Rickus v Motor Trades Association of Australia Superannuation Fund Pty Limited

Leave to Appeal 101 Leave to appeal is required from the costs order made by the primary judge on 24 December 2008 because that order was interlocutory in form (see s 24(1A) of the Federal Court of Australia Act 1976 (Cth) and Merit Protection Commissioner v Nonnenmacher (1999) 86 FCR 112 at [20]). In the present case, the appellant's Application for Leave to Appeal should have been filed by no later than 21 January 2009. This conclusion is arrived at by applying the terms of O 52 r 10(2A)(b) and O 3 r 2(4A) of the Federal Court Rules to the facts of the present case. 102 The Application for Leave to Appeal was filed on 4 February 2009. It was, therefore, 14 days late. 103 The subject matter of the appellant's Application for Leave to Appeal (ACD 7 of 2009) is closely connected to the subject matter of his appeal in ACD 8 of 2009 which, of course, is also under consideration in these Reasons for Judgment. The appellant's delay in filing his Application for Leave to Appeal from the costs order made by the primary judge on 24 December 2008 is not inordinate and is probably to be explained by the fact that the appellant and those advising him believed that the appellant had until 4 February 2009 in which to seek to overturn the primary judge's costs order. 104 We think that the appellant should be granted an extension of the time within which to file his Application for Leave to Appeal from the primary judge's costs order made on 24 December 2008.

The Relevant Principles (Leave to Appeal) 105 In Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397, the Full Court (at 398-399) held that, in the general run of cases in which leave to appeal from an interlocutory judgment is sought, the applicant for leave must demonstrate that the decision is attended with sufficient doubt to warrant its being reconsidered by the Full Court and that substantial injustice would result if leave were refused, supposing the decision to be wrong. 106 The Full Court went on to say that there were no rigid rules which should be applied in all cases. 107 At 399-400, the Court said: In our opinion, the principles discussed in Niemann and in the other cases to which we have referred provide general guidance which a court should normally accept. However, there will continue to be cases raising special considerations, and the court should not regard its hands as tied in any case beyond this; that by s 24(1A) the legislature has evinced a policy against the bringing of interlocutory appeals except where the court, acting judicially, finds reason to grant leave. When the court comes to exercise its discretion on a particular application, an important distinction to be observed is that between the common interlocutory decision on a point of practice - concerning which the High Court has given (see Adam P Brown Male Fashions v Philip Morris Inc (1981) 148 CLR 170 at 177) a strong warning that "a tight rein" should be kept on appeals - and an interlocutory decision determining a substantive right - where leave will more readily be granted. Although the judgments of Jordan CJ in Re Will of Gilbert (deceased) (1946) 46 SR(NSW) 318 at 323 and of the majority of the High Court in Adam P Brown Male Fashions Proprietary Ltd v Philip Morris Inc (supra) are not concerned with the question of the granting of leave, they emphasize this distinction, which was applied to the granting of leave in Ex parte Bucknell (1936) 56 CLR 221 and Sharp (supra). In the present case, the interlocutory decisions in respect of which leave is sought are certainly attended with difficulty, and their correctness is open to dispute. If they are wrong, significant consequences will be suffered by the applicants. We regard this as a clear case for the grant of leave. 108 We shall apply these principles in the present case.

The Reasons of the Primary Judge 109 The primary judge dealt with the question of costs of the Trustee's proceedings at [91]-[103] of his Reasons. 110 At [93], his Honour noted that the Court has a discretion as to the making of an order for costs where a proceeding is discontinued. At [98], his Honour held that there was no general rule that a party who discontinues a proceeding with the leave of the Court pursuant to O 22 r 2(1)(d) of the Federal Court Rules should normally pay the costs occasioned by the discontinuance. His Honour found that the appropriate order as to costs in those circumstances remains in the discretion of the Court. In the second half of [98], his Honour said: Where there has been no hearing on the merits and where both parties have acted reasonably, a proper exercise of the discretion may be to make no order as to costs: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 625 per McHugh J. The approach there pursued by McHugh J has been accepted as an appropriate test to apply when proceedings are discontinued under O 22 r 2(1)(d): Mineralogy Pty Ltd v National Native Title Tribunal [1998] FCA 1700. It is no part of the function of the Court when a proceeding is discontinued "to make a prediction as to the outcome of a hypothetical case": Clark v ING Life Ltd [2007] FCA 1960 at [16] per Rares J. 111 At [99]-[101] of his Reasons, his Honour held that, had there been no Cross-Claim and had the discontinuance of the Trustee's proceedings brought the entire litigation to an end, it may have been appropriate to award costs to the appellant. This was because the issue of whether or not the appellant was bound to produce to the Trustee the documents or a copy of the documents which he had produced to APRA would not have been an issue requiring resolution. But, said his Honour, the pursuit of the Cross-Claim made that matter an issue in the resolution of the Cross-Claim by the Court. This meant that, contrary to the usual position, the Court knew or had a firm position on the underlying merits of the case. Because those merits were against the appellant and in favour of the Trustee, his Honour concluded that there should be no order as to costs. 112 Thus, his Honour gave great prominence and weight to the fact that he had found that the appellant would have been liable to produce to the Trustee a copy of the documents which he had produced to APRA, had the Trustee pressed the Trustee's proceedings to finality. In determining the Cross-Claim, his Honour found that the appellant was so liable. This factor was decisive in his Honour's consideration of the costs question.

Consideration 113 There is no doubt that appellate courts are loathe to overturn discretionary costs orders made by single judges. This reluctance reflects a history of caution expressed by appellate courts when asked to overturn discretionary judgments generally. 114 By applying the principles laid down in Decor Corporation Pty Ltd v Dart Industries Inc 33 FCR 397, we have come to the conclusion that the primary judge took the wrong approach to the question of the costs of the Trustee's proceedings in light of the abandonment of those proceedings by the Trustee. Had the appellant not had the benefit of the contractual indemnities given to him, it is very likely that substantial injustice would have been visited upon the appellant if his Honour's decision were allowed to stand in the sense that there would almost certainly have been a substantial shortfall between the amount of legal costs expended by him in defending the Trustee's proceedings and the claims made before those proceedings were commenced, on the one hand, and the amount of legal costs recovered by him under the existing order for costs made on 26 November 2007, on the other hand. 115 For these reasons, we would grant leave to the appellant to appeal from the costs order made by his Honour on 24 December 2008. 116 A party who discontinues a proceeding without the leave of the Court becomes liable to pay the costs of the other party or parties unless, in cases where the consent of the other parties is relevant, that consent provides otherwise. This is the effect of O 22 r 3 of the Federal Court Rules. That rule reflects a more general policy of the law to the effect that a party should always be permitted to discontinue its proceedings but, in the modern setting, should usually have to pay the costs of the other parties occasioned by the bringing of the proceedings and their subsequent abandonment. 117 In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, McHugh J discussed some general principles applicable to the award of costs in Australian courts. At 624, his Honour said that, after a hearing on the merits, as a general rule, the successful party is entitled to his or her costs. It is success in the action that usually controls the exercise of the court's discretion in respect of costs. At 624-625, his Honour also said: 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 (Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201). 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 (Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201). In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 133, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. 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 (Unreported, Federal Court of Australia, 10 February 1989) 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 (footnotes omitted). 118 In Mineralogy Pty Ltd v National Native Title Tribunal [1998] FCA 1700, the Full Court accepted that, when this Court is considering the question of costs in relation to an application for leave to discontinue proceedings pursuant to O 22 r 2(1)(d) of the Federal Court Rules, the appropriate test to apply is that which was explained by McHugh J in Ex parte Lai Qin 186 CLR 622 at 625. The Full Court held that, in most cases where there has been no trial on the merits, it is not appropriate in determining an issue of costs to make a prediction as to the outcome of the hypothetical case. That approach was followed by Rares J in Clark v ING Life Limited [2007] FCA 1960 at [16]. See also O'Neill v Mann [2000] FCA 1680 at [11]-[13] (per Finn J) and J H Lever & Co Pty Ltd v Maniotis (2005) 215 ALR 773 at [3] (per Mansfield J). 119 In our judgment, the question of costs thrown up by the grant of leave to the Trustee to discontinue the Trustee's proceedings and the subsequent discontinuance of those proceedings was one which had to be determined in light of that discontinuance and having regard to the circumstances in play at the time that that discontinuance was put into effect. As at 28 July 2008, there had been no hearing of the appellant's Cross-Claim and no determination on the merits of the issues raised in that Cross-Claim. If the question of costs occasioned by the discontinuance of the Trustee's proceedings had been determined at that time, that question would have been considered in circumstances where there had been no hearing on the merits of the claims made by the Trustee in its proceedings and would have fallen squarely within the principles enunciated by McHugh J in Ex parte Lai Qin 186 CLR 622. In a case such as the present, it would have been inappropriate for a judge to enter into a detailed examination of all relevant facts and circumstances in order to determine whether or not the bringing and maintaining of the Trustee's proceedings up to 28 July 2008 had been reasonable. 120 It is but a happenstance that the question of the costs occasioned by the discontinuance of the Trustee's proceedings came to be decided at the same time as and in light of the appellant's Cross-Claim. That circumstance, however, does not, in our view, elevate the significance of his Honour's approach to the underlying liability of the appellant to the Trustee to produce the relevant documents in the context of determining the appellant's Cross-Claim to a point where, in effect, his Honour was entitled to approach the question of costs occasioned by the discontinuance of the Trustee's proceedings on the basis that: (a) there had, in fact, been a hearing on the merits; and (b) on the basis of that hearing, the Trustee had been successful. In our view, the correct approach in the present case was to consider and determine the question of costs occasioned by the discontinuance of the Trustee's proceedings on the basis that there had been no hearing on the merits as at the date of that discontinuance and no justification for entering upon an inquiry as to whether the Trustee had acted reasonably in instituting and maintaining the Trustee's proceedings. 121 The primary judge erred in approaching the matter upon the basis, in effect, that there had been a hearing on the merits and that the Trustee had been successful. The result was unreasonable and plainly unjust. 122 For these reasons, we would allow the appeal in ACD 7 of 2009. 123 The appropriate order for costs consequent upon the discontinuance of the Trustee's proceedings is an order that the Trustee pay the appellant's costs of and incidental to the Trustee's proceedings as and from 27 November 2007 up to 28 July 2008 being the date when those proceedings were discontinued. 124 The Trustee made many detailed submissions in support of its contention that this Court should not interfere with the costs order made by the primary judge. We have not found it necessary to deal with many of those submissions as we have come to a firm view on the question of costs for the reasons which we have given. The Trustee's submissions will, of course, remain with the Court file. 125 The appellant has claimed his costs on an indemnity basis. No particular arguments were advanced in support of that special order and we would decline to make an order in those terms. The appellant will receive full indemnity for his legal costs, in any event, pursuant to the contractual indemnities which we have held he is entitled to invoke.

The Costs of the Matters in the Full Court 126 The appellant has been successful in the Full Court in all matters under consideration. The Trustee should pay the costs incurred by the appellant of and incidental to all matters determined by this Court's decision.

Conclusions 127 In proceeding ACD 7 of 2009, we would make an order extending to 4 February 2009 the time within which the appellant might file his Application for Leave to Appeal. We would grant leave to appeal to the appellant and allow the appeal with costs. 128 In proceeding ACD 8 of 2009, we would allow the appeal with costs, set aside the primary judge's order dismissing the appellant's Cross-Claim, make an appropriate declaration and make an order for payment pursuant to the indemnities acknowledged in that declaration with interest. I certify that the preceding one hundred and twenty-eight (128) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jacobson, Siopis and Foster.