Rotel Co Ltd v Panasales Clearance Centre

Federal Court of Australia|2008-05-15|Before: Tracey J

REASONS FOR JUDGMENT 1 This proceeding has had a long and tortuous history since it was commenced by application on 28 September 2006. The efficient progress of the pre-trial stages of the proceeding has been impeded by repeated failures of the respondents to comply with orders made by the Court and by the filing of defences and cross-claims which, for various reasons, were found to be deficient. Unsurprisingly, these shortcomings led to the filing of a series of notices of motion and the need for interlocutory hearings. Costs of three of those hearings were reserved. The applicants now seek orders in their favour for the costs (some on an indemnity basis) of and incidental to those hearings. They also seek indemnity costs generally in relation to a series of unsuccessful attempts by the first and second respondents/cross-claimants to obtain leave to file a revised cross-claim. 2 The applicants seek orders as follows: · The respondents and cross-claimants pay the applicants' and cross-respondents' costs of and incidental to the Notice of Motion dated 4 October 2007 filed on behalf of the applicants and cross-respondents. · The cross-claimants pay the cross-respondents' costs of and incidental to the Notice of Motion dated 26 November 2007 filed on behalf of the cross-respondents on an indemnity basis, such costs to be taxed and paid forthwith upon taxation. · The cross-claimants pay the cross-respondents' costs of and incidental to the Notices of Motion dated 15, 22 and 28 November 2007 filed on behalf of the cross-claimants on an indemnity basis, such costs to be taxed and paid forthwith upon taxation. · The cross-claimants pay the cross-respondents' costs of the cross-claim on an indemnity basis, such costs to be taxed and paid forthwith upon taxation. 3 As indemnity costs are sought in a number of the proposed orders it will be convenient, before turning to the circumstances in which the various costs orders are sought, to outline the principles which govern the determination of applications for the award of indemnity costs. These principles are, conveniently, drawn together in the recent judgment of Gilmour J in Barrett Property Group Ltd v Metricon Homes Pty Ltd (No 2) [2007] FCA 1823 at [3] and [4]. His Honour there said: "An award of costs is in the discretion of the Court or Judge except as provided by any other Act: Federal Court of Australia Act s 43(2). The discretion must be exercised judicially. In the normal course, costs are ordered to be paid on a party and party basis: Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 232; Re Wilcox; Ex parte Ventura Industries Pty Ltd (No 2) (1996) 72 FCR [151] at 158 per Cooper and Merkel JJ. A costs order is not intended to punish the unsuccessful party but rather to compensate the successful party: Hurst v Education Queensland (No 2) [2005] FCA 793 at [5]. This is so even where the ordinary practice is departed from. The aim is not to punish or deter future litigants but simply to compensate a party fully for costs which normal party-party costs could not be expected to do, where it was unreasonable for that party to be subjected to any expenditure of costs, such as where a hopeless proceeding is brought: Cirillo v Consolidated Press Property Ltd (No 2) [2007] FCA 179 at [4]-[5]. Any departure from this general rule requires a special reason: Access For All Alliance (Hervey Bay) Inc v Hervey Bay City Council [2007] FCA 974 at [10]; Pacific Publications Pty Ltd v Next Publishing Pty Ltd [2005] FCA 971 at [5]. The categories in respect of which departure from the usual rule are contained are not closed: John S Hayes & Associates Pty Limited v [Kimberly-Clark] Australia Pty Limited (1994) 52 FCR [201]; Jianshe Southern Pty Ltd v Turnbull Cooktown Pty Ltd (No 2) [2007] FCA 903 at [32]. In Colgate-Palmolive, (at p 233)Sheppard J identified various categories which might give rise to an award of indemnity costs. These include: · the making of allegations of fraud knowing them to be false, and the making of irrelevant allegations of fraud; · evidence of particular misconduct that causes loss of time to the Court and to other parties; · the commencement or continuation of proceedings for an ulterior motive; · wilful disregard of known facts or clearly established law; · the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions; and · an imprudent refusal of an offer to compromise."

NOTICE OF MOTION DATED 4 OCTOBER 2007 4 The principal orders sought in the notice of motion dated 4 October 2007 were orders requiring the respondents and cross-claimants to provide further and better particulars of their pleadings. Those further and better particulars had been requested on 4 June 2007. They had not been provided despite consent orders having been made on three occasions (in June, July and August 2007) for them to be provided. 5 The notice of motion was returnable on 18 October 2007. On that day senior counsel for the respondents obtained leave to file and serve amended defences. He advised the Court that, having regard to the pleadings in those amended defences, it would be inappropriate and unnecessary to renew the orders for provision of further and better particulars of the defences. 6 I granted the respondents leave to file and serve further amended defences on or before 15 November 2007. 7 The applicants (as cross-respondents) also pressed for orders requiring the production of further and better particulars of the cross-claim. I made a self executing order requiring the provision of those further and better particulars on or before 15 November 2007 in default of which the cross-claims were to be struck out. This order was not complied with and it was vacated on 30 November 2007 because the particulars had been sought of claims which were no longer to be pressed. Leave was also given to apply to file and serve any amended cross-claim on or before 15 November 2007. 8 I reserved the costs of this notice of motion. 9 The respondents contend that each party should bear its own costs of the notice of motion. This is said to be an appropriate order because, so the respondents assert, they were frustrated in their attempts to respond to the requests for further and better particulars because the applicants declined to make discovery of material, sought in correspondence between solicitors, which would have furnished information necessary for the particulars to be provided. The particulars sought included particulars of allegations made in paragraph 84 of the cross-claim as it then stood. The allegations were that, sometime prior to the commencement of proceeding VID 750 of 2006, the solicitors for the applicant had sent one or more letters to RG International Pty Ltd which threatened legal proceedings "for infringement of the [a]pplicant's legal rights" unless RG International Pty Ltd undertook to cease selling products "under or by reference to the word marks "EUROTEL" and "EUROTEL DIGITAL"". The pleadings provided that particulars of the letters would be provided after discovery and inspection. 10 These requests for discovery were made in a desultory fashion very late in the day. They do not explain repeated failures to comply with orders made by the Court. The more likely explanation was that there was no foundation for the allegations. The allegations were subsequently varied. New allegations were made in revised versions of the draft cross-claim. These allegations were subsequently varied. New allegations were made in revised versions of the draft cross-claim. These allegations were subsequently withdrawn. The applicants should have their costs of and incidental to the notice of motion dated 4 October 2007.

THE NOTICE OF MOTION DATED 26 NOVEMBER 2007 11 On 15 November 2007 the first, second and third respondents (as cross-claimants) filed a notice of motion to which was annexed a draft amended cross-claim. On 22 November 2007 the first and second respondents (as cross-claimants) filed an amended notice of motion to which was attached a revised version of a draft amended cross-claim. These versions of the cross-claim varied the contentious paragraph 84 and associated paragraphs about which requests for further and better particulars had been made. As varied, the paragraphs remained objectionable for a variety of reasons. The applicants (as cross-respondents), in their notice of motion dated 26 November 2007, sought an order that the cross-claimants' notices of motion and the attached pleadings be removed from the Court file. By consent it was ordered that the draft pleadings be removed from the Court file and returned to the respondents. Costs of the application were reserved. 12 At the hearing on 30 November 2007 counsel for the cross-claimants advised the Court that, having considered the objections raised to the versions of the draft cross-claim which had been filed on 15 and 22 November 2007 and a later version filed on 28 November 2007, further amendments to paragraph 84 and related paragraphs were being considered. 13 The respondents claim to be entitled to an indemnity costs order in their favour. They do so because their solicitors had advised the solicitors for the applicants, on 23 November 2007, that it was proposed to substitute a further version of the cross-claim for the versions filed on 15 and 22 November 2007. The applicants had, thereby, obtained the relief sought and the notice of motion was unnecessary. 14 I do not accept the respondents' submissions. Whilst the applicants had been advised that the versions of the cross-claim which had been attached to the notices of motion dated 15 and 22 November 2007 would be superseded, those documents remained on the Court file. They contained objectionable material. They could only be removed from the Court file by Court order. The orders sought were obtained by consent on 30 November 2007 without any waste of Court time. 15 The applicants were successful in obtaining the order which they sought. They should have their costs of and incidental to the notice of motion dated 26 November 2007. I do not consider that the applicants have made good their claim for indemnity costs. No special reason for departing from the general rule has been identified.

THE NOTICES OF MOTION DATED 15, 22 AND 28 NOVEMBER 2007 16 These notices of motion were filed by the first and second respondents/cross-claimants. They were successively a notice of motion, an amended notice of motion and a further amended notice of motion. The terms of the orders sought in each version of the notice of motion were the same. As already explained, the moving parties sought leave to file and serve an amended cross-claim in the terms of a draft which was attached to the notice of motion. The reason for there being successive notices of motion was that the terms of the draft pleading attached to the 15 November 2007 notice of motion were varied at least twice and the varied versions were attached to the subsequent notices of motion. 17 The notices of motion were made returnable on 30 November 2007. At the hearing on that day, senior counsel for the first and second respondents/cross-claimants advised the Court that, as a result of the submissions made on behalf of the applicants, the version of the draft cross-claim which was attached to the further amended notice of motion dated 28 November 2007 would be withdrawn and consideration would be given to making further amendments. 18 I granted the cross-claimants leave to apply for leave to file an amended cross-claim on or before 15 February 2008. I further ordered that the cross-claimants pay the applicants' costs thrown away in dealing with the cross-claimants' notices of motion dated 15 November, 22 November 2007 and 28 November 2007. This order was intended to compensate the applicants for the costs incurred in giving consideration to the versions of the cross-claim which were superseded by the version attached to the further amended notice of motion. Otherwise the costs of the motions were reserved. 19 The respondents submit that each party should bear its own costs of these notices of motion. Those costs were the costs of the hearing and, in particular, the applicants'/cross-respondents' costs occasioned by the cross-claimants' desire yet again to amend their cross-claim. 20 The applicants press their claim for their costs of these notices of motion to be paid on an indemnity basis. They rely on the following matters: · The first and second respondents (as cross-claimants) were on notice, no later than 23 November 2007 of the applicants' opinion that the 15 and 22 November 2007, versions of the cross-claim were defective and the reasons for that opinion. The opinion was accepted by the respondents. · The 28 November 2007 version of the cross-claim was also defective. Again, the applicants' solicitors had advised the solicitors for the respondent that this was the applicants' view and provided reasons for that view. Despite this, the further amended notice of motion was not withdrawn. · At the hearing on 30 November 2007, counsel for the respondents advised the Court that the respondents no longer sought leave to amend their cross-claim in the form proposed on 28 November 2007 and foreshadowed the making of further amendments. The applicants contend that these events justify the conclusion that the respondents persisted in pleading causes of action which were unsustainable and bad in law despite repeated and detailed warnings from the applicants' solicitors that the claims were fundamentally defective. The application for leave to amend, contained in the further amended notice of motion of 28 November 2007, was the fourth attempt at pleading a viable cross-claim. It was unsuccessful and the cross-claimants did not press their motion. Rather, they sought leave to replead yet again. 21 In my view the applicants have made out an exceptional case which warrants a departure from the normal rule that costs be paid on a party and party basis. The interlocutory stages of this proceeding have been unnecessarily delayed by the inability of the cross-claimants to plead viable causes of action. Groundless contentions have been pleaded and then withdrawn. Causes of action which were bad in law have been pleaded and then withdrawn. In the circumstances, I consider that the applicants'/cross-respondents' costs of the notice of motion of 28 November 2007 should be paid by the first and second respondents/cross-claimants on an indemnity basis.

THE COSTS OF THE CROSS-CLAIM 22 The applicants (as cross-respondents) seek an order that the cross-claimants pay their costs of the cross-claim on an indemnity basis. Any such order would overlap with the order which I have just indicated that I am disposed to make in relation to the further amended notice of motion of 28 November 2007. Whilst I consider that it is appropriate to award indemnity costs in respect of the cross-claimants' fourth unsuccessful attempt to plead a cross-claim, I do not consider that it is appropriate that the earlier unsuccessful attempts should be so treated. The original cross-claim was defective but this was eventually accepted by the cross-claimants. The second and third attempts at pleading the cross-claim foundered within a matter of days and no attempt was made to defend them. Orders have already been made on a party and party basis in respect of these earlier attempts and I do not consider it appropriate to vary those orders. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY.

Associate: Dated: 15 May 2008 Counsel for the Applicants/Cross-Respondents: Mr C Gunst QC and Ms E Strong SC

Solicitor for the Applicants/Cross-Respondents: Clayton Utz

Counsel for the First and Second Respondents/Cross-Claimants: Mr B Hess SC and Dr L Duncan

Solicitor for the First and Second Respondents/Cross-Claimants: Cornwall Stoddart

Counsel for the Third, Fourth, Fifth and Sixth Respondents: Mr B Hess SC and Dr L Duncan

Solicitor for the Third, Fourth, Fifth and Sixth Respondents: Cornwall Stoddart

Date of Hearing: 29 February 2008, 14 March 2008 (Written Submissions) 4 April 2008 (Written Submissions) 11 April 2008 (Written Submissions)

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Judgment (12 paragraphs)

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Cases Cited (7)