Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1997] FCA 502 | Case summary

REASONS FOR JUDGMENT SUNDBERG J: Five questions relating to costs arise for determination. Separate questions motion By notice of motion dated 23 August 1995 the applicant sought, inter alia, the following orders: 2. An order that the Court decides separately from all other questions raised by the pleadings ... the following question: "Was the Applicant, in making each of the requests referred to in paragraphs 20-22 (inclusive) of the Amended Statement of Claim herein, a "new entrant to the domestic aviation industry" within the meaning of that expression as used in the definition of "third party carrier" in each of the Head Leases referred to in paragraphs 8 and 10 of the Amended Statement of Claim?" ... 8. An order that the costs of this Application be reserved. On 15 September 1995 Drummond J directed that two questions, one of which was the "new entrant question", be determined separately. His Honour ordered that the costs of the motion be reserved. On 25 June 1996 Northrop J answered the questions favourably to the applicant. An appeal by the first and second respondents (whom I will call "the respondents") was dismissed by the Full Court. By notice of motion dated 26 May 1997 the applicant sought an order that the respondents pay its costs of the separate question motion. Reliance was placed on Order 62 rule 15, under which, where the costs of a motion, application or other proceeding are reserved, those costs "follow the event" unless the Court otherwise orders. It was submitted that "the event" here was the determination of the separate questions. Those questions had been determined favourably to the applicant, and so it should have the costs reserved by Drummond J. I will first consider the matter apart from Order 62 rule 15. Although the applicant was successful in obtaining a declaration that it was a "new entrant to the domestic aviation industry" within the meaning of that expression in the leases between the Federal Airports Corporation ("FAC") (the third respondent) and the respondents, the proceeding is still on foot. Northrop J said in his reasons for judgment that while answering the "new entrant" question unfavourably to the applicant would bring the whole proceeding to an end, a favourable answer meant it would continue "and many difficult questions of fact and law would need to be investigated". The principal outstanding issues are whether, since it is not a party to the leases from FAC, the applicant can recover damages from the respondents: cf Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, and if it can, the measure of damages. So there are significant issues still to be determined notwithstanding the applicant's success on the "new entrant" issue. The ultimate outcome of the case may impact on the appropriateness or otherwise of the separate questions being raised, and whether in fact they led anywhere. In those circumstances, in the exercise of my general discretion as to costs, I would not at this stage award the reserved costs to the applicant. Does Order 62 rule 15 alter this conclusion? Authority indicates that "the event" referred to in rule 15 is the final disposition of the proceeding, and that the phrase "unless the Court or a Judge otherwise orders" is directed to the Judge who finally disposes of the case. In Woods v Walsh (1989) 22 FCR 204, at 206-207 Lee J said:

The rule has not provided for reserved costs to be payable without an order. It requires the costs to follow "the event". The event to which the rule refers is the outcome of the principal proceedings .... The outcome of the principal proceedings would be the outcome relating to any order for costs of the proceedings .... Although the words "follow the event" may mean "according to who wins" ..., unless an order is made in respect of costs there would be no event in respect of which the provisions of r 15 could operate. If no order for the payment of costs is made on disposal of the cause or matter, or an order is made that no costs be paid, no foundation for the taxation of the reserved costs would be provided by r 15. The effect of the rule, therefore, is to make reserved costs of interlocutory proceedings costs in the cause of the successful party in the principal proceedings unless some other order is made in respect of them. ... Pursuant to O 62, r 15 ... the court or judge may make a specific order in respect of reserved costs upon determination of the principal proceedings, but if no such order is made the rule will operate to allow such costs to be taxed pursuant to the order reflecting the result of the proceedings in respect of costs. In O'Keeffe Nominees Pty Ltd v BP Australia Ltd (1995) 128 ALR 718 at 724-725 Spender J said: The "event" referred to, in my opinion, refers to the outcome of the principal litigation and requires that in that litigation there be an order made concerning costs. ... The primary concern that an order for costs reflect the justice of the situation is the reason that on many interlocutory questions the costs are reserved. In most cases, when an order for costs of the principal proceeding is made, no specific reference is made to costs which are reserved and they are, by the order for costs which is made, picked up in favour of the party that has been successful in the litigation. This circumstance reinforces the not uncommon position that in respect of the payment of costs of an interlocutory application, it is not necessarily just that the costs of an interlocutory application should follow the result of that interlocutory application but rather should be determined by the result of the principal litigation of which the interlocutory application forms but a part .... In this particular case, there has not been a final determination of the issues initiated between O'Keeffe Nominees and BP. In that sense, there has been no determination of which party would ultimately succeed and there has not been "the event" which, absent any specific order, reserved costs would follow. In that case the Trade Practices Commission applied to intervene in proceedings between O'Keeffe and BP. BP opposed the application. The Commission was allowed to intervene, and the Court ordered that the costs of its motion be reserved. The proceedings between O'Keeffe and BP were settled, and the court ordered that the application be dismissed. Hence the absence of "the event" to which Spender J referred. Because in the present case "the event" is not the determination of the separate questions but the outcome of the principal proceeding, Order 61 rule 15 is not relevant to the application before me. The question arises under my general discretion to make orders for costs (Federal Court of Australia Act 1976, s43), and for the reasons I have given, I am not persuaded that I should now order that the applicant have its costs of the separate questions application before Drummond J. Separate questions determination costs Having answered the separate questions in the manner I have indicated, Northrop J ordered that the question of costs be reserved. I gave the applicant leave to amend the notice of motion of 26 May so that it covered those costs as well as the costs reserved by Drummond J. What I have said under the preceding heading applies here, though there is one additional matter to note. Having dismissed the appeal from Northrop J's answers to the separate questions, the Full Court ordered the respondents to pay the applicant's and FAC's costs of the motion for leave to appeal and of the appeal, but that "otherwise there be no order for costs". The Court could have awarded the reserved costs to the applicant because it had won the issue relating to the separate questions. But it did not interfere with Northrop J's order. It is proper to assume that that order was left untouched because those costs related to but part of the larger litigation, and that whatever came to pass at the end of that litigation might bear on the question of who should pay them. Discovery motion On 26 November 1996 Northrop J ordered the applicant to provide a list of documents by 7 February 1997. The applicant did not comply with the order, and by notice of motion dated 26 February 1997 the respondents sought both an order that the applicant comply with the earlier order and an order for costs. On 24 April 1997 orders were made by consent that the applicant provide its list of documents by 15 May 1997. Paragraph 3 of the order reads "Costs be reserved". The motion was adjourned until 30 May 1997. One of the reasons for the adjournment was that the respondents had been informed that the applicant might contend that some of the discovered documents were subject to commercial confidentiality, an issue that could be determined on 30 May. The applicant provided its list of documents on 23 May, and at that time claimed that many of the documents were confidential. On 29 May the respondents' solicitors agreed with the confidentiality solution proposed by the applicant's solicitors. Thus, when the matter came before me on 30 May, the only question was whether the respondents should have their costs of the 27 February motion and of the day, namely 24 April. The respondents contended that they had been successful in obtaining the relief they sought, and should have their costs. Counsel for the applicant referred to Order 62 rule 15. But the rule could only assist the applicant if "the event" was the principal proceeding and not the discovery application, and in the light of his submissions on the separate questions issue, counsel did not want to "say too much about that". The events surrounding the consent order of 24 April show that the parties did not regard the motion as having been finally dealt with. It was adjourned to 30 May in case some question of confidentiality required resolution. In those circumstances the reservation of the costs was no more than a deferral of a decision about them to 30 May when, after the confidentiality issue had been disposed of, the appropriate order would be made. Accordingly, the order of 24 April did not reserve "the costs of a motion" within the meaning of rule 15. The fate of the motion was not then determined. Apart from the reference to Order 62 rule 15 the applicant has not advanced any reason why the respondents should not have their costs of the motion and of the day. The applicant was in default in respect of discovery, the notice of motion was issued, the respondents obtained the order they sought, and should have their costs. Security for costs By notice of motion dated 22 August 1995 the respondents sought an order that the applicant provide security for their costs of the proceeding. On 15 September 1995 Drummond J ordered that the applicant provide security in the sum of $20,000, and that in default the action be stayed. The sum was paid into court in accordance with the order. By the notice of motion of 26 May 1997 the applicant sought, inter alia, payment of the security money to its solicitors. No material has been filed in support of the application. The security order was not made by reference to any particular issue that has now been determined in favour of the applicant. It was an order referable to the ultimate outcome of the principal proceeding, and the material upon which Drummond J made the order was directed to the costs of the hearing of that proceeding. The determination of the separate questions has cleared up some issues, but as I have said, the ability of the applicant to recover damages, not being a party to the leases, and the quantum of damages, if any, remain to be determined. In those circumstances there is no reason to release the security money. FAC injunction proceeding By notice of motion dated 25 November 1996 the respondents sought interim orders restraining FAC from acting on or enforcing various notices of breach of covenant in the leases. The applicant was a party to the motion, which was heard by Finn J on 6 December 1996. After hearing argument his Honour adjourned the matter so that written submissions could be filed in relation to several matters raised in argument. By letter of 11 December the respondents informed the applicant that they were willing to negotiate with a view to entering into sub-leases as required by the relevant clauses of the head leases. The matter was mentioned before Finn J on 12 December. Counsel for the respondents informed his Honour that the letter of 11 December had been sent to the applicant, and that in those circumstances the respondents sought an order that the injunction application be adjourned sine die. Counsel for FAC consented to such an order. Counsel for the applicant did not oppose it, and asked that the costs be reserved. Finn J adjourned the motion sine die with liberty to apply, and reserved the costs of all parties. The matter came back before his Honour later in the day. Counsel for the respondents informed him that FAC and the respondents agreed that the respondent's motion be dismissed and that the respondents pay FAC's costs. Counsel for the applicant said she did not have any instructions, whereupon counsel for the respondents informed his Honour that if the applicant sought its costs, he would not oppose an order. Pursuant to that statement, the respondents have agreed to pay the applicant's taxed costs of the motion. But the applicant seeks its costs on a "solicitor/own client basis or alternatively, an indemnity basis". It relies upon the circumstances surrounding the dismissal of the motion, and says that the respondents must have realised from the beginning that their case was hopeless. Reliance was placed on the observations of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401: I believe it is appropriate to consider awarding "solicitor and client" or "indemnity costs", wherever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. See also Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362 and Rouse v Shepherd [No 2] (1994) 35 NSWLR 277 at 279-281. I am unable on the material relied on to come to the conclusion that the respondents, had they been properly advised, should have known they had no chance of success. All I know is that after a day's hearing before Finn J his Honour reserved his decision pending the filing of further submissions, and that the respondents later settled with FAC and agreed to pay its and the applicant's costs. Those facts fall short of showing that the respondents should have known the case was hopeless. Nor can I infer from them that the proceedings against FAC were commenced for some ulterior motive or because of some wilful disregard of known facts or clearly established law. The applicant is entitled to its taxed costs and no more. Conclusion The respondents have been successful on their motion, and I order that the applicant pay their taxed costs of the motion notice of which is dated 26 February 1997. The applicant has been unsuccessful in its motion, which is dismissed. The applicant should pay the respondents' taxed costs of that motion. I certify that this and the preceding nine pages are a true copy of the reasons for judgment of the Honourable Justice Sundberg .................................................................. Associate 5 June 1997

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd

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