Tour Squad Pty Ltd v Fifth Amendment Entertainment Inc

The law 8 Rule 40.13 of the Rules provides: If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. 9 This rule recognises that it is usually inappropriate to require the unsuccessful party in an interlocutory application to pay costs immediately as they might ultimately succeed in the substantive proceeding: Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2013] FCA 567 [29]; Telstra Corporation Ltd v Phone Directories Company Pty Ltd (No 3) [2014] FCA 949 [29]. Further, the rule is designed to avoid the inconvenience and potential injustice caused by a series of successive taxations following interlocutory applications: Courtney v Medtel Pty Ltd (No 3) [2004] FCA 347 [20]. 10 The rule is not, however, immutable. The Court may order that costs of an interlocutory application be taxed immediately if it is in the interests of justice to do so: QS Holdings Sarl v Paul's Retail Pty Ltd (No 2) [2011] FCA 1038 [33]; Axent Holdings Pty Ltd v Compusign Australia Pty Ltd (No 3) [2018] FCA 6 [13].

Submissions 11 The applicants submitted that there were several facts relevant to the exercise of the discretion: (a) The events which are the subject of the claim in the substantive proceedings occurred several years ago, and there is no denial by the respondents that money was paid by the applicant to the respondents for the arranged tours, which did not eventuate. (b) The respondents have "not been straightforward" in accepting service of the proceedings, and their representation has attempted to withdraw, leaving no alternative representation or means of service in Australia. (c) There was no meaningful attempt to comply with the directions made by the Court in respect of the filing of pleadings and material. 12 The applicants further submit that the conduct of the respondents in relation to service, their purported withdrawal of representation, and their failure to comply with case management directions in a timely fashion are significant because they indicate a failure to act reasonably, and suggest the litigation will be attenuated by delay. The applicants submit these are both factors which indicate it would be in the interests of justice to order the costs of the interlocutory application be taxed immediately. The applicants further contend that the absence of any security for costs, and the fact that the respondents are conducting the litigation from a foreign jurisdiction, both support this conclusion.

Reasonableness of the respondents' conduct 13 Consistent with the applicant's submissions, a factor which may incline the Court to order that costs on an interlocutory application be taxed immediately is some unreasonable conduct on the part of the party against whom costs have been ordered: Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 (Morningstar) [12]. In this way, an order for costs to be payable immediately may be used to discourage interlocutory disputation and conduct inconsistent with the overarching requirement for parties to act in accordance with ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). As further explained by Colvin J in Richmond v Ora Gold Limited [2020] FCA 70 at [37]: [T]he references in the cases as to unreasonableness as a basis for exercising the discretion to order that costs thrown away be assessed and paid forthwith are intended to capture those cases where there has been a relatively serious failure to observe the approach to the bringing or contesting of interlocutory applications that may be expected to be adopted in accordance with the modern approach to case management. 14 Here, the respondents failed to file a defence within the time specified in the orders made on 23 July 2020, namely by 20 August 2020. They only filed it on 24 September 2020, less than a day before the hearing of the applicant's application for default judgment. There has been no adequate explanation for that conduct. In these circumstances, the respondents have failed to act in accordance with the modern approach to case management, a factor which weighs in favour of granting the applicant's application for costs to be taxed immediately.

Uncertainty and delay in the conclusion of the matter 15 Another factor relevant to the exercise of the discretion is whether a party will not have the benefit of an award of costs for a considerable period of time: Hill v Zhang (No 2) [2019] FCA 1649 [11]. Where the controversy is likely to run for at least a further 12 months, this delay is sufficient to warrant an order that costs be taxed forthwith: Morningstar; Horrobin v Australia & New Zealand Banking Group Ltd (unreported, New South Wales Court of Appeal, Priestly JA, 6 June 1997). 16 In the circumstances of this case, it is not unreasonable to predict that these proceedings are unlikely to conclude within the next 12 months, particularly in light of the delays occasioned by the respondents' conduct to date. This is another factor which weighs significantly in favour of exercising the discretion in favour of the applicants.

Other factors 17 Whether security for costs has been provided is another factor of relevance to consider: Lynx Engineering Consultants Pty Ltd v The ANI Corporation Ltd (t/as ANI Bradken Rail Transportation Group) (No 3) [2010] FCA 32 [37]. Here, the absence of an order for security for costs and the not unlikely possibility that the respondents may cease to be represented by lawyers in this jurisdiction does place the applicant in an arguably vulnerable position. Again, this factor weighs in favour of ordering the costs of the interlocutory application be taxed immediately. 18 Mr Dillman, who appeared on behalf of the respondents, was unable, due to a lack of instruction, to provide any submissions as to why the orders sought by the applicant should not be made. It ought be noted that nothing that is said in these reasons ought to cast any doubt on the professionalism of Mr Dillman or his firm. It is obvious that Mr Dillman has attempted to act on the instructions which he has been able to obtain, and the evidence to date in this matter suggests that the difficulties have arisen as a result of his clients' actions, rather than that of his solicitors.

Conclusion 19 For the foregoing reasons I am satisfied that the costs of the interlocutory application for default judgment, ordered to be paid by the respondent on 25 September 2020, should be taxed immediately. I make orders accordingly. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.