Seven Network Limited v News Limited

THE COURT ORDERS THAT: 1. No order be made in relation to the costs of the applicants' motion filed 9 December 2003, other than order 9 of the orders made on 9 February 2004. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

the motion 1 By a motion filed on 9 December 2003, the applicants sought leave to file a second further amended statement of claim in the form exhibited to an affidavit (the "abandoned statement of claim"). The motion also sought leave to add two further respondents and to file a further amended application. 2 By consent, the applicants' motion has been dismissed. However, also by consent, the applicants have been granted leave to file a second further amended statement of claim in a different form (the "current statement of claim"). The current statement of claim excludes two pleaded claims that were included in the abandoned statement of claim. These can be described as the "1997 Agreement claim" and the "access dispute claim". It is not necessary for the purposes of this judgment to explain the nature of these claims. 3 All respondents other than the third, fifth and sixth respondents ("Telstra") are content with an order that the applicants pay the respondents' costs of the motion up to 23 January 2004 and the costs thrown away by reason of the amendments in the current statement of claim (order 9 of the orders made on 9 February 2004). Telstra, however, seeks an order that the applicants pay its costs of the motion up to 23 January 2004 on an indemnity basis. The significance of 23 January 2004 is that on this date the applicants advised the respondents that they no longer pressed the motion "to the extent that the proposed amendments are connected with the 1997 Agreement or the access dispute". 4 Telstra says that the pleading of the 1997 Agreement claim in the abandoned statement of claim effectively repeated allegations made in earlier versions of the statement of claim that had been struck out by orders made on 6 May 2003: Seven Network Ltd v News Ltd [2003] FCA 388. Moreover, by letter of 11 December 2003, Telstra warned the applicants that their insistence on maintaining the 1997 Agreement claim would result in Telstra incurring additional and unnecessary costs and that, if the claim was not withdrawn, it would seek indemnity costs. The 1997 Agreement claim in fact was not withdrawn until the day before Telstra's submissions on the motion were due to be filed. 5 Telstra also contends that the proposed access dispute amendment was doomed to fail and that it pointed out the defects in the amendment in a letter written to the applicants' solicitors as long ago as 2 October 2003. Telstra accepted that it did not warn the applicants that it would seek indemnity costs if the access dispute amendment was not promptly withdrawn. Nonetheless, it argues that the applicants had been put on notice that their application to amend the pleadings to include the access dispute claim was doomed. Despite being given detailed reasons for this view, the applicants had persisted with the misconceived claim until almost the last minute. 6 The principles governing an applicant for indemnity costs were not in dispute. I summarised them in Australian Competition and Consumer Commission v Amcor Printing Paper Group Ltd [2000] FCA 163, at [7]-[9], as follows: "7. By s 43(2) of the Federal Court of Australia Act 1976 (Cth), the award of costs is in the discretion of the Court or Judge. See also Federal Court Rules, O 62, r 4. In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, at 152-153, Black CJ stated the principles applicable to a claim for indemnity costs: '…it is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which will fall short of complete indemnity. Nevertheless, the court has an absolute and unfettered jurisdiction in awarding costs, although the discretion must be exercised judicially. So, indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the court exercising its discretion in that way: see John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 at 203 per Hill J…. But as Hill J pointed out in John S Hayes (at 203): "…care must be taken not to circumscribe the discretion by reference to closed categories. It is not a necessary condition of the power to award costs that a collateral purpose be shown. The categories warranting the exercise of the discretion are not closed…. In each case it will be necessary to look at the particular facts and circumstances to see whether an exercise of discretion to order costs on an indemnity basis is warranted". See also at 156-157, per Cooper and Merkel JJ. 8. In Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, at 232-234, Sheppard J set out circumstances in which costs may be appropriately awarded on a basis other than a party and party basis. The circumstances identified by his Honour include the making of allegations that ought never to have been made, the undue prolongation of a case by groundless contentions and an imprudent refusal of an offer to compromise. Other decisions have recognised that it is sufficient to enliven the discretion to award costs on an indemnity basis that a party, for whatever reason, persists in what should have been seen to be a hopeless case: J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch (No 2) (1993) 46 IR 301, at 303, per French J. In Davids Holdings Pty Ltd v Coles Myer Ltd (1995) ATPR 41-383, at 40,303, Drummond J said that if a respondent, at an appropriate stage, puts an applicant on notice that it regards the action as misconceived and sets out detailed reasons for so thinking, and if the applicant nevertheless proceeds and fails, there may be good reason to consider an order for indemnity costs. 9. The authorities in this Court have accepted that the rejection of a Calderbank offer (in the sense of an offer to settle specifically made with a view to being used, if not accepted, in relation to a costs application) does not of itself justify an order for costs on an indemnity basis if the offeree fails to secure a more favourable outcome in the proceeding: John S Hayes v Associates Pty Ltd v Kimberley-Clark Australia Pty Ltd (1994) 52 FCR 201, at 206, per Hill J. The significance to be attached to a Calderbank offer depends on its terms and the circumstances of the litigation, including the time at which the offer is made and the understanding of the parties as to the strengths and weaknesses of their respective cases: Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd (Lehane J, 11 February 1998, unreported), at 3." 7 Telstra's submissions are not without some force, especially in relation to the 1997 Agreement claim. In particular, the applicants were put on notice on 11 December 2003 that an application for indemnity costs would be made if they persisted with the motion to amend the pleadings to include that claim. There is also some connection between the 1997 Agreement claim and paragraphs struck out in an earlier version of the pleading. 8 On balance, however, I do not think that the circumstances of the present case warrant an order for indemnity costs. I have three main reasons for this conclusion. 9 First, I think that care must be taken not to discourage parties from taking steps to narrow the issues in the course of proceedings. If abandoning a motion leads too readily to an order for indemnity costs against the moving party, there is a risk that that party will proceed to a hearing on the motion primarily to demonstrate that it is not misconceived or hopeless. This is not to say that an early (or relatively early) recognition that a claim is ill-founded will necessarily defeat a claim for indemnity costs. It is merely intended to warn against too readily acceding to a claim for indemnity costs when one party decides not to persist with a particular claim or contention. 10 Secondly, I do not think that the 1997 Agreement claim was simply a repetition of the earlier rejected pleadings. The written submissions on the motion filed by the applicants indicate that there were arguments that have been put in support of that claim, as pleaded, even though they may not ultimately have carried the day. I accept that an attempt by the applicants to replead a rejected pleading, without any effort to address the deficiencies in the earlier pleading, might well have constituted special circumstances warranting an order for indemnity costs. However, the present is not such a case. 11 Thirdly, I do not think that the access dispute pleading in the abandoned statement of claim can be regarded as misconceived from the outset. There were difficulties with it and these were pointed out in Telstra's letter of 2 October 2003. But the difficulties were not in substance different from those that frequently provoke successful strike out applications, yet do not result in orders for indemnity costs. Moreover, Telstra did not warn the applicants of Telstra's intention to seek indemnity costs if they persisted with the access dispute pleading. 12 In the circumstances, I think that the interests of justice will be served if the costs order in favour of Telstra is limited to an order requiring costs to be paid on the usual basis. This will be achieved by the consent order in relation to costs that has already been made. No further order is necessary. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.