Western Sydney Wanderers FC Pty Ltd v Football Australia Limited

Submissions

1. The plaintiff submits that costs should be ordered on an indemnity basis because the conduct of the proceedings by FA and Mr Lopar (through his representative, the PFA) merits a departure from the ordinary approach to costs. Specifically, the plaintiff submits that: 1. The defendants' conduct of the matter was unreasonable, in that they advanced arguments to uphold the Determination that they must have known were hopeless: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801. The defendants' reliance on cl 25 of the NDRC Regulations was an 'afterthought to bridge the deliberate decision by the FA and PFA to simply "muddle through"': plaintiff's submissions (PS) at [21(b)], [22]. 2. The defendants' conduct of the matter was not consistent with s 56 of the Civil Procedure Act 2005 (NSW) (CPA) as they filed and relied upon substantial and irrelevant evidence. In particular, the inclusion of lengthy documents attached to the affidavit of Ms Angela Collins in the primary proceedings, was required to be considered by the plaintiff's representatives. This evidence was 'plainly irrelevant': PS [21(a)] 3. FA (through Mr Kempson) deliberately failed to obtain the plaintiff's consent to a different composition of the Panel, instead only obtaining that of PFA, an admitted breach of the NDRC Regulations: PS [19]. FA and the PFA knew of the issues with the composition of the panel The Court should infer that the reason for Mr Kempson's actions, and that of FA is that they were concerned that the plaintiff would not consent to this approach: PS [14]. This was unreasonable and sufficiently connected with the litigation to justify a deviation from the ordinary approach to costs: Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [24].
2. In response, FA submits: 1. The plaintiff's reliance on conduct anterior to the litigation is misplaced and it cannot be the subject matter of the litigation itself: Mead v Watson [2005] NSWCA 133 at [9]-[10]; Capello v Home Building Pty Ltd [2023] NSWCA 109 at [47]. The Court must approach the case with the background facts of a case as a 'given' and take into account their conduct of the litigation: NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77 at [63]. 2. Further, in any event, that conduct does not justify an award of indemnity costs. The plaintiff seeks to rely on inferences that FA and PFA acted in a collusive manner. That is not supported by any of the findings in the Judgment and was not put to Mr Kempson in cross-examination: (FA's submissions (FAS) at [19]. 3. The evidence filed in the proceedings and relied upon by FA was not unreasonable or inconsistent with the obligations laid out in s 56 of the CPA. The length of the exhibits in the proceedings is related to the length of documents required to give the Court an appropriate overview of the contractual positions of relevant actors: FAS [22]. 4. The arguments raised at trial were reasonably arguable and ultimately dealt with in some detail at [66]-[85] of the Judgment. A finding that a party adopted a 'hopeless' case is a high bar, which results in a presumption that the proceedings have been 'commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts of the clearly established law': Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401; [1988] FCA 364. Here, the case adopted by FA at trial was not so hopeless that it warrants such a presumption. 5. The argument on which the plaintiff ultimately succeeded was only raised at the start of the hearing: FAS [26].
3. The submissions of the second defendant largely mirror FA's. In addition, he submits that there was no question that he could have been involved in the conduct that was impugned by the plaintiff.

Consideration

1. Indemnity costs should only be ordered where there are exceptional circumstances. The principles relating to the award of indemnity costs was outlined by Black J in In the Matter of Indoor Climate Technologies Pty Ltd [2019] NSWSC 356 at [8]: The principles on which an order for indemnity costs may be made are also well established. Section 98(1)(c) of the Civil Procedure Act 2005 (NSW) permits the Court to order costs on an ordinary or indemnity basis. Rule 42.2 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, unless the Court otherwise orders or the rules otherwise provide, costs payable are to be assessed on an ordinary basis. Rule 42.5 of the Uniform Civil Procedure Rules deals with an order for costs on an indemnity basis. Costs are awarded on the ordinary basis unless there are exceptional circumstances: Leichhardt Municipal Council v Green [2004] NSWCA 341. An order for indemnity costs is not made to punish an unsuccessful party for persisting with a case that fails, but to compensate a successful party fully for costs incurred, when the Court takes the view that it was unreasonable for the other party to have subjected the successful party to the expenditure of costs: Hamod v New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20]. Whether an indemnity costs order should be made depends, at least in part, on whether there was a relevant delinquency on the part of the unsuccessful party: Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324 at [24]; Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6]. That is to be determined by reference to the conduct of the proceedings, not the conduct that is the subject of the substantive dispute.
2. In Bale v Kimberley Developments Pty Ltd (No 2) [2022] NSWSC 1009, Ward CJ in Eq said at [45] that: Circumstances in which indemnity costs may be awarded include: where a party has made allegations that ought never to have been made; where an action has been commenced or continued where the plaintiff, properly advised, should have known the applicant had no chance of success; and where proceedings have been commenced in wilful disregard of known facts or clearly established law. An award of indemnity costs serves the purpose of compensating a party fully for costs incurred when the Court takes the view that it was unreasonable for the party against whom the order was made to have subjected the innocent party to the expenditure of the case.
3. I reject the plaintiff's submission that the position adopted by the defendants at the hearing was hopeless, even though I determined that they were wrong. There was a divergence in approach to the interpretation of what could be characterised as a poorly drafted set of arbitral rules. Ward CJ in Eq noted in Anderson v Canaccord Genuity Financial Ltd (No 2) [2022] NSWSC 649 at [96] that a high degree of certainty is required regarding the deficiencies in the losing party's case in order to reach the conclusion that it was hopeless or otherwise doomed to fail, and that caution is required to avoid considering the question of prospects with hindsight. See also the comments of Peden J in Kalloghlian v Mitry Lawyers Pty Ltd (No 3) [2022] NSWSC 1201 at [13]-[17].
4. I also do not accept the plaintiff's criticism of the amount of the defendants' evidence. The size of the evidence in the proceeding is largely referable to the length of the contracts in question, and the amount of paper generated by the underlying dispute. It was appropriate that the Court was given those documents in whole rather than in a piecemeal fashion: see eg Judgment, [81].
5. I do not accept that the FA's failure to obtain the plaintiff's consent to a different composition of the panel is an appropriate basis for the award of indemnity costs. The award of indemnity costs is based on the conduct of the litigation, rather than the subject matter of the litigation: see the cases referred to at [6(1)] above and Black J's observations set out at [8] above. The plaintiff's reliance on conduct of FA before these proceedings commenced (which relates to the conduct of the proceedings in the NDRC) is misplaced. In any event, the implication of the plaintiff's submissions that there was a design to conduct the proceedings in the NDRC unfairly or in a way constructed to defeat the plaintiff's contentions is not supported by the evidence before the Court. There was no basis for the plaintiff's suggestion that Mr Kempson, and FA generally, was attempting to prejudice the plaintiff's interests. While the panel was composed in a defective manner, I accept that Mr Kempson throughout acted in a good faith in attempting to convene a panel to hear Mr Lopar's claim. As I indicated in the Judgment at [5], I accepted Mr Kempson's evidence without reservation, and at [44], dealt with Mr Kempson's reasoning for his actions: [Mr Kempson's] evidence was that he tried to remedy the situation of there being no appointed Chair of the NDRC by obtaining the agreement of FA and PFA for Mr McCarthy (and before him Mr Lo Surdo) to act as chair of the Panel for this particular matter.
6. While this was inadequate to cure the difficulty presented by the lack of a chair, it is explicable on the basis that the NDRC procedure generally was the product of agreement between those two interest groups, and it is fair to say that the wording of cl 25 of the NDRC Regulations was not as clear as it might have been (which appears to have been recognised by subsequent amendments made to the Regulations). Unfortunately, Mr Kempson's attempt to convene a panel did not satisfy the requirements of the NDRC Regulations for the reasons explained in the Judgment at [66]-[85], but that did not make it unreasonable for the FA or Mr Lopar to run the proceedings in the NDRC, or to defend the proceedings in this Court.
7. For these reasons the plaintiff's motion should be dismissed. Having failed on its application, the appropriate order is that the plaintiff pay the defendants' costs of the motion.

Orders

1. Accordingly, I will make the following orders: 1. Order the defendants, jointly and severally, to pay the plaintiff's costs of the proceedings on the ordinary basis, as agreed or assessed. 2. Dismiss the plaintiff's motion. 3. Order that the plaintiff pay the defendants' costs of its motion on the ordinary basis, as agreed or assessed.

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