Sheather v Staples Waste Removals Pty Limited

ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA

JUDGE: NICHOLAS J DATE OF ORDER: 3 April 2014 WHERE MADE: SYDNEY

1. The appeal be allowed in part.
2. Orders 3 and 4 of the Federal Magistrates Court (now the Federal Circuit Court) made on 8 May 2012 be set aside and in lieu thereof orders that: (a) "3. The second and fourth respondents (Mr Bjornsson and Mr Sheather respectively) pay to the applicant (Staples Waste Removals Pty Ltd) the sum of $23,580 by way of equitable compensation." (b) "4. The second and fourth respondents pay to the applicant the sum of $7,163.65 by way of interest."
3. The appeal otherwise be dismissed.
4. The cross-appeal be dismissed.
5. The appellant pay 70% of the first respondent's costs of the appeal.
6. There be no other order as to costs of the appeal or the cross-appeal.
7. The sum of $12,500 paid by the appellant into Court pursuant to Order 1 made on 11 September 2012, together with any interest accrued thereon, be paid to the first respondent, or its legal representative authorised in writing to receive such payment on its behalf, in partial satisfaction of the appellant's liability for the costs payable pursuant to Order 5 hereof. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 716 of 2012

ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 747 of 2012

ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA

JUDGE: NICHOLAS J DATE: 3 April 2014 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 In this matter I delivered reasons for judgment on 19 February 2014 and made various procedural orders requiring the parties to agree to interest calculations and to file written submissions in relation to the questions of costs (Sheather v Staples Waste Removals Pty Limited (No 2) [2014] FCA 84). 2 It remains for me to make substantive orders including in relation to the costs of the appeal. None of the parties have sought to disturb the primary judge's order requiring that the appellants pay the first respondent's costs of the trial. However, the parties are well apart so far as the costs of the appeal and cross-appeals are concerned. The first respondent (Staples) submits that the appellants, Mr Bjornsson and Mr Sheather, should each pay the costs of his respective appeal and that there be no order as to the costs of Staples' cross-appeal in each matter. Mr Bjornsson submits that Staples should pay one half of Mr Bjornsson's costs of the appeal and that Staples should pay his costs of the cross-appeal. Mr Sheather submits that Staples should pay two-thirds of his costs of the appeal and that Staples should also pay his costs of the cross-appeal. 3 The relevant principles were referred to by the Full Court in Roadshow Films Pty Ltd v iiNet Ltd (No 2) (2011) 91 IPR 482 at [3] and Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271-272. The present matter is complicated by the existence of two appeals, two cross-appeals and mixed success of the parties in relation to liability and quantum issues. 4 As is evident from the principal judgment, the amount of equitable compensation awarded to Staples was substantially reduced. The amount of the award (exclusive of interest) was reduced from $55,000 to $23,580. Furthermore, Staples' attempts to obtain a larger award of equitable compensation than that awarded by the primary judge was wholly unsuccessful. Accordingly, focussing on the ultimate outcome of the appeals and the cross-appeals, Staples was wholly unsuccessful in its attempts to improve upon or, at the very least maintain, the amount of the award that it obtained at first instance. 5 However, in each of the appeals Mr Bjornsson and Mr Sheather contested the key findings made against each of them and most of the time taken up during the hearing of the appeals related directly to that contest. My broad assessment of the time spent during the course of the appeal in considering liability related issues (to which those challenged findings related) as opposed to quantum issues is that more than two-thirds, and perhaps as much as three-quarters, of that time was occupied in dealing with Mr Bjornsson's and Mr Sheather's challenge to factual findings. In particular, a great deal of attention was given during the course of the hearing to the question of whether Mr Bjornsson stood in a fiduciary relationship to Staples which in turn depended upon a close analysis of the primary judge's findings and related evidence as to the dealings between Mr Bjornsson and Mr Staples. The submissions made on behalf of Mr Bjornsson in relation to his dealings with Mr Staples, were adopted by Mr Sheather's counsel in support of the proposition that Mr Sheather could not be liable for having knowingly participated in a breach of fiduciary duty by Mr Bjornsson if no such duty existed. 6 I do not accept that it is appropriate in this case to make any order for costs in favour of either appellant in relation to the costs of his appeal. The position may well have been different had the appellants' appeals been confined to issues of quantum, in which event the scope of the appeals would have been very significantly reduced. But to approach the matter in that way in circumstances where the focus of the appeals was on liability related issues would be quite unjust to Staples which successfully defended the primary judge's decision from a wide ranging attack against key factual findings upon which Staples' entitlement to any relief depended. 7 It was submitted on behalf of Mr Bjornsson that the amount of compensation ultimately awarded to Staples was "nominal". I do not accept that submission. The claim was always a small one which is no doubt why it was commenced in the Federal Magistrates Court. However, in no sense would I regard the relevant award as nothing more than a peg on which Staples has sought to hang costs. 8 Mr Sheather submitted that he had some limited success on liability because the primary judge found him liable on the basis that he was "wilfully blind" to Mr Bjornsson's breach of fiduciary duty and that this finding was overturned. However, Mr Sheather was also found liable on the basis that his conduct came within Baden category (iv) knowledge and that, even if not liable to Staples on the former basis, he was, as the primary judge himself found, liable to Staples on the latter basis in any event. Nor is there any suggestion that, but for the finding of wilful blindness, Mr Sheather would never have brought the appeal. As I have previously indicated, his challenge to the primary judge's judgment went not only to his own state of mind, but also to the very existence of the fiduciary duty that Mr Bjornsson owed to Staples. 9 The last matter I should mention concerns Staples' cross-appeal against the primary judge's rejection of the case against Mr Sheather based upon direct contravention of s 52 of the Trade Practices Act 1974 (Cth) which was referred to by me at [139] of the principal judgment. That aspect of the cross-claim was purely defensive and was relied upon by Staples only against the possibility that Mr Sheather might succeed in overturning the primary judge's finding that he participated with the requisite degree of knowledge in Mr Bjornsson's breach of fiduciary duty. This aspect of the cross-appeal, like most others, received only slight attention at the hearing. 10 Taking all relevant circumstances into account, I think the appropriate costs orders to make in respect of the appeals and cross-appeals are as follows. 11 Mr Bjornsson will be ordered to pay 70% of Staples' costs of his appeal. Mr Sheather will be ordered to pay 70% of Staples' costs of his appeal. So far as the cross-appeals are concerned, the 30% discount I have imposed in relation to Staples' costs of the appeals is intended to, and in my view will appropriately, reflect the overall outcome of the litigation at the appellate level including Staples' lack of success on its cross-appeals. On that basis, I do not think this is a case in which there should be an order in favour of either of Mr Bjornsson or Mr Sheather in connection with the cross-appeals. There will be no order as to costs in relation to the cross-appeals. 12 Orders for security for costs were previously made against each of Mr Bjornsson and Mr Sheather. Each resisted the order for security essentially on the basis that they were impecunious and were unable to comply with any order for security or, at the least, any order for the substantially larger amounts sought by Staples. In the result, and for reasons explained in my judgment on that question, the security that the appellants were ordered to lodge was relatively modest when compared to the costs that the first respondent has actually incurred. In the present case it is clear that the costs to which Staples will be entitled pursuant to the costs orders that I propose to make will greatly exceed the amount of security that the appellants were ordered to lodge. In those circumstances, I propose to order that the security for costs that has been provided by the appellant in each matter be paid out to Staples. There will also be an order releasing to Staples the security it provided in support of the cross-appeal against Mr Sheather. 13 There will be orders accordingly. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.