The Pharmacy Guild of Australia v Ramsay Health Care Ltd

Supreme Court of NSW|2019-10-17|Before: Ward CJ

Judgment

HER HONOUR: In this matter, for the reasons that I published on 16 August 2019 (The Pharmacy Guild of Australia v Ramsay Health Care Ltd [2019] NSWSC 1045), I dismissed the present proceedings pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) but reserved the question of costs (to be dealt with, if possible, on the papers) and made directions for the filing of brief written submissions on costs.
Although the defendants, in their submissions dated 21 March 2019 in support of the substantive relief claimed in their notice of motion filed 3 December 2018, indicated that they wished to be heard on the appropriate order as to costs (from which I had gathered that what was contemplated would be an order otherwise than on the usual basis), ultimately neither side sought an oral hearing on the question of costs and accordingly I have dealt with the matter on the papers.
The defendants do not seek any order other than the usual order as to costs.
The plaintiffs accept that they should be required to pay the defendants' costs on the ordinary basis. However, they seek a reduction in the costs that they be ordered to pay, such that they not be required to pay the defendants' costs incurred in connection with the issues raised by the plaintiffs as to lack of standing and alleged abuse of process - in other words, that the costs be apportioned across the different issues raised in the proceedings. They submit that the significant majority of the costs incurred in these proceedings were associated with the two issues (standing and abuse of process) on which they maintain in substance they would have succeeded but for the determination made as to the third issue in the proceedings (the appropriateness of declaratory relief). They submit that an appropriate order would be that they pay 50% of the defendants' costs on the agreed ordinary basis. The defendants object to such an order and maintain that there are no special circumstances to warrant departure from the general rule.

Background

The background to the proceedings is set out in my earlier reasons and does not need here to be repeated in any detail. The plaintiffs had sought declarations that the first defendant and/or the second defendant held financial interests in certain pharmacies (which would have amounted to a contravention of the prohibition contained in cl 5(1) of Schedule 5F to the Health Practitioner Regulation National Law (NSW) (the National Law)). The making of such a declaration thus would have amounted to a declaration as to past and continuing commission of a criminal offence (see my earlier reasons at [155]) and I concluded that it was not appropriate to entertain what was in essence an application for declaratory relief to the effect that conduct is criminal (see my earlier reasons at [167]-[168], [221]). Having regard to that conclusion, it was not necessary for me to make a final determination as to the other issues that had been raised by the defendants (namely, that all the plaintiffs lacked standing and that the proceedings constituted an abuse of process).

Plaintiffs' submissions

The plaintiffs submit that this is a case where it is appropriate to depart from the ordinary rule as to costs, having regard to the principles considered by the Court of Appeal in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik (No 2)) (at [38]) as to when such a departure may be warranted. In summary, those principles were identified by the plaintiffs in their submissions as follows: (a) where there are multiple issues in a case, the Court will not generally attempt to differentiate between issues on which a party was successful and those which it failed. Unless a particular issue or group of issues was 'clearly dominant or separable' it will ordinarily be appropriate [that] costs follow the event; (b) in relation to trials, it may be appropriate to deprive a successful party of costs or a portion of costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument; (c) if an appellant loses on a separate issue argued on appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue; (d) whether an order contrary to the general one should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court; (e) a 'separable issue' can be 'any disputed question of fact or law' before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter; (f) where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. It depends on matters of impression and valuation. [footnotes omitted]
Emphasis is placed by the plaintiffs on the breadth of the Court's discretion as to costs, noting that, in Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274, the Court of Appeal made clear that it is necessary to analyse the whole of the proceedings to determine the appropriate cost order; and further noting that the discretion as to costs must be exercised judicially.
The plaintiffs argue that the issues in the present case were readily separable; raising three discrete "disputed questions of fact or law". They point to my observation (in my earlier reasons at [2]) as to the emphasis that had been placed in the defendants' oral submissions on the issue as to the inappropriateness of the claims for declaratory relief and the inadequacy of the pleading when seen through the prism of a pleading raising allegations of conduct that would amount to a criminal offence (the third of the issues the plaintiffs identified as having arisen in the proceedings), that being the issue on which the defendants ultimately succeeded. The plaintiffs submit that that emphasis was not apparent on the face of the defendants' written submissions, nor on their evidence on their notice of motion.
The plaintiffs submit that, although not the subject of final determination, it is apparent from the reasons for judgment that the other two issues (as to standing and abuse of process) would have been determined substantially in the plaintiffs' favour had they been determined (noting the observations made in the judgment to the effect that three of the four plaintiffs would likely have had standing based on the apprehended impact to their commercial interests and that I would have concluded that it had not been established on the balance of probabilities that the commencement or continuation of the proceedings to date was or had been an abuse of process by reference to any impermissible use of the "Released Documents'', as there defined).
The plaintiffs say that those two issues (which were raised solely by the defendants) accounted for a very significant portion of the evidence and hearing time (and, in turn, costs); and that those costs would not have been incurred had the defendants confined their attack on the plaintiffs' case to the issue on which they were ultimately successful.
It is noted that the question of any reduction of costs has been said necessarily to depend upon matters of impression and evaluation; and that the amount of prepared material addressing each issue, and the time taken on hearing, will be appropriate touchstones for that evaluation.
In that regard, the plaintiffs say that material regarding the question of standing made up a significant portion of affidavit evidence, referring to the two affidavits of Jennifer Nelson (the first of 53 pages, and a supplementary affidavit of six pages); the affidavit of Michael Troy (23 pages); and the affidavit of Ashleigh Poole sworn 13 December 2018 (159 pages, approximately two-thirds of which it is said relate to the issue of standing of the Pharmacy Guild of Australia). The plaintiffs have calculated that arguments on standing occupied approximately 19 pages of transcript, five pages of argument in written submissions, and approximately 13 pages of the judgment.
The plaintiffs similarly calculate that arguments on the abuse of process issue encompassed a significant amount of time (noting that the cross-examination of Ms Poole on this issue occupied approximately nine pages of the transcript; that oral argument on the point comprised approximately 30 pages of transcript; and that consideration of the matter occupied almost half the judgment). It is said that that portion of Ms Poole's December affidavit not dealing with standing relates to the issue of abuse of process; that all of Mr Cowling's 68 page affidavit of 20 March 2019 relates to this issue; and that the majority of Mr Cowling's 333 page affidavit of 31 October 2018 also contains evidence only relevant to allegations of an abuse of process.
The plaintiffs argue that the defendants' contention on the third issue that the declaratory remedy was inappropriate was not raised in evidence and "received little attention" in written submissions (being addressed, they say, in only two of the 27 pages of written submissions filed by the defendants in support of their motion). The plaintiffs further submit that, to the extent that those submissions addressed the appropriateness of the declaratory remedy, they did so in the context of the defendants' standing argument rather than as a distinct ground on which the proceedings ought be summarily dismissed.
It is submitted by the plaintiffs that, had the defendants not pursued their complaints about the plaintiffs' standing and alleged abuse of process, the proceedings would have taken a very different course; that the evidence filed would have represented only a fraction of the material ultimately put before the Court; that the time required for the hearing of the matter would have been substantially reduced; and that the costs incurred by the parties would have been comparatively minimal.
In those circumstances, the plaintiffs seek orders reducing the costs payable such that they not be required to pay that portion of the costs referable to the defendants' complaints about standing and abuse of process. They do not seek any costs orders in their favour in respect of their own notice of motion (seeking early discovery of documents), though noting that I had indicated that I might have been inclined to grant such orders had the defendants' motion not been successful.

Defendants' submissions

The defendants accept (as is clearly the case) that there is a broad power in relation to the costs of proceedings (s 98 of the Civil Procedure Act 2005 (NSW)) but say that in the present case there are no circumstances that would cause the Court to consider some order other than the usual order that costs follow the event (r 42.1 of the UCPR); and, in particular, that here there was no disentitling conduct on the part of the defendants (cf Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [69]-[70] per McHugh J).
It is noted that the proceedings were dismissed following an interlocutory hearing which lasted only one day of Court time. It is submitted that this was not a lengthy trial, appeal or other hearing which might justify the close examination of the different issues in order to determine whether to exercise a discretion to depart from the usual rule as to costs (and that so to do would be to dissuade parties from bringing forward all issues in the hearing of interlocutory applications and perversely to encourage the unsuccessful party to seek to have costs determined in short matters on an issue by issue approach).
The defendants further submit that this is not a case where the issues are clearly definable or severable or where it could be said that there was extensive evidence prepared, submissions made, or documents produced, which were wasted or which were irrelevant to the issues upon which the defendants succeeded. By way of example, it is noted that, in determining whether to dismiss the proceedings, account was taken as to whether there was any public or private interest in granting the declaration (referring to [159] of my earlier reasons) and to the fact that I had noted that this was a civil suit commenced by an industry body (not the regulator) and three competitors of the entities said to be in breach of the National Law (who I considered clearly had a personal interest in eliminating competition as much as they might also be said to have an interest in enforcing compliance by other pharmacists with the National Law) (see my earlier reasons at [167]).
The defendants say that Mr Cowling's affidavits addressed the nature of the various plaintiffs and the history of the disputes between the parties (including disputes as to document requests and the various judicial and other proceedings that had been commenced). It is submitted that such matters could not be said to be irrelevant to the dismissal on the grounds that the declaratory suit should not be permitted to proceed. Further, it is said that Mr Cowling's affidavits were, in part, relevant to the standing of the first plaintiff, a matter on which the defendants would have succeeded had it been necessary to determine (see my earlier reasons at [173]).
The defendants argue that their submissions were interlinked between the nature of the declaration sought, the standing of the plaintiffs, and the history of the pre-litigation steps taken by the plaintiffs; and hence it is not possible to say that the issues upon which the defendants did not succeed are clearly definable or severable (nor, even if the issues were clearly definable or severable, that it could be said that any one issue was dominant so as to justify a departure from the usual rule).
Complaint is also made that there is no evidential basis for the 50% reduction the plaintiffs have proposed; and no identification by the plaintiffs' solicitors in any disciplined fashion of the time taken or costs referable to the issues upon which the defendants did not succeed.

Determination

There is no dispute between the parties as to the breadth of the discretion to award costs; nor as to the requirement that such discretion be exercised judicially and having regard to the overriding purpose mandated in relation to the conduct of litigation in this Court.
Nor is there any doubt that, in particular cases, it may be appropriate to apportion or reduce costs in a manner that reflects the way in which the proceedings were conducted and a party's success or failure on individual issues.
Relevantly, however, as the plaintiffs have noted, ordinarily the Court will not attempt to differentiate between issues on which a party was successful and those on which it failed (at least unless those issues were clearly dominant or separable).
The defendants have noted the observations by Brereton J (as his Honour then was) in In the matter of Optimisation Australia Pty Ltd (Costs) [2018] NSWSC 280 (Re Optimisation) at [13], namely that: ...The court does not usually apportion costs between issues, but acts on the outcome of the proceedings as a whole, without attempting to differentiate issues on which the party may not have succeeded. However, a successful plaintiff who has failed on certain issues may be deprived of costs on those issues, or even ordered to pay the defendant's costs of them. But this course, while open, is one on which the court embarks with hesitation; the authorities reflect consistent themes that (1) justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case; but (2) it may be appropriate to apportion costs where a clearly definable and severable issue, on which the otherwise successful; party failed, has occupied a significant part of the trial. The severability of one issue on which the successful party failed is not, without more, sufficient to warrant departure from the general rule. However, the court may depart from the general rule if the ultimately unsuccessful party succeeds on significant issues, particularly if those issues are clearly dominant or separable. [footnotes omitted]
It has been said on more than one occasion that the discretion to apportion costs is one to be exercised only in the most exceptional of circumstances (Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201; (1979) 42 FLR 213; (1979) ATPR 40-141; Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12]).
In the present case, I am not persuaded that this is a case in which the approach of apportionment of costs is warranted.
I have in mind that matters going to standing were interwoven to some degree with the issues to be considered when considering whether there was any public or private interest in the grant of the declaratory relief sought; and that the history of the pre-litigation document requests (which formed the factual basis for the abuse of process argument) was relevant to the consideration of the plaintiffs' motion seeking early disclosure of documents. Moreover, I am conscious of the caution to be exercised in embarking on an apportionment of costs as between particular issues lest parties be dissuaded by the risk of costs from canvassing material issues (to the detriment or potential detriment of the interests of justice) - as recognised in the passage extracted above from Re Optimisation.
The fact that emphasis was squarely placed in oral argument on the third of the three issues identified (that being the issue which was determinative of the defendants' application, rather than (as the plaintiffs had apprehended) the central issue being the abuse of argument point), does not mean that the inappropriateness of declaratory relief in relation to criminal conduct was not an issue raised in the defendants' written submissions - it was; albeit perhaps with a somewhat different emphasis (that being what had prompted my observation in the course of oral argument as to this being the defendants' highest point). I did not apprehend there to be any suggestion by the plaintiffs at the time (nor is there any reason to believe that this would have been the case) that, had the issue been raised differently in the written submissions, the issue would at that stage have been conceded (and hence that the plaintiffs would have taken a different course at the hearing of the motion in relation to the dismissal of the proceedings there being sought by the defendants). In any event, for the reasons set out above, I do not consider that the fact that the defendants succeeded only on that point (the others not finally being determined) warrants an apportionment of costs across the various issues.
I therefore do not consider that there should be a departure from the usual rule that costs follow the event and accordingly it is not necessary to consider whether, had I formed a different view on that question, the broad brush impressionistic approach suggested by the plaintiffs to the quantification of such costs (arriving at a proposed 50% reduction) would have been appropriate. Suffice it simply to say that an approach based on an analysis of the transcript going to, or evidence adduced on, particular issues is not an uncommon way of forming a view as to how any apportionment of costs should be approached but the circumstances of each case will necessarily vary. In James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 (James v Surf Road Nominees (No 2)), per Beazley, Tobias and McColl JJA (at [35]), for example, their Honours noted that an available approach to the exercise of the court's discretion in particular cases could be to estimate the time taken on discrete issues at the hearing and to make orders accordingly. In Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 (cited by the Court of Appeal in James v Surf Road Nominees (No 2) (at [36]) and again in Bostik (No 2) (at [38])), Gummow, French and Hill JJ said (at [272]): Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation.
Therefore, had I concluded that apportionment of costs as between particular issues was warranted in the present case, there might be much to be said for an approach of the kind suggested here by the plaintiff.
That said, as noted above I do not consider that such an order is warranted and accordingly I make the following order, which will now dispose of the proceedings: 1. Order that the plaintiffs pay the defendants' costs of the proceedings on the ordinary basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 October 2019

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