Scarati v Republic of Italy
[2023] FCA 1269
At a glance
Source factsCourt
Federal Court of Australia
Decision date
2023-10-20
Before
Levine J, French J, Mr J, Bromberg J, Katzmann JJ
Source
Original judgment source is linked above.
Judgment (8 paragraphs)
- The costs incurred by the applicant with respect to the mediation which took place on 13 August 2021 and the application relating to costs of 19 August 2021 be payable by the respondent on an indemnity basis to be agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
INTRODUCTION 1 These reasons relate to costs applications made in relation to an abandoned mediation on 13 August 2021 and the provision of discovery.
THE PRINCIPLES - COSTS - FW ACT SECTION 570 - INDEMNITY COSTS 2 Section 43 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) allows the Court a broad jurisdiction in awarding costs in all proceedings before the Court "other than proceedings in respect of which this or any other Act provides that costs must not be awarded". The power is said to be subject to s 570 of the Fair Work Act 2009 (Cth) (the FW Act). 3 A party to proceedings in relation to a matter arising under the FW Act may be ordered by the Court to pay costs incurred by the other party only in accordance with the requirements of s 570(2). 4 Section 570(2) provides that a party may be ordered to pay costs only if: (a) … (b) the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs; or (c) … 5 The discretion conferred by s 570(2) must be exercised cautiously and the case for its exercise must be clear (Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6] per Bromberg J). The policy behind s 570 of the FW Act is to free parties from the risk of having to pay the opponents' costs so that those with a genuine grievance and an arguable basis for the grievance are not put off from commencing or continuing proceedings, while at the same time protecting parties from incurring costs as a result of the other party's unreasonable acts or omissions or as a result of proceedings which have been instituted vexatiously or without cause (Australian Workers' Union v Leighton Contractors Pty Ltd (No 2) (2013) 232 FCR 428; [2013] FCAFC 23 at [7] per Dowsett, McKerracher and Katzmann JJ). 6 Essentially, s 570 seeks to balance the access to justice aspect (costs can be ordered only in limited circumstances outlined in s 570(2)) against the expectation that the parties and their legal representatives will act in a responsible way (costs can be awarded if the party instituted the proceedings vexatiously or without reasonable cause, or the party's unreasonable act or omission caused the other party to incur the costs or the party unreasonably refused to participate in a matter before the Fair Work Commission) (Ryan v Primesafe (2015) 323 ALR 107; [2015] FCA 8 (Ryan) at [65]-[67] per Mortimer J (as her Honour then was)). 7 Once an exception under s 570 is enlivened, it is within the Court's general discretion to decide if any award for costs is made and, if so, upon what terms (Pal v Commonwealth of Australia (No 2) [2021] FCA 37 at [22] per Anderson J). 8 The most common order made in relation to costs is that costs be paid on a party and party basis. Principles relevant to an award of costs other than on a party and party basis, including an order that costs be paid on an indemnity basis, were summarised by Wigney J in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) (2021) 151 ACSR 26; [2021] FCA 246 at [6]-[12] (portions relevant to the current case extracted) as follows: [6] The Court's discretionary power to award costs derives from s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). The usual rule is that an order for costs means costs "as between party and party": r 40.01 of the Rules … A party or person who is entitled to costs may, however, apply for an order that costs be awarded in their favour "other than as between party and party": r 40.02(a) of the Rules. That includes an order that costs be awarded on an indemnity basis. [7] The discretion to award costs on a basis other than as between party and party, including on an indemnity basis, is "unfettered, save that it must be exercised judicially and not arbitrarily or capriciously": Australian Competition and Consumer Commission v The Construction, Forestry, Mining and Energy Union (No 4) [2018] FCA 684 at [96]. The discretion must also be exercised in light of the requirement that the Court consider any failure by a party to comply with the overarching purpose of the civil practice and procedure provisions to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see ss 37N(4), 37M(1) of the FCA Act; LFDB v SM (No 2) [2017] FCAFC 207 at [7]. [8] The discretion to depart from an order for party and party costs will not be exercised unless there is some special or unusual feature or the justice of the case so requires … [9] The purpose of a costs order is to compensate the successful party, not to punish the unsuccessful one … An award of indemnity costs is to "serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs": Hamod v New South Wales (2002) 188 ALR 659; [2002] FCAFC 97 … [10] The circumstances in which it may be found to be unreasonable for the successful party to be subjected to the expenditure of any costs are not fixed or closed … 9 I agree with the observation made by Mortimer J in Ryan at [114] (in the context of an application under s 570(2)(b)) when her Honour observed that, in the authorities such as Colgate-Palmolive Company v Cussons Pty. Limited (1993) 46 FCR 225 (Colgate-Palmolive), a factor which appears to influence the decision "is a level of blameworthiness which involves conscious or deliberate choices to flout the norms by which litigation is usually conducted, and courts expect it to be conducted". It must be at a higher level of disregard than, for example, a delay in taking steps in litigation. Sheppard J in Colgate-Palmolive referred to the decision of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 400-401 where his Honour referred to "some special or unusual feature in the case to justify the court exercising its discretion in that way" and observed that, in all the cases he had considered, "there has been some further factor which has influenced the exercise of the court's discretion". Examples include a comparison between where charges of fraud have been made and not sustained as compared with "allegations of fraud hav[ing] been made knowing them to be false, or they have been irrelevant to the issues between the parties". Reference was made to a position "where the applicant, properly advised, should have known that he had no chance of success" or where proceedings were commenced with some ulterior motive or, "because of some wilful disregard of the known facts or the clearly established law". 10 This approach is consistent with the regime imposed with respect to matters to which s 570(2)(b) refers. In that case, to make any order as to costs, it is necessary that the Court be satisfied of a party's unreasonable act or omission. In such a matter, the starting point after a finding of an unreasonable act or omission would be that the costs be paid on a party and party basis. It follows that conduct must be at a more serious level to bring an order for costs to be paid on an indemnity basis into play. The approach is illustrated in Ryan. In that case, Mortimer J found there was insufficient evidence of wilful disregard of the facts and law in pleading allegations. Whilst there had been some loss of court time, bearing in mind the magnitude of the loss, it was not such as to justify a departure from the usual form of costs orders. In Ryan, Mortimer J concluded that, without more, this did not justify "what would be, in substance, a second departure from the underlying policy and evidenced in s 570 by a costs order at the level of indemnity costs". 11 Evidence of particular misconduct that causes loss of time to the Court or other parties has been thought to warrant the exercise of the discretion to order indemnity costs (Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, French J, 3 May 1991) and Colgate-Palmolive at 5). 12 In terms of the consideration of the failure by a party to comply with the overarching purpose of the civil practice and procedure provisions, the following provisions of the Federal Court Act are relevant: 37M The overarching purpose of civil practice and procedure provisions (1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes: (a) according to law; and (b) as quickly, inexpensively and efficiently as possible. (2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. (3) The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose. (4) The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings: (a) the Rules of Court made under this Act; (b) any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court. 37N Parties to act consistently with the overarching purpose (1) The parties to a civil proceeding before the Court must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose. (2) A party's lawyer must, in the conduct of a civil proceeding before the Court (including negotiations for settlement) on the party's behalf: (a) take account of the duty imposed on the party by subsection (1); and (b) assist the party to comply with the duty. (3) The Court or a Judge may, for the purpose of enabling a party to comply with the duty imposed by subsection (1), require the party's lawyer to give the party an estimate of: (a) the likely duration of the proceeding or part of the proceeding; and (b) the likely amount of costs that the party will have to pay in connection with the proceeding or part of the proceeding, including: (i) the costs that the lawyer will charge to the party; and (ii) any other costs that the party will have to pay in the event that the party is unsuccessful in the proceeding or part of the proceeding. (4) In exercising the discretion to award costs in a civil proceeding, the Court or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2). (5) If the Court or a Judge orders a lawyer to bear costs personally because of a failure to comply with the duty imposed by subsection (2), the lawyer must not recover the costs from his or her client. 13 The Court should take into account any failure to comply with the duties in s 37M in exercising its costs discretion (Specsavers Pty Ltd v The Optical Superstore Pty Ltd (2012) 208 FCR 78; [2012] FCAFC 183 at [57]-[58] per Foster, Barker and Griffiths JJ). 14 The Central Practice Note: National Court Framework and Case Management (CPN) "sets out the fundamental principles concerning the National Court Framework ("NCF") of the Federal Court, together with key principles of case management procedure" (emphasis in original) (see cl 1.1). 15 The CPN describes the overarching purpose of civil practice and procedure and case management within the individual docket system to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible, and refers to ss 37M and 37N of the Federal Court Act (see cl 7.1). The parties and their lawyers are expected, and have a statutory duty, to co-operate with the Court and among themselves to assist in achieving the overarching purpose (see cl 7.2). The CPN refers to considering the use of, and timing for, any alternative dispute resolution, including mediation, as a matter which should be considered by the parties in preparation (see cl 8.5). 16 Clause 9 deals specifically with Alternative Dispute Resolution (ADR). Clause 9 indicates that the ADR options should be viewed by the parties not only as a means of possible resolution of the whole dispute, but also as a means of limiting or resolving issues by agreement and of resolving interlocutory disputes (cl 9.1). 17 Clause 9.5 requires that, when attending mediation, "parties and their legal representatives must attend for the purpose of participating in good faith negotiations and must have the ability, in a practical way and with flexible instructions, to participate meaningfully in negotiations with a view to narrowing the issues in dispute and reaching a mutually acceptable resolution between them by way of compromise".