Costs
17 In the Commissioner's written submissions filed on 25 January 2023, in support of its objection to the competency of the appeal, the Commissioner made submissions to the effect that, if its objection were successful, the Court should make orders against the solicitors purporting to act for the nominal applicant in the appeal and that such costs should be awarded on an indemnity basis. At the hearing on 8 February 2023, the Commissioner's counsel made oral submissions to the same effect. The Court invited counsel purporting to act for the nominal applicant to make submissions in response on the question of costs, but he said that he was not then in a position to address that question.
18 At the conclusion of the hearing on 8 February 2023, I indicated, in effect, that it was my intention to make an order in favour of the Commissioner on the notice of objection, but the matter was reserved because counsel for the nominal applicant submitted that he was not in a position to make submissions on costs at the time of the oral hearing. He submitted he wanted an opportunity to file submissions and affidavit material and to be heard at a separate hearing.
19 I made an order to the effect that the solicitors on the record for the nominal applicant were to file and serve written submissions and any affidavits in opposition to the Commissioner's submissions to the effect that the solicitors be ordered to pay the Commissioner's costs of the application to dismiss the proceedings and the proceedings, on an indemnity basis. On 22 February 2023, further written submissions were filed by the solicitors on the record for the nominal applicant purportedly on its behalf.
20 The solicitors' written submissions suggested that the nominal applicant was confused (or perhaps more accurately the solicitors were confused) as to exactly what submissions the Court required and the made the following submissions:
5. Unless the Court has decided to deal with this matter in an unusual or unique way, there is no proper or known process in civil litigation, whether before the Federal Court or otherwise, where a party needs to make submissions as to costs before the substantive matter before that Court is determined.
6. Further, the nature of the orders made by the Court, particularly in light of the Appellant's submissions filed on 19 December 2022, and the concessions by the Respondent as to the type of orders Courts have made in similar circumstances (see para 13 of Respondents Submissions) will significantly affect the type of submissions made by the parties as to costs.
7. Further, none of the authorities' on costs referred to by the Respondent in their submissions (see paragraph 24 and the cases in footnote 14) support, as a legal principal and /or matter of law, the Federal Court, as a creature of statute, making the orders as to costs sought by the Respondent.
8. The Respondent has not pointed to any provision of the Federal Court of Australia Act 1976 that supports its theory that the costs order they appear to seek, can be made by the Court.
9. Even if such an order is available, the Court cannot roll all those matters up into one process or hearing. The Appellant's solicitors have rights in those instances, including the right to be heard. That can't be achieved by, respectfully, a global order to file submissions with all issues rolled in together.
10. Further, the Respondent can't have it all ways. If it maintains that the Appellant does not exist, then it follows these proceedings (presumably) ought not exist, and they cannot exist as a party to proceedings which don't exist.
11. If all that follows, how can they claim legal costs as a party that does not exist in proceedings that do not exist.
12. The Appellant maintains that it is premature to make submissions as to questions of costs and further maintains that the Court need first determine the substantive matter brought before it by way of the Respondent's application.
13. The Appellant as a consequence reserves its right, as does its solicitors, to make further and detailed submissions as to costs after the Court has determined the substantive matter.
21 As to the submissions in para 5 and 9 above, the premises of them are wrong. There is nothing unusual, unique or procedurally irregular about parties making submissions on costs on the assumption that one party or the other is successful on an application the subject of the hearing.
22 As to the submission in para 6 above, it is also without substance. If it is contended that there are different potential cost consequences based on the final form the orders may take, it is open to the solicitors to make submissions as to what those different consequences should be in respect of each potential form of order.
23 As to the submissions in paras 7 and 8 above, these are also wrong. It is well established that the Court has a broad discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth). There is an undoubted discretion and power of the Court to order a non-party to pay costs. The power is commonly exercised against a non-party who is the real party and against a solicitor who instituted proceedings without authority: Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 at 187 (per Mason CJ, Deane J); Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd [1993] FCA 667; (1993) 45 FCR 224 at 229-231 (and the authorities therein referred to); BNY Australia at 361. As to the submissions in paras 10 and 11 above, these are incoherent and appear to misunderstand the power of the Court to award costs against a non-party and a solicitor who instituted proceedings without authority.
24 As to the submissions in paras 12 and 13 (together with paras 5 and 9) above, I do not accept that it was premature for the solicitors to make submissions on the question of costs before the orders on the hearing were pronounced, that the solicitors should have any further opportunity to make such submissions, or that determination of the question of costs requires a further oral hearing. Notwithstanding reasonable notice of the issues arising on the question of costs and reasonable opportunity to make oral and written submissions on those issues, the solicitors have chosen, in effect, not to engage with those issues and not to make substantive submissions.
25 Having regard to s 37M and s 37N of the Federal Court Act and that the Commissioner filed written submissions on 25 January 2023 in which it was clearly identified that the Commissioner would seek orders for costs against the solicitors purporting to act for the nominal applicant and provided authorities in support of those submissions, the solicitors purporting to act for the nominal applicant had reasonable notice before 8 February 2023 to consider the issues and reasonable opportunity on 8 February 2023 to make submissions on the question of costs on the assumption that the Commissioner was (or was not) successful on the hearing of the notice of objection to competency. Further, the solicitors were informed on 8 February 2023 that the Court intended to make an order in favour of the Commissioner and, notwithstanding that they should have been able to make oral submissions at that time, they were given an opportunity to file further written submissions and affidavit evidence on the question of costs. In my view, the solicitors have had a reasonable opportunity to consider and make submissions on the question of costs on the assumption that the Court will make an order in favour of the Commissioner. Taking into account these matters and that the Court has power to deal with the question of costs without any (or any further) oral hearing under s 20A(2)(c) of the Federal Court Act, in my view, it is unnecessary to have a further oral hearing to address the question of costs.
26 In my view, costs should follow the event. Costs should be paid by the solicitors as the real party to the proceedings or as solicitors who have commenced the appeal without authority. The only remaining question is whether those costs should be paid on a party and party or indemnity basis.
27 At the hearing on 8 February 2023, the Commissioner sought to tender a letter from the Commissioner to the solicitors purportedly acting for the nominal applicant dated 3 October 2022. Counsel for the nominal applicant objected to the tender of that letter notwithstanding that the letter was addressed to him and the solicitors on the record for the nominal applicant and no objection was taken to the authenticity of it. Given that the matter was to be adjourned in any event, I granted the Commissioner leave to file an affidavit annexing a copy of the letter which it was duly done after the hearing on 8 February 2023. Therefore, I also take the affidavit of Ms Duke, affirmed 8 February 2023, to be read on the question of costs.
28 The affidavit of Ms Duke annexes a copy of the letter of 3 October 2022. That letter indicated the Commissioner considered that the contention that a deregistered company is able to both commence and to prosecute the appeal to be manifestly hopeless. The Commissioner put the solicitors on notice that if they continued to proceed with that contention then, in the event the contention proves unsuccessful and the Court dismisses the appeal or further adjourns it, the Commissioner would seek the costs of dealing with the contention on an indemnity basis against the solicitors personally for the reasons set out in the letter. The reasons set out in the letter largely mirror the authorities referred to and submissions made in the Commissioner's written submissions on the hearing of the notice of objection to competency.
29 An argument or point may be described as unarguable or hopeless where there is no rational ground for considering the argument might succeed: Levick v Deputy Commissioner of Taxation [2000] FCA 674; (2000) 102 FCR 155 at [45]. Having regard to the weight of authority against the proposition, it is difficult to see how any Australian legal practitioner could have considered that there was a rational basis upon which the argument that a deregistered company may commence and prosecute an appeal might succeed. Nonetheless, on the strength of the decision of the Deputy President of the Fair Work Commission in Fan, the solicitors purportedly acting for the nominal applicant argued against that weight of authority. In my view, notwithstanding the views expressed in Fan, the contention advanced by the solicitors was untenable and the hopeless nature of the contention should have been evident to the solicitors.
30 The usual order for costs to be taxed or assessed means 'costs as between party and party'. The dictionary in Sch 1 of the Rules defines these costs to mean 'only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation. However, the Court may make an order for assessment or taxation of 'costs on an indemnity basis'. Sch 1 of the Rules defines these costs to mean 'costs as a complete indemnity against the costs incurred by the party in the proceedings, provided that they do not include any amount shown by the party liable to pay them to have been incurred unreasonably in the interests of the party incurring them'.
31 As to the Court's discretion to order costs on an indemnity basis, Sheppard J in Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 summarised the applicable principles as follows (at 232 - 234):
…
It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:
1. The problem arises in adversary litigation, ie litigation as between parties at arm's length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.
2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this Court the provisions of O 62, rr 12 and 19, and the Second Schedule to the Rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. …
4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (supra) at 141 said the Court had a general and discretionary power to award costs as between solicitor and client 'as and when the justice of the case might so require'. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston (supra) at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo, 'The categories in which the discretion may be exercised are not closed'. Davies J expressed (at p 6) similar views in Ragata (supra).
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. [For] instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September (1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
…
32 In my view, the circumstances warrant the exercise of the discretion to award costs on an indemnity basis for the period from which it ought to have been evident to the solicitors who purportedly act for the nominal applicant that the contentions they advanced were hopeless. In my view, that was no later than 10 October 2022. That being a reasonable period after receipt of the Commissioner's letter dated 3 October 2022.
33 I am also of the view that up until about that point in time it was not unreasonable for the solicitors purporting to act for the nominal applicant to continue to maintain the proceedings as determination of the notice of objection to competency had been, in effect, adjourned to allow them the opportunity to apply to have the company reinstated. However, from about that time, the solicitors purportedly acting for the nominal applicant evidently chose not to apply to reinstate the company and instead chose to proceed with what ought to have been apparent to them was an incompetent appeal.