Zelcliff Pty Ltd v Container Exchange

A contested application for leave to discontinue

• [1] This proceeding was commenced on 4 October 2019. It was managed by way of caseflow reviews for a number of years. On or about 18 February 2022, the proceeding was set down for trial before me for 10 days between 31 October 2022 and 14 November 2022. I reviewed the proceeding on 15 June 2022 and made orders by consent which were designed to progress the matter to the first day of the trial. Those orders granted liberty to apply. No applications were made pursuant to that grant.
• [2] On 18 October 2022, the plaintiff's solicitors wrote to the defendant's solicitors and materially advised "... for commercial reasons, our client has determined to discontinue the... proceeding, effective immediately."
• [3] On 31 October 2022, I heard an application for leave to discontinue. Following the oral argument, I made orders as follows:

"UPON THE UNDERTAKING OF THE PLAINTIFF GIVEN BY ITS COUNSEL THAT THE PLAINTIFF WILL NOT BRING ANY FRESH CLAIM AGAINST THE DEFENDANT ARISING OUT OF THE SUBJECT MATTER OF THE PROCEEDING, THE ORDER OF THE COURT IS THAT:

1. Leave be given to the plaintiff pursuant to UCPR rule 304(2) to discontinue the whole of the claim against the defendant;
2. The matter is adjourned to 9:15 am on 3 November 2022 for further orders in relation to costs"

• [4] These are the reasons for my decision concerning the grant of leave to discontinue, the form of the undertaking and in relation to the issue of costs.

Relevant procedural rules and guiding principles

• [5] Rules 304 and 307 of the Uniform Civil Procedure Rules 1999 (Qld) ('UCPR') are relevant. They provide:

(1) A plaintiff or applicant may discontinue a proceeding or withdraw part of it before being served with -

(a) for a proceeding started by claim - the first defence of any defendant; or

(b) for a proceeding started by application - the first affidavit in reply from a respondent.

(2) However, after being served with the first defence or first affidavit in reply, a plaintiff or applicant may discontinue a proceeding or withdraw part of it only with the court's leave or the consent of the other parties.

(3) Also, if there is more than 1 plaintiff or applicant, or a counterclaim against a plaintiff, a plaintiff or applicant may only discontinue with the court's leave or the consent of the other parties.

(4) A plaintiff may discontinue against one or more defendants without discontinuing against other defendants.

(5) An applicant may discontinue against one or more respondents without discontinuing against other respondents.

(1) A party who discontinues or withdraws is liable to pay -

(a) the costs of the party to whom the discontinuance or withdrawal relates up to the discontinuance or withdrawal; and

(b) the costs of another party or parties caused by the discontinuance or withdrawal.

(2) If a party discontinues or withdraws with the court's leave, the court may make the order for costs it considers appropriate."

• [6] Another relevant provision is r 685 which provides:

"685 Costs if further proceedings become unnecessary

(1) If, for any reason, it becomes unnecessary to continue a proceeding other than for deciding who is to pay the costs of the proceeding, any party to the proceeding may apply to the court for an order for the costs.

(2) The court may make the order the court considers just."

• [7] In Fairfield Services Pty Ltd (in liq) v Leggett,[1] Bond J identified some of the considerations which can influence the exercise of discretion in a case where a plaintiff withdraws from the continued prosecution of a proceeding by discontinuing without any hearing on the merits. The relevant passage of his Honour's reasons may be set out as follows:

"First, costs discretions are truly discretionary and there are no absolute rules. In each case the discretion must be exercised judicially, so that the Court arrives at the order it thinks just in the particular circumstances of the case ....

Second, under r 681, the general rule is that costs follow the event unless the Court orders otherwise. In Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, McHugh J explained the principle and policy underlying that general rule:

'The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.'

Third, where the proceedings are discontinued prior to any hearing on the merits, the r 681 general rule cannot be applied in terms. As McHugh J observed in Lai Qin, a Court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. The Court cannot try a hypothetical action between the parties to determine the question of costs: Johnson v Clancy [2010] NSWSC 1301 [21](f); see also Petavrakis v Hirst & Co [2001] QSC 224 [9]; Kennedy v Griffiths [2014] QSC 43 [66]; Rushbrook v Chalmers [2015] QSC 145 [19]. At the time of discontinuance, usually it will be impracticable to assess the eventual prospects of success in the action: Johnson v Clancy at [21](f).

Fourth, it may nevertheless be appropriate to make an order that costs are borne by one side. Each case will depend on its own facts, but it may be relevant to consider the following:

(a) (in a particular case) the conduct of the defendant prior to the commencement of the proceeding, where such conduct may have precipitated the litigation (Johnson v Clancy at [21](h));

(b) the whole of the proceeding, including whether the plaintiff has acted reasonably in commencing and continuing to prosecute the proceeding and whether the defendant has acted reasonably in defending it (Johnson v Clancy at [21](g) and Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107; (2014) 199 LGERA 424, 433 [33] per Preston CJ of LEC (with whom Beazley P and Ward JA agreed)), but bearing in mind that the question of reasonableness may not be one capable of determination absent a full hearing on the merits (see Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 [43], [57] per Hodgson JA (with whom Tobias and Basten JJA agreed)); and

(c) the reasons for discontinuance (Johnson v Clancy at [21](g)), but bearing in mind that the subjective considerations of one party not put before the other party will generally be immaterial so that the discretion will be exercised on the basis of the objective circumstances established on the evidence (see Bitannia Pty Ltd v Parkline Constructions Pty Ltd per Basten JA at [81]; Ralph Lauren 57 Pty Ltd v Byron Shire Council at [34] per Preston CJ of LEC (with whom Beazley P and Ward JA agreed)).

Fifth, when evaluating the relevant considerations, there is an important distinction between (1) cases in which one party, after litigating for some time, effectively surrenders to the other, and (2) cases where some supervening event, or settlement, so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs: ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548, 553 [6]. As to this:

(a) In the former type of case, the surrender or capitulation will usually provide a strong reason to award costs against the party who has surrendered or capitulated: Zhao v Suzhou Haishun Investment Management Co Ltd [2020] VSCA 34. It seems to me that this must be a partial reflection of the principles and policies which underlie the r 681 general rule, as identified by McHugh J in Oshlack v Richmond River Council. A classic illustration of the type of case where one party has effectively surrendered to the other is a case where proceedings are dismissed or discontinued because the applicant chooses not to proceed with them: Kiama Council v Grant [2006] NSWLEC 96; (2006) 143 LGERA 441, 453-454 [57] (Preston CJ).

(b) In the latter type of case, there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs, and that might provide good reason to decide that each party should bear its own costs. Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 is one example of a case falling into this category, but other examples include Commonwealth Bank of Australia v Daleport Pty Ltd (in rec) (No 6) [2019] NSWSC 958, where the proceeding was assessed to have become futile in light of the fact that sequestration orders had been entered against defendants, and True Conservation Association Inc v Minister Administering the Threatened Species Conservation Act 1995 , where the passage of legislation rendered the proceeding futile.

Sixth, the Queensland rules are silent as to onus. Care must be taken in the application of authorities from other jurisdictions where the rules are different. But as McMeekin J observed in Jones v Jones [2012] QSC 342 [45], 'obviously r 307(1) does provide some guide'. The principle and policy underlying the r 681 general rule as explained by McHugh J in Oshlack v Richmond River Council support the outcome dictated by r 307(1). It seems to me to follow that if the only information before the Court is that the proceeding was discontinued but at a date after the first defence had been filed, there would be no reason not to exercise the r 307(2) discretion in the same way as suggested by r 307(1). In such a case, it would be difficult to see why plaintiffs who discontinue before the first defence must pay their opponent's costs, but plaintiffs who wait to discontinue for months or years after the first defence should not. Without more, those facts would normally be regarded as demonstrating a strong ground to award costs against the discontinuing plaintiffs: cf Zhao v Suzhou Haishun Investment Management Co Ltd. But there might well be some particular reason why the discontinuing plaintiffs should not pay an opponent's costs, or indeed, why the opponent should pay the costs of the discontinuing plaintiffs. Ordinarily, the law expects that 'he who asserts must prove': Cook's Construction Pty Ltd v SFS 007.298.633 Pty Ltd (formerly t/as Stork Food Systems Australasia Pty Ltd) [2009] QCA 75; (2009) 254 ALR 661 at [43] per Keane JA. At least on that basis, the party seeking a particular exercise of the costs discretion must demonstrate why it is appropriate."

• [8] In Fairfield Services, Bond J also considered the discretion to order costs to be assessed on an indemnity basis and made reference to Colgate Palmolive Company v Cussons Pty Ltd.[2] His Honour noted that that there was no doubt that an award of indemnity costs may be warranted in circumstances where, relevantly, allegations have been made which ought never to have been made and there has been an undue prolongation of a case by groundless contentions.

• [9] The plaintiff carried on a scrap metal recycling business. The Waste Reduction and Recycling Act 2011 (Qld) ("the Recycling Act") established a container refund scheme ("the Scheme") which commenced on 1 November 2018. The defendant was the product responsibility organisation for the Scheme. The Scheme was solely funded by contributions provided by manufacturers and distributors who sold beverages in Queensland.
• [10] On 17 July 2018, the plaintiff and defendant entered into a container collection agreement ("the Agreement") within the meaning of s 99ZA of the Recycling Act. Schedule 2 to the Agreement ("Schedule 2") identified the services to be performed and the minimum performance requirements in respect of those services. Clause 2.3(b)(ii)(C) of Schedule 2 provided:

"The Operator is required to reasonably ensure that all Containers: are, to the extent the Operator reasonably believes, purchased in Queensland after the [S]cheme Commencement Date".

• [11] By letter dated 19 April 2019, the defendant required the plaintiff to show cause why the defendant should not terminate the Agreement pursuant to clause 19.6 of the Agreement on the basis that the plaintiff was not, or was no longer, a fit and proper person to provide the services pursuant to the Agreement. By letter dated 29 April 2019, the plaintiff responded to the show cause letter. By letter dated 31 May 2019, the defendant terminated the Agreement on the basis that it had formed the view that the plaintiff was not, or was no longer, a fit and proper person to provide the services pursuant to the Agreement.
• [12] The plaintiff commenced the proceeding alleging that, relevantly, any opinion held by the defendant in relation to whether the plaintiff was not or was no longer a fit and proper person was not reasonable. The plaintiff further alleged that by terminating on the basis of that opinion, the defendant had repudiated the Agreement. The plaintiff sued for the loss of the benefit of the Agreement and the lost opportunity to earn profits "on eligible containers processed through the Scheme".[3] The claim for loss and damage was particularised as follows:[4]

"By reason of the matters aforesaid the plaintiff has lots the benefit of the said Agreement and lost the opportunity to earn profit on eligible containers processed through the Scheme that it would otherwise have received thereunder and has suffered loss and damage, as follows:

Lost profit from the plaintiff's existing stockpile of eligible containers

Lost profit from eligible containers that would have been processed through the Scheme by the plaintiff

Less actual profit (loss) from eligible containers processed outside the Scheme by the plaintiff

Less savings in operating expenditure associated with cessation of the plaintiff's participation in the Scheme, as follows:

Particulars of the amounts claimed are contained in the report of Elias Lytras dated 23 June 2020."

• [13] By its written submissions, the defendant described "the fundamental issue in [the proceeding]" as being whether "large quantities of pre-Scheme containers were not and effectively could not be eligible under the Scheme".[5]
• [14] In terms of the conduct of the proceedings, the following matters may be noted:

(a) the parties' respective solicitors each retained senior and junior counsel;

(b) the pleadings on each side of the record were settled by senior and junior counsel;

(c) the proceeding was placed on the Supervised Case List;

(d) there were 10 case flow reviews;

(e) the Court made directions for the provision of lay evidence by way of affidavits and expert reports;

(f) the affidavits constituting the lay evidence intended to be adduced by each party were delivered throughout the course of 2022;

(g) the report of the plaintiff's forensic accountant, Mr Lytras was delivered on 7 June 2022;

(h) the defendant at no stage prior to 26 October 2022:

(i) made an application to strike out the plaintiff's pleadings on any basis whatsoever;

(ii) applied for summary judgment;

(iii) made any formal offer of settlement under the UCPR;

(iv) made an offer in accordance with the principles in Calderbank v Calderbank;[6]

(v) made an informal offer of settlement not being a Calderbank offer; or

(vi) by its solicitors wrote to the plaintiff's solicitors identifying any deficiencies or flaws in the plaintiff's case of such a quality or character as to give rise to the prospect of an indemnity costs order against the plaintiff;

(i) on 7 October 2022 the plaintiff abandoned that part of its damages claim (quantified at $1, 550, 025) which reflected the value of the lost opportunity to process quantities of pre-Scheme material stockpiled since 2015;

(j) on 11 October 2022, this Court's Resolution Registrar wrote to the parties in the following terms:

"I refer to the above proceeding, listed for hearing in the Supreme Court at Brisbane for 10 days from 31 October 2022... Would you please confirm by return email that the hearing is to proceed as listed. If there is some obstacle to the hearing commencing as listed would you please advise.";

(k) the plaintiff's solicitors wrote to the Court on 11 October 2022 in the following terms:

"The plaintiff confirms that the hearing is to proceed as listed and that there are presently no known obstacles for the hearing to commence as listed.";

(l) the parties meanwhile finalised an agreed trial plan and the plaintiff responded to inquiries directed to it in relation to the trial bundle;

(m) on 17 October 2022, the plaintiff served a Schedule of Objections to the defendant's evidence;

(n) on 18 October 2022, the plaintiff's solicitors sent the letter to which I have already referred advising of the plaintiff's intention to discontinue because of "commercial reasons";

(o) by its solicitors' letter dated 19 October 2022, the defendant did not consent to the discontinuance and required the plaintiff to seek leave to discontinue;

(p) On 21 October 2022, the plaintiff's solicitors wrote to the defendant's solicitor in the following material terms ("the plaintiff's 21 October Offer"):

"Our client offers to settle the proceeding on the basis that the parties consent to the following orders:

1. Upon the undertaking of the plaintiff, given by its Counsel, to not bring any fresh claim against the defendant arising out of the subject matter of the proceeding, the plaintiff is given leave pursuant to UCPR rule 304(2) to discontinue the proceeding; and
2. The plaintiff is to pay the defendant's costs of and incidental to the proceeding on the standard basis to be agreed or assessed.

This offer is sent on an open basis and our client reserves the right to produce a copy of this letter to the Court.";

(q) On 23 October 2022, the defendant's solicitors emailed the plaintiff's solicitors in the following material terms:

"In response to your client's open offer by letter dated 21 October 2022... we are instructed as follows:

• In relation to (a), a discontinuance of the proceeding on the provision of an undertaking of the type you have proposed would be acceptable, however, would need to be expanded in terms of the parties who are providing the undertaking and the ambit of the undertaking;
• In relation to (b), payment of costs on the standard basis is not acceptable; our client seeks payment of its costs on the indemnity basis.

For the avoidance of doubt, the instructions summarised above do not constitute an offer capable of acceptance. Rather, we await your further response.";

(r) on 24 October 2022, I reviewed the proceeding and made directions providing for the filing of an application for leave to discontinue and affidavits and submissions in support of, and opposition to, that application. On the occasion of that review, an oral submission was made by the defendant to the effect that, in relation to the potential issues that might arise in respect of the foreshadowed application for leave to discontinue, one such issue was "in a more broad sense, whether your Honour should give such leave".[7] The defendant's position at the review was that it did not agree to the discontinuance or to the trial dates being vacated in their entirety;[8]

(s) by its solicitors' letter dated 26 October 2022 (the defendant's 26 October Offer"), the defendant made an offer of settlement "in relation to [the plaintiff's] intended discontinuance of the proceeding". [9] The defendant's 26 October Offer offered to settle on the basis that the plaintiff and "its controllers" were to provide undertakings to the Court and the parties were to consent to orders in the following terms:

(i) the plaintiff, in its own capacity and as trustee for a discretionary trust, undertaking to the Court that it would not make any demand or claim or bring any further proceeding upon such demand or claim against the defendant arising out of or in any way connected with the subject matter of the proceeding;

(ii) Messrs Norman and Matthew Baldwin undertaking to the Court that they would not permit or authorise the making of any demand or claim or the bringing of any proceeding upon such demand or claim against the defendant arising out of or in any way connected with the subject matter of the proceeding;

(iii) the defendant consenting to the plaintiff being granted leave to discontinue the proceeding;

(iv) the plaintiff paying the defendant's costs fixed in the sum of $850,000 within 28 days of the date of the order;

(v) the plaintiff's solicitors upon acceptance of the offer immediately providing to the defendant's solicitors the bank guarantee held by them as security for the defendant's costs and such bank guarantee would be immediately presented for payment; and

(vi) the plaintiff's application for leave to discontinue being dismissed with no order as to costs; and

• [15] By the time of the hearing of the application for leave to discontinue on 31 October 2022, the real issues in dispute had been reduced to the form of the undertaking that should be required from the plaintiff in respect of the discontinuance and the appropriate exercise of the Court's discretion as to costs.
• [16] As will be apparent, by the time of the hearing of the application for leave to discontinue, the plaintiff had offered to pay the defendant's costs of and incidental to the proceeding on the standard basis to be agreed or assessed and was offering an undertaking to not bring any fresh claim against the defendant arising out of the subject matter of the proceeding. That offer, communicated some 10 days prior to the hearing of the application for leave to discontinue, was an objective concession by the plaintiff that its very late communication of its intention to discontinue involved its effective surrender or capitulation in the litigation. As a result, the real issue before me in respect of costs, concerned whether any grant of leave to discontinue should be accompanied by an order that the plaintiff pay the defendant's costs of and incidental to the proceeding on the standard or indemnity basis.

• [17] The defendant could not call in aid any formal, informal or Calderbank offer made prior to 26 October 2022 in support of its submission that an indemnity costs order was appropriate. The defendant placed particular reliance upon Palmer v Parberry & Ors[10] where Morrison JA had ordered the applicant for a stay pay the costs of the withdrawn application on the indemnity basis. That case was relied upon as authority for a broad proposition that the complete abandonment of a proceeding at the last moment without any explanation provided a basis for an indemnity costs order. The statement that the discontinuance was for "commercial reasons" was described as being "so vague as to be meaningless".[11] The plaintiff submitted that the effective absence of a proper explanation for the discontinuance was a "most compelling feature of this case"[12] and sought to infer from the form of the explanation in fact given, that the plaintiff's case had little or no prospects of success.[13]
• [18] The plaintiff conceded that the present case involved a situation where the plaintiff had effectively surrendered and, for that reason, it accepted that the defendant was entitled to costs.[14] The plaintiff submitted that many of the authorities which acknowledged the relevance of the reasons for a discontinuance did so in the context of considering whether it was appropriate that costs should be borne by one side.[15]
• [19] Beyond the late abandonment and the explanation offered for the discontinuance, the defendant advanced three essential reasons why an indemnity costs order should be made.
• [20] First, the defendant described the plaintiff's construction of the Recycling Act as, variously, "tortured"[16] and "utterly untenable"[17]. On this application, the plaintiff's primary submission was that it was inappropriate for the Court to attempt to resolve the question as to the proper construction of the Recycling Act. The plaintiff submitted that it had a reasonable basis for contending, as it had done in its pleading, that the Recycling Act did not prohibit the processing of containers purchased or collected prior to the commencement of the Scheme.

• [24] Although on the occasion of the review hearing on 24 October 2022, the defendant submitted that a potential issue concerned whether "in a more broad sense" this Court should give leave to discontinue, it was accepted on the hearing of this application that the real issues were limited to the terms of any undertaking and the terms of the costs order.[24] It has long been recognised that it is not desirable that a plaintiff should be compelled to litigate against its will.[25] The Court should grant leave, if it can do so, without injustice to the defendant and in so doing should be careful to see that the defendant is not deprived of some advantage which it has already gained.[26] I formed the view that it was appropriate in the present case for the plaintiff to be granted leave to discontinue particularly because, as I have noted, the defendant ultimately did not oppose the grant of leave and there was no evidence that the discontinuance would deprive the defendant of some advantage which it had already gained.

• [25] In Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin,[27] McHugh J observed about the discretion to order costs:

"Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is a fact that usually controls the exercise of the discretion. As successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

If it appears that both parties have acted reasonably in commencing and defending the proceedings, and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceeding. This approach has been adopted in a large number of cases."

• [26] In Zhao v Suzhou Haishun Investment Management Co Ltd,[28] the Victorian Court of Appeal[29] relevantly said:

"... absent any consideration of the merits of the proceeding, costs may be ordered where there is a capitulation by one party - in the sense that it 'effectively surrenders to the other'

We accept as a general principle that where a party litigates for some time and then acts so as to effectively surrender or capitulate to the other, that will usually be a strong ground to award costs against the party who has surrendered or capitulated. But each case will depend on its own facts."

• [27] In Fairfield,[30] Bond J was careful to note in the context of a discontinuance that a Court cannot try a hypothetical action between the parties to determine the question of costs. His Honour observed that at the time of discontinuance "usually it will be impracticable to assess the eventual prospects of success in the action".[31] Later in his reasoning, Bond J[32] rejected a submission that the Court could or should form a view as to whether a party had acted reasonably (or unreasonably) in the circumstances of a discontinuance. His Honour in that regard observed:[33]

"Objective reasonableness could only be established if I was prepared to assess the merits of each side's case. I have explained that the court cannot try a hypothetical action between the parties to determine the question of costs. Both the plaintiff's argument which seeks to persuade me of the reasonableness of their conduct and the defendant's argument which seeks indemnity costs, seeks to have me do just that. To my mind the factual and legal complexity of each side's case at trial makes it obviously impracticable to take that course. For that reason I cannot accept either this aspect of the plaintiff's argument or the defendant's argument for indemnity costs."

• [28] The decision in Palmer v Parbery[34] needs to be considered in the context of its facts. On 27 July 2018, a judge of the trial division had made case management directions including an order which set the proceeding down for trial in April 2019. On 31 July 2018, Mr Palmer filed a notice of appeal against the directions. On 2 August 2018, Mr Palmer filed an application to stay the directions pending the appeal. The stay application was listed for hearing on 5 September 2018. On 4 September 2018, Mr Palmer's solicitors advised the Deputy Registrar that he wished to withdraw the application. On 5 September 2018, the application for a stay was dismissed. Mr Palmer was ordered to pay the costs of and incidental to the stay application to be assessed on the indemnity basis. No explanation was given as to why the application for a stay was abandoned. Importantly, there had been two decisions of the primary judge which pre-dated the application for a stay which had indicated that Mr Palmer's prospects on the stay application were poor. There were findings that, in the unusual circumstances of that case, it was unreasonable to have brought the application and to then persist with it. Against that background, Morrison JA concluded that "... the application for a stay should be regarded as one which, had ... Mr Palmer been properly advised, would never have been made. That characterisation must be taken into account when considering the unexplained abandonment of the application at the last minute."[35] His Honour then cited the following passages of the judgment of Emmett JA in Ghougassian v Fairfax Community Newspapers Pty Ltd:[36]

[53] Mere abandonment of a claim may not, of itself, be sufficient to warrant an order for indemnity costs. If, upon material reflection and consideration of the questions, an appellant resolves to abandon an appeal at a stage when the issues have been clarified, it does not necessarily follow that indemnity costs should be ordered. Parties should not be discouraged from the proper, albeit late, abandonment of unwinnable appeals or points. The reality is that close attention to an appeal is often not made until shortly before the hearing of the appeal. Parties should not be discouraged from abandoning bad arguments by reason of the possibility of an order for indemnity costs.

[54] However, the overall attitude of Mr Ghougassian to the conduct of the proceedings gives rise to an inference that they had no legitimate object. That inference is confirmed by the complete abandonment at the last moment without any explanation. There may be good reasons why parties would seek to withdraw an appeal at hearing, quite unconnected with the acceptance of the proposition that the appeal is hopeless. Mr Ghougassian has had ample opportunity to adduce evidence to explain why the proceedings were abandoned at the last moment, but has elected not to do so. On the other hand, Mr Ghougassian submits that the respondents did not warn him in advance that they considered the appeal to be hopeless and that they would seek an order for indemnity costs should the appeal proceed.

[57] While, as I have said, the abandonment of unwinnable appeals or points does not of itself justify an order for indemnity costs, the other factors present in this case justify such an order. Abandonment without explanation, in combination with other factors, may justify an order for indemnity costs. For example, where an action is commenced or continued in circumstances where the moving party, properly advised, ought to have known that there were no prospects of success, indemnity costs may well be appropriate. In the present circumstances, the abandonment of the proceedings at the last moment, without explanation, exacerbates the matter.

• [29] After having cited those passages, Morrison JA expressed the following view in relation to the facts of the case then before his Honour:[37]

"In my view, this is a case where it was unreasonable to bring the application for a stay and persist with it, particularly in the face of the reasoning exposed in the previous two decisions by the learned primary judge. The continued utility of the directions to bring the main proceedings to trial, particularly given that it is a matter subject to the close management which is the hallmark of the commercial causes list, was obvious and would have been the subject of proper advice."

• [30] The defendant's 26 October Offer contended that the parties' engagement of junior and senior counsel, and experienced law firms, reflected "the scale and complexity of the litigation".[38] I am prepared to accept that characterisation of the proceeding for the purpose of the exercise of my discretion as to costs.
• [31] In the context of complex litigation that warranted the involvement of silk and junior counsel and experienced law firms, the defendant was unable to call in aid any formal or informal offer sent prior to 26 October 2022 or any correspondence outlining the problems in the plaintiff's case as advanced by the amended statement of claim. The absence of this type of material meant that, to warrant an order of indemnity costs, the plaintiff was effectively obliged to invite the Court to make findings about the objective unreasonableness of the plaintiff's conduct of the proceeding.
• [32] Before turning to the question of the unreasonableness of the plaintiff's conduct of the proceeding, it should be observed that the fact that the defendant did not apply for summary determination, strike out or dismissal of the plaintiff's claims and did not send any correspondence through its solicitors outlining the perceived problems in the plaintiff's case, has some relevance to the reasonableness of the defendant's conduct of the proceeding. The defendant did not explain why it did not reveal its view of the perceived fundamental problems in the plaintiff's case at any earlier stage. On one view, the failure to reveal or ventilate those perceived problems was inconsistent with the defendant's obligation under rule 5 of the UCPR to identify the real issues in dispute and proceed with expedition.[39]
• [33] I turn then to the reasonableness of the plaintiff's conduct of the proceeding. In Palmer v Parbery, the merits and prospects of a discrete, limited piece of litigation, a stay application, had already been the subject of judicial consideration prior to the application being filed. In the circumstances of the present case, the litigation is of a markedly different scale and complexity and objective reasonableness could only be established if I was prepared to assess the merits of each side's case without the benefit of a trial. The factual and legal complexity of this proceeding makes it impracticable and inappropriate to attempt that kind of assessment. I am also not prepared to infer from the explanation offered for the discontinuance that the plaintiff's case had little or no prospects of success. In this case, there is no sound basis for the Court drawing that inference. The precise reasons for the plaintiff's surrender remain a matter of speculation rather than of reliable inference. In any event, in the circumstances of this case, the minimal explanation offered is more relevant to the anterior question whether one party should bear the burden of costs, as distinct from the present question as to the basis on which any ordered costs should be assessed. The plaintiff's 21 October Offer meant that the anterior question was not a real issue in dispute on this application.

(a) the pleadings clearly revealed an issue in dispute as to the proper construction of the Recycling Act;[40]

(b) the defendant relevantly alleged that "it was implicit" in the offence created by s 99T(1) of the Act and the terms of s 99S(3)(b) that containers purchased or collected prior to 1 July 2018 (as at the date that s 99P was introduced) and then 1 November 2018 were not intended to be eligible to be claimed under the Scheme;[41]

(c) the plaintiff's construction sought to emphasise there was no express limitation in the Recycling Act which excluded from eligibility, containers collected or purchased prior to the Scheme.[42] The plaintiff also relied on s 99S for the proposition that, as an operator of a container refund point, it was obliged to accept a container and pay the person the refund amount for the container, except in certain circumstances which were not concerned with whether the container had been purchased or collected prior to the Scheme. The plaintiff's construction argument apparently postulated that clause 2.3(b)(ii) of Schedule 2 to the Agreement was inconsistent with the Recycling Act;[43]

(d) on this application, I did not receive any substantive submissions directed to the proper construction of the Recycling Act. I consider that it is unnecessary, and would be inappropriate, for the Court to attempt to finally determine the issue of construction raised by the pleadings in the context of the present application;

(e) it suffices for me to say that in circumstances where there was a clear joinder of issue on the face of the pleadings as to the proper construction of the Recycling Act, the defendant never sought to have that issue determined in a preliminary way and nor did it seek any summary relief in respect of the plaintiff's alleged construction. The plaintiff's alleged construction would appear fairly arguable and, in my consideration, it gave rise to a triable issue;

(f) the defendant's written submissions to the effect that the plaintiff knew or ought to have known that it did not have even arguable prospects of success and that there were always fatal flaws in the plaintiff's case, were overreaching. The language that the plaintiff knew that it did not have even arguable prospects of success from the commencement of the proceeding was plainly suggestive of an abuse of process. Yet when this issue was raised with the defendant's counsel in oral argument, any suggestion of an abuse of process was disclaimed. That language could also be interpreted as a criticism of those who had pleaded the cause of action. Again, when this issue was raised with the defendant's counsel in oral argument, any suggestion of wrongdoing by the pleader was disclaimed. Further, on my reading of the Amended Defence, no allegation was made to the effect that the plaintiff was in fact motivated by a fraudulent intent. Yet, the defendant's written submission spoke of duplicitous conduct and a flagrant attempt to "game" the Scheme;

"Since the commencement of this proceeding, I have been referred to clause 2.3(b)(ii)(C) of schedule 2 to the Agreement, which states that [the plaintiff] is 'required to reasonably ensure' that all collected containers are, to the extent [the plaintiff] 'reasonably believes', purchased after the commencement of the Scheme. I am aware that there is a legal issue in this proceeding as to whether or not that obligation is enforceable given the relevant legislation. I am not a lawyer and do not know whether that obligation is enforceable or not. I can say though that I was not aware of the existence of this clause until after [the defendant] purported to terminate the Agreement and at no time did it occur to me, prior to the attendance at [the plaintiff] by Mr Sweet ... , that containers collected prior to the commencement of the Scheme might not be eligible.

In fact, it was common prior to the commencement of the Scheme to begin collecting and stockpiling containers and this was expressly encouraged by the Queensland government. As at that time, I had seen and heard a lot of promotional material (either on television or newspaper advertisements or heard on radio advertisements), by or on behalf of the Government which encouraged people to collect their containers now and redeem these when the Scheme had commenced.

For example, prior to the Scheme commencing, I saw a number of advertisements and publications (even from the Queensland Minister for Environment) which encouraged people to collect items in preparation for the Scheme. Annexed at MB.001.002 is a true and correct copy of the media statement issued on 28 October 2019 by the Hon. Leanne Enoch (being the Queensland Minister for Environment)."; and

(i) finally, the mere fact that the plaintiff did not press a significant portion of its quantum case and was apparently faced with insurmountable difficulties of proving quantum at trial does not provide a compelling reason for ordering indemnity costs. In this respect, I observe that in cases where a plaintiff sues for damages and obtains only nominal damages, the court still retains a discretion to order costs in favour of the plaintiff.[48] It does not necessarily follow that an inability or failure to prove loss and damage gives rise to an entitlement to indemnity costs.

• [35] This is not an appropriate case for an indemnity costs order. In the exercise of my discretion, and for the foregoing reasons, I have decided that it is just and appropriate that any costs order in favour of the defendant should be assessed on the standard basis.

• [36] The undertaking offered by the plaintiff essentially placed the defendant into a position akin to that which it might have been at the end of a trial with the benefit of a judgment. That is, the undertaking provided protections to the defendant similar to the protections provided by issue estoppels and res judicata. The defendant properly conceded that the undertakings it sought in the defendant's 26 October Offer sought more than it could have hoped to have obtained after a trial.[49] In the circumstances, and because of that reason, I considered it inappropriate to require those undertakings as a condition of leave to discontinue.

• [37] The plaintiff's 21 October Offer was a reasonable offer which should have been accepted by the defendant. By the time of the review hearing on 24 October 2022, there had been sufficient time for the defendant to consider, take advice about and accept the plaintiff's 21 October Offer. In the exercise of my discretion as to costs, I consider that it is appropriate to limit the defendant's costs of and incidental to the proceeding to its costs incurred up to and including 24 October 2022. The plaintiff made no submission as to its entitlement to its costs of the application for leave to discontinue and its costs following the making of the plaintiff's 21 October Offer. In those circumstances, I will make no order as to the parties' costs of the proceeding after 24 October 2022.
• [38] The order as to costs is that the plaintiff pay the defendant's costs of and incidental to the proceeding to be assessed on the standard basis and limited to those costs incurred by the defendant up to and including 24 October 2022.

[1] [2020] QSC 183; (2020) 5 QR 50, 59-61 [19]-[27].

[2] [1993] FCA 536; (1993) 46 FCR 225.

[5] Defendant's submissions on application for leave to discontinue filed 25 October 2022 [67].

[6] [1976] Fam 93

[10] [2018] QCA 268.

[11] Defendant's submissions on application for leave to discontinue filed 25 October 2022 [13]; T 1-33 l 16.

[12] Defendant's submissions on application for leave to discontinue filed 25 October 2022 [21].

[14] Submissions on behalf of the Plaintiff filed 27 October 2022 [21].

[15] See for example Fairfield Services Pty Ltd v Leggett [2020] QSC 183; (2020 5 QR 50, 59-60 [22(c)]; Johnson v Clancy [2010] NSWSC 1301 [21(g)], particularly noting the introductory words to [21].

[16] Defendant's submissions on application for leave to discontinue filed 25 October 2022 [34(g)], [48].

[23] Defendant's submissions in reply filed 28 October 2022 [3].

[25] Covell Matthews & Partners v French Wools Ltd [1997] 1 WLR 876, 879.

[27] [1997] HCA 6; (1997) 186 CLR 622, 624-625.

[28] [2020] VSCA 34 [10], [12].

[30] Fairfield Services Pty Ltd v Legett [2020] QSC 183; (2020) 5 QR 50, 59 [21].

[34] [2018] QCA 268.

[36] [2015] NSWCA 307 [53], [54], [57].

[37] [2018] QCA 268 [29].

[39] See by analogy Harrem Pty Ltd v Tebb [2008] NSWSC 510 [19]; Rhodes v Tower Superannuation Limited [2004] FCA 812 [19]; Green v Schneller [2003] NSWSC 202 [32], [33].

[40] Amended Statement of Claim [11(f)(v)], [11(f)(vi)], [11(f)(xii)] and [11(f)(xiii)], noting the introductory words to [11] "and it was the fact that"; Amended Defence [3A], [3B].

[42] Submissions on behalf of the Plaintiff filed 27 October 2022 [34]-[36].

[45] Bar Association of Queensland Barristers' Conduct Rules, r 63.

[47] Amended Defence [11D(d)] was addressed to whether a reasonable inference could be drawn of knowing involvement. If it were to be alleged that the plaintiff had an actual fraudulent intent, that matter might have been expected to be pleaded: refer to r 149(c) and 150(f) UCPR. The fraudulent intent might also have been relevant to the discretion to refuse specific performance.

[48] Cargill Australia Ltd v Viterra Malt Pty Ltd [2022] VSC 164 [24]-[25]; KSG Investments Pty Ltd v Open Markets Group Ltd (No 2) [2021] VSC 359 [10].