Zafra Legal Pty Ltd v Harris

1. The third respondent pay the costs of the first, second and fourth to eleventh respondents to be assessed, if not agreed, as to 90% of the total assessed costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BARKER J: 1 This judgment deals with the question of what costs orders, if any, should be made in this proceeding following the primary judgment delivered 15 June 2018 and orders then made. See Zafra Legal Pty Ltd v Harris [2018] FCA 908. 2 The proceeding was an interpleader proceeding where the principal protagonists were (to use the same terminology used in the primary judgment) the companies, on the one hand, and Mr Caratti, on the other. The parties were in contest over who was entitled to an order for delivery up of the hard drives referred to in the primary judgment. In the result, I indicated I would declare that each of Mr Caratti and the respondents (in relation to those files that belong to each respondent) are entitled to possession of the hard drives, or the electronic files thereon. 3 So far as the costs of the proceedings are concerned, the companies contend that they were always prepared to take a middle road and to recognise the possibility that materials on the hard drives might belong to both the companies and Mr Caratti. The companies submit that Mr Caratti, at the trial, brooked no such middle ground. His contention was that he and he alone was entitled to the materials on the hard drives. The companies refer to [11] of the primary judgment where the issue to be determined, as formulated by the companies, reflects their position. 4 Counsel for Mr Caratti took the Court to some pre-action correspondence between the parties and their solicitors. On behalf of Mr Caratti it is submitted that at material times before the trial, he had indicated a position whereby the contesting parties might come to a document sharing or access arrangement in respect of the disputed files. 5 In particular, counsel for Mr Caratti pointed to a letter from Zafra Legal to HWL Ebsworth, dated 23 May 2017, where, amongst other things, a "facilitative approach" was proposed on Mr Caratti's instructions: … in the interests of the external administrators of the companies obtaining material reflecting books and records of the Companies, whilst avoiding tricky legal issues that could interfere with that process, cause delay and add unnecessary costs … . A seven step process was then set out, including involving PwC Legal preparing a copy of the material that they would select as reflecting books and records of the respective companies, with further steps following. 6 It is sufficient to say that the proposal put forward in the letter from Zafra Legal was reasonably complex and qualified and not entirely straight forward. 7 What might be said about what issues remained in contest at the trial is this. The primary position of each of the companies and Mr Caratti was that they and they alone were entitled to possession of the books and records and other documents relating to the respective companies that had been seized under warrant by the Australian Federal Police (AFP) and were to be found on the hard drives. 8 Mr Caratti, as I have pointed out in the primary judgment, was at pains to insist that only he ever made a request of the AFP under the Crimes Act 1914 (Cth) for copies of documents on his own behalf. He strenuously resisted the idea that his request was also made for the respective companies. I rejected that evidence and in the result found that the respective companies and Mr Caratti were entitled to the materials on the hard drives. 9 Whilst it might be said that the companies left open the possibility, both through the way the issues were stated by them for the purposes of the trial, and also in the closing submissions of senior counsel for the companies, as to the entitlement being a joint one of the parties and not an either/or situation, the strongly put primary position of the companies was that they respectively were entitled to the materials on the hard drives and that Mr Caratti had no such entitlement, on his own part or shared. 10 Indeed, it was argued that to the extent that Mr Caratti may have made a request on his own behalf, it was an "unlawful" request. I rejected that proposition in the primary judgment. 11 In the result, it must be said that the companies have been largely successful on the interpleader proceeding. Mr Caratti's position, reflected by his primary testimony, was not vindicated. Nonetheless, it does appear to me that it should also be remarked that the companies have not been wholly successful either. I recognise though that the companies did foresee the possibility, and made submissions briefly about it, that I might find that the parties each had entitlements in respect of the materials on the hard drives. 12 I consider some allowance should be given in favour of Mr Caratti, in formulating the final costs order, that recognises that each party, including the companies, could be seen to have argued for an "either/or" position on the question of entitlement. 13 I consider that the costs order should also reflect the argument put by the companies that even if Mr Caratti did make a request on his own behalf, it was "unlawful". As I noted that proposition was rejected by me. However, it must be said that that issue was in some respects only faintly put and did not occupy much time at the trial or in the submissions, either in writing or orally. 14 In the result, I consider that in exercising my costs discretion judicially, the usual rule whereby the costs follow the event should apply. Thus, the companies should have their costs in the proceeding against Mr Caratti. However, there should be some allowance for the matters I have mentioned. I would, in all the circumstances, reflect this allowance in applying a discount of 10% as to the costs that the companies are otherwise entitled to. I would therefore allow the companies 90% of their costs of the proceedings, to be assessed if not agreed between the parties. 15 I need not further discuss the principles and process by which the Court may allow a percentage of costs in a proceeding. See discussion in Smith v Starke, in the matter of Action Paintball Games Pty Ltd (in liq) (No 3) [2016] FCA 40. It appears to me that this is an appropriate case in which to order that the primarily successful party should have a high percentage of its costs, but not all of its costs, having regard to the factors I have mentioned. It is convenient for the trial judge, who has close familiarity with what issues were at trial and how the trial was conducted, to assess the appropriate discount. I have done that and the order is as I have stated.