaints made of him in his judicial capacity: see O'Neill v Mann (1997) 191 CLR 204 at 217 per McHugh J dissenting; at 271 per Kirby J; Mr O'Neill had the legal right to pursue the course he did. For his part Dr Mann was entitled to defend the claim with the vigour he demonstrated. It was not unreasonable or inappropriate to have the defence of absolute privilege determined separately. It was a seriously arguable defence as is evidenced in the lack of unanimity in judicial decision on it from the initial hearing to the final High Court ruling. The course taken by Mr O'Neill's legal advisers in 1998 both in attempting ineffectively to discontinue the proceedings without leave and to have an interlocutory costs order taxed without a court order put Dr Mann in a position in which he should never have been placed. He was denied the protections afforded by the respective leave requirements. 18 When one turns to the reasons for discontinuing the proceeding I have not, as I have indicated, been provided with evidence by Mr O'Neill of his reasons for pursuing this course. What is significant is Mr O'Neill's apparent acceptance that he should pay Dr Mann's costs in respect of the discontinued claim. Given that there is nothing to suggest that the proceeding was futile, one simply is left wondering at the reasons for the discontinuance. The case is clearly one that does not fall within the principle stated by McHugh J in Qin's case, above. 19 I earlier indicated that, when an applicant seeks leave to discontinue, a consideration of which account is taken is whether the grant of leave would deprive a respondent of an advantage already obtained. The present case is the converse of that. Mr O'Neill wants the advantage of discontinuance and the shelter it incidentally provides from a significant adverse costs award in the event that the defamation action would have been unsuccessful in the event. But he seeks to retain the benefit of the Full Court's cost order. In my view, he seeks too much. He fought and won a preliminary skirmish which resulted in a costs order but which did not cast light on his prospects of success in the proceeding. He now seeks to leave those prospects forever unresolved. Dr Mann did not act unreasonably in defending the claim by having the separate question determined. And he may ultimately have been successful in his defence of the claim at trial. It is not my function to make a prediction about that. What I consider to be unfair is for Mr O'Neill to seek the benefit of his interlocutory "spoils" while seeking to terminate prematurely the contest he initiated and which already has occasioned cost to Dr Mann and has exposed him to a costs liability. What may have been appropriate for him to have had at the end of the day and as an element in a larger reckoning as to costs is, in my view, quite inappropriate when he seeks to walk away from litigation he initiated. 20 In the circumstances I consider the proper orders to be made in giving leave to discontinue would be ones that confer no greater benefit on either party than that of having the proceeding discontinued. I cannot, of course, set aside the order of the Full Court. Nonetheless I do not consider it should be able to be enforced notwithstanding discontinuance on the defamation proceeding - even if leave to have the costs taxed could be granted after discontinuance (a question I do not decide). Accordingly I will grant leave to discontinue the proceeding on condition that Mr O'Neill undertake not to take steps to have taxed the costs awarded by the Full Court of this Court in this proceeding. In light of that leave I do not consider that it would be appropriate as well to make an order as to costs. I note that Dr Mann does not contend otherwise. I will make orders accordingly. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.