20 Leave to rely upon the new grounds should be refused.
21 First, the substantive case which the Tredrea parties wish to raise on the appeal (as opposed to the question of damages) is new. Indeed, it may fairly be said that the Tredrea parties' case as to liability has been entirely recast on the appeal with the benefit of the primary judge's reasons. The effect of that approach is, with respect, to treat the trial as a "practice run" for the appeal. It would be contrary to principle to permit this to occur.
22 Secondly, while senior counsel for the Tredrea parties accepted that Channel 9 expressly raised non-compliance with the first direction as a valid ground for terminating the services agreement in its defence, he also accepted that the Tredrea parties had not taken issue with that pleading in their reply or otherwise. The Tredrea parties also accepted in argument on the appeal that they had placed no evidence before the Court as to the reasons for the decision not to do so, and that the Court would proceed on the basis that this was a "forensic decision". However, an appeal is not an occasion to revisit and reverse forensic decisions made at trial. As the High Court observed in Metwally, leave is generally refused to raise a new argument which, "whether deliberately or by inadvertence, [the appellant] failed to put during the hearing when [they] had [an] opportunity to do so": at 483 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ).
23 Thirdly, the "errors" in the primary judge's reasons upon which the Tredrea parties rely are found in passages where his Honour sets out reasons for agreeing with relevant aspects of Channel 9's case at trial which the Tredrea parties did not put into issue. In particular, the primary judge (at [103]) explicitly held that "the applicants did not direct any pleading or argument specifically at the first direction. No case was articulated as to why it was not 'reasonable'". Thus, while the primary judge then explained briefly why, in his view, the first direction was clearly a reasonable one, his Honour did so without the benefit of argument from the parties. As Channel 9 points out, that gives rise to a prejudice to Channel 9 in that, if the primary judge had had the benefit of the parties' submissions on those issues, his Honour's reasons may well have been more extensive and traversed the arguments which the Tredrea parties now seek to raise.
24 Fourthly, there was no evidence as to why the Tredrea parties had failed to raise the new issues at trial. While senior counsel for the Tredrea parties explained that the reason was due to them "perhaps only focusing upon [their] own pleaded case, and not necessarily directly answering the respondent's pleaded case", that is not an adequate explanation. Accordingly, we have given significant weight to the fact that no adequate explanation has been given by the Tredrea parties for failing to raise the new grounds at trial, despite both parties being represented by senior counsel. As Mortimer J (as her Honour then was) observed in CPE15 at [18], the rule in Coulton has particular application to prevent new issues from being raised on appeal in private law litigation involving represented parties. The lack of an explanation is the more telling where the primary judge afforded the Tredrea parties considerable latitude over Channel 9's objections as to the grounds on which the Tredrea parties could rely to challenge the termination of the services agreement. Specifically, [16] of the statement of claim pleaded that:
The respondent did not have any grounds or basis to terminate the Services Agreement, whether under clause 9.1 of the Services Agreement or at all.
(Emphasis added.)
25 The statement of claim at [17], in turn, alleged that "[w]ithout limiting the plea in paragraph 16 above", Mr Tredrea "did not disobey a lawful direction within the meaning of clause 9.1(a) of the Services Agreement. A lawful direction for the purposes of that clause is a reasonable one. The Direction [referring to the second direction] was not reasonable" for a variety of reasons. Those reasons included an alleged increased risk of certain medical conditions and the availability of other measures and control mechanisms in the workplace said to be equally, if not more, effective than vaccination.
26 With respect to those pleadings, the primary judge found (at [57]) that:
It is appropriate, however, to note a further point concerning SOC [16]. It is a completely general and unparticularised allegation that Channel 9 did not have any grounds or basis to terminate the Services Agreement. SOC [17]-[19], which make more specific allegations that particular aspects of cl 9.1 were not engaged, are expressed not to limit SOC [16]. No application was made to strike out SOC [16] or to require further and better particulars in order to narrow the applicants' case. Holding the applicants strictly to their pleaded case does not greatly assist Channel 9, in circumstances where the pleaded case in its terms encompasses any argument that might be thought of to the effect that the power to terminate in cl 9.1 did not arise. Consequently, where evidence adduced by the applicants was objected to at the hearing on the ground that it did not go to the issues raised by SOC [17], I have determined that that evidence should be admitted.
(Emphasis added.)
27 The latitude afforded by the primary judge at [57] to the Tredrea parties as to the manner in which they could run their case at trial demonstrates that the Tredrea parties had an ample, indeed generous, opportunity to raise the new grounds at trial yet inexplicably failed to do so.
28 Fifthly, at a reasonably impressionistic level, the Tredrea parties' case is not strong or straightforward. Specifically, the Tredrea parties would have to overcome a series of adverse findings by the primary judge in order to succeed on the appeal as to liability, and with respect to the appeal grounds relating to damages. As Bromwich J stated in Han (at [15]), "the weaker the point, the greater the need for other aspects to be favourable". The fact that the Tredrea parties' case is not strong or straightforward should be read cumulatively with the other factors which weigh against the grant of leave.
29 Sixthly, the grounds of appeal which dispute the reasonableness of the first direction would require "new or additional findings of fact": Dovuro at [153] (Hayne and Callinan JJ). Thus, as Channel 9 submitted, the new grounds would require the Court to "traverse the bulk of the evidence in order to come up with factual findings afresh". In this regard, senior counsel for the Tredrea parties acknowledged that his argument for leave to raise the new grounds is weaker with respect to those grounds which raise the question of reasonableness because they are inherently more factual than the ground disputing the characterisation of the first direction.
30 Seventhly, there is no matter of general public importance which could be said to be served by permitting the new issues to be raised on appeal. Those issues are relevant only to the construction of the services agreement in this case (on the characterisation question) or to the particular direction given to Mr Tredrea (on the reasonableness of the direction): see NAJT at [166] (Madgwick J).
31 Finally, while we acknowledge that the Tredrea parties face some prejudice because of the primary judge's focus on the first direction, that prejudice is outweighed by the fact that the Tredrea parties knew of Channel 9's intention to rely on the first direction from the time that it filed its defence. Furthermore, granting leave to raise the new grounds would prejudice Channel 9 by denying it a practical right to appeal: Han at [20(5)] (Bromwich J).
32 For these reasons it would be contrary to the interests of justice to grant leave to the Tredrea parties to raise the new grounds. In reaching this view, we have also taken into account that the grant of leave would not advance the overarching principle of s 37M of the Federal Court of Australia Act 1976 (Cth). In short, as Gibbs CJ, Wilson, Brennan and Dawson JJ said in Coulton (at 7): "[i]t is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial".
33 It follows from the refusal of leave to raise the new grounds that the substantive appeal in SAD 49 of 2024 must be dismissed, as the Tredrea parties accepted in the event that the Court reached that view. Timetabling orders will be made for the filing of any submissions as to costs of the appeal in the event that agreement is unable to be reached.
3. CHANNEL 9'S APPLICATION FOR LEAVE TO APPEAL IN RELATION TO COSTS
34 In dismissing the application which was the subject of the judgment below, the primary judge initially made orders that the Tredrea parties were to pay Channel 9's costs of the proceeding as agreed or assessed. His Honour's orders contemplated, however, that the parties may wish to seek a different order as to costs, and a regime was put in place to accommodate that eventuality.
35 As matters transpired Channel 9 sought an order for indemnity costs, relying on five offers which it had made to settle the proceeding. The Tredrea parties, relying on s 17 of the IC Act, contended that there should be no order as to costs. The primary judge considered the parties' submissions and resolved the question of costs on the papers. For reasons published on 3 May 2024, his Honour determined that there should be no order as to the costs of the proceeding. In essence the primary judge accepted the submission of the Tredrea parties that s 17 of the IC Act required that there be no order as to costs. Although his Honour considered that it may have been conceptually unsatisfying, he concluded that it was appropriate to make an order to confirm the completion of the proceeding and he therefore made an order that there be no order as to the costs of the proceeding.
36 By an application dated 17 May 2024, Channel 9 sought leave to appeal from the order of the primary judge on 3 May 2024 in relation to costs, relying on the grounds set out in a draft notice of appeal which was exhibited to an affidavit sworn by its legal representative on 17 May 2024.
37 On 26 July 2024, Wheelahan J ordered that the application for leave to appeal should be referred to the Full Court hearing the substantive appeal. Channel 9 accepted that leave to appeal was required, but submitted that ultimately little turned on the interlocutory nature of the application having regard to Wheelahan J's order that the application for leave proceed instanter with the hearing of the substantive appeal. The Tredrea parties adopted much the same position, submitting that in the particular circumstances here the question of whether leave should be granted was effectively the same question as whether the appeal should be allowed, and there was little point drawing a distinction between the two stages of the process.
38 In any event, Channel 9 advances the following grounds of appeal from the orders of the primary judge in relation to costs:
- The primary judge erred in finding that the [Tredrea parties] had not, by unreasonable act or omission, caused [Channel 9] to incur costs in connection with the proceeding, by reason of the [Tredrea parties]' refusal of the 7 and 21 July 2023 offers and in thereby finding that pre-condition for the enlivening of the costs power did not exist.
- In reaching this conclusion (at [38]), the primary judge evaluated the unreasonableness of the [Tredrea parties]' refusal to accept the offers by comparison with the [Tredrea parties]' own legal costs, and thereby erred:
a. in failing to have regard to the fact that the [Tredrea parties] could not have recovered such costs even if they had been successful, having regard to the terms of s 17 of the Independent Contracts [sic] Act 2006 (Cth);
b. thereby failing to assess the imprudence of the refusal of the offers based upon a prospective assessment of the [Tredrea parties] prospects of achieving a result greater than the sums offered disregarding the legal costs that had been incurred by the [Tredrea parties].
- The primary judge erred (at [39]) in failing to take into account in the evaluation of whether the precondition to an order for costs was enlivened the primary judge's assessment that by the time of trial the IC Act claim had become little more than an afterthought.
39 The terms of s 17 of the IC Act are, relevantly, as follows:
17 Costs only where proceeding instituted vexatiously
(1) A party (the first party) to a proceeding (including an appeal) in a matter arising under this Part must not be ordered to pay costs incurred by any other party to the proceeding unless the first party instituted the proceeding vexatiously or without reasonable cause.
(2) Despite subsection (1), if a court hearing a proceeding (including an appeal) in a matter arising under this Part is satisfied that a party (the first party) to the proceeding has, by unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding, the court may order the first party to pay some or all of those costs.
40 Channel 9 does not contend that the Tredrea parties instituted the proceeding vexatiously or without reasonable cause. Rather, the issue arising from the decision of the primary judge in relation to costs is whether the Tredrea parties' rejection of Channel 9's offers to settle the proceeding (pursuant to Part 25 of the Federal Court Rules 2011 (Cth) and as Calderbank offers) constituted an "unreasonable act or omission" that "caused [Channel 9] to incur costs in connection with the proceeding" for the purpose of s 17(2) of the IC Act.
41 Although Channel 9 concedes that leave to appeal a costs order will not readily be granted by reason, in particular, of the discretionary nature of such judgments, it submits that the point here is one of principle. That is to say, that the question of whether s 17(2) of the IC Act was engaged was one which was capable of only "one uniquely right answer" ("unreasonable act or omission") and therefore does not involve the exercise of discretion: see GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; (2023) 97 ALJR 857 at [16]-[17] (Kiefel CJ, Gageler and Jagot JJ). It is the correctness standard of appellate review (as articulated in Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 264 CLR 541 at [41], [43], [46] and [48]-[49] (Gageler J)) rather than a House v The King [1936] HCA 40; (1936) 55 CLR 499 standard involving judicial restraint affording latitude to a trial judge (see SZVFW at [150]-[151] (Edelman J)) that applies. Under the correctness standard, so Channel 9 contends, the appellate court determines for itself the correct outcome while making due allowance for such "advantages" as may have been enjoyed by the judge who conducted the trial or hearing: see Steven Moore (a pseudonym) v The King [2024] HCA 30; (2024) 98 ALJR 1119 at [14] (Gageler CJ, Edelman, Steward, Gleeson and Beech-Jones JJ); Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531 at 552 (Gibbs ACJ, Jacobs and Murphy JJ); Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [23]-[24] (Gleeson CJ, Gummow and Kirby JJ).
42 Channel 9's argument is in substance that it was unreasonable for the Tredrea parties not to accept two offers to settle the proceeding which were described by the primary judge at [28] and [29] of his reasons - an offer for a payment of $50,000 and then a later offer for a payment of $120,000. Channel 9 challenges the decision of the primary judge (at [38]) that he did not consider that pursuit of the Tredrea parties' claims through to judgment was made unreasonable by them having rejected the offers of settlement which (with the benefit of hindsight) would have been advantageous.
43 In rejecting the submission that it was unreasonable for the Tredrea parties not to have accepted the two offers, the primary judge observed (at [38]) that acceptance of either offer would have produced for the Tredrea parties a sum that was less than their legal costs, and that their prospects were not so poor as to make it unreasonable for them not to accept these offers. Channel 9 criticises his Honour's reasoning in this respect, submitting that by the operation of s 17 of the IC Act the Tredrea parties, like Channel 9, should have expected that they would be denied their costs absent a s 17 exception being established. This meant that the Tredrea parties' costs were necessarily a sunk cost. Channel 9 submits that in those circumstances the evaluation of whether the refusal to accept the offers of compromise was unreasonable needed to be assessed prospectively, having regard to the prospective outcome of the proceedings, and in a context where all past legal costs were unrecoverable (referring in this regard to the observations of Charlesworth J in Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222; (2017) 256 FCR 306 at [174]).
44 Thus, Channel 9 contends, viewed in the correct light an offer of $120,000 was generous and its non-acceptance was unreasonable when weighed against the difficulties which attended the Tredrea parties' case. Channel 9 submits that the primary judge erred by assessing reasonableness retrospectively, weighing the offer against past costs that were always going to be unrecoverable having regard to the operation of s 17 of the IC Act.
45 Channel 9 also contends that the primary judge erred (at [39]) in failing to take into account, in the evaluation of whether the precondition to an order for costs was enlivened, his Honour's assessment that by the time of the trial the IC Act claim had become little more than an afterthought. Channel 9 relies on Stratton Finance Pty Ltd v Webb [2014] FCAFC 110; (2014) 314 ALR 166 at [82] (Allsop CJ, Siopis and Flick JJ) in support of an argument that the existence of both the IC Act claims and the contact claims was a matter to be considered in the application of s 17 of the IC Act, and contends that the primary judge did not properly account for s 12(3) of the IC Act which confines consideration under that Act to matters known at the time of entry into the relevant agreement (as to which see Informax International Pty Ltd v Clarius Group Ltd [2012] FCAFC 165; (2012) 207 FCR 298 at [143] and [170] (Besanko, Jagot and Bromberg JJ)). Channel 9 also contends that the primary judge was mistaken in concluding that it was unsafe to assume that the case would have been significantly shorter had it been run solely as a claim under the IC Act.
46 Notwithstanding the submissions of Channel 9, we have come to the view that in the circumstances of this case it is not correct that the question of whether s 17(2) of the IC Act was engaged was one that is capable of only "one uniquely right answer" or, to use the language of GLJ at [16], "one legally permissible answer". The language of s 17(2) of the IC Act requires the court hearing a proceeding under Part 3 of the IC Act to be satisfied that there has been an unreasonable act or omission by a party causing another party to incur costs in connection with the proceeding before an order could be made with respect to the payment of some or all of those costs. The relevant question, then, is whether the primary judge erred in not being satisfied that there had been an unreasonable act or omission.
47 We accept the Tredrea parties' submission that the finding of the primary judge that it was not unreasonable for them not to have accepted the 7 and 21 July 2023 offers was a finding which it was open to his Honour to make and which he was uniquely placed to make. As Charlesworth J observed in Celand (at [171]), the question of whether there had been an unreasonable act in not accepting the offers of settlement required an evaluative assessment of all of the circumstances, turning on matters of judgment and degree.
48 In our view it is clear when the primary judge's reasons are read as a whole that his Honour undertook an orthodox weighing exercise in considering whether it was unreasonable for the Tredrea parties to have rejected the settlement offers. The primary judge accepted that a range of considerations were relevant in making a decision in this regard at the relevant time, which was prior to the commencement and conduct of the trial. The last two sentences of [38] of his Honour's reasons must be read in the context of the entirety of his Honour's analysis. The amount that a party that settles litigation will be required to pay its lawyers will always be a factor which will inform a decision to settle. The conclusion that it was not unreasonable for the applicants to have rejected the relevant offers was open to the primary judge in all the circumstances, accepting that different people will have different levels of tolerance for risk. That the Tredrea parties' costs to the point of the offers may have been unrecoverable is not a factor which should properly be attributed the significance that Channel 9 contends. At the stage the offers were made the Tredrea parties had at least a chance that they might have succeeded in obtaining an award of damages to defray (at least to some extent) whatever legal costs they had so far incurred. We also note that the largest offer that was rejected ($120,000) was for less than the damages the Tredrea parties might have expected to recover if they were successful on the issue of liability and if (contrary to the view taken by the primary judge as to the effect of cl 14.4 of the services agreement) damages were to be calculated on the basis of loss of payments up to the expiry of the services agreement (which the primary judge quantified at $176,458.32 plus GST).
49 It is not necessary to decide whether the conclusion of the primary judge that it was unsafe to assume that the case would have been significantly shorter if it had been run solely as a claim under the IC Act was one that was open to his Honour. That is because the primary judge was correct to hold, at [39(a)], that the fact that the IC Act claim itself ultimately was not a focus of the Tredrea parties' case did not, in principle, affect the approach to the assessment of the reasonableness of their conduct in rejecting the offers made by Channel 9. Once s 17 of the IC Act was engaged, the costs protection it provided applied to any and all claims that were part of the "matter", and the reasonableness of the rejection of an offer did not depend upon the prospects of the IC Act claim considered separately.
50 For these reasons we do not consider that the reasoning of the primary in relation to the application of s 17 of the IC Act has been shown to be affected by any error warranting appellate intervention. We would, accordingly, dismiss the application for leave to appeal in SAD 66 of 2024. The parties can make further submissions if they are unable to reach agreement in relation to costs, and we will make provision for this in our orders.
I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Perry, McEvoy and McDonald.