Procedure - Civil proceedings in State and Territory courts - Costs - Indemnity costs - Particular cases - Hopeless cases.

Preston v Preston (1982) 1 All ER 41; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294; Hamod v State of New South Wales [2002] FCA 424, 188 ALR 659; Tey v Optima Financial Group Pty Ltd [2012] WASCA 192, referred to.

Judgment Number: [2017] TASSC 5

The appellants will pay the respondent's costs of the appeal on an indemnity basis.

1. This decision concerns the costs of an appeal to this Court from a decision of the Chief Justice. On 10 October 2016 his Honour allowed an appeal brought by the appellants from a decision of a magistrate in the Magistrates Court (Civil Division). Comprehensive reasons were published on 13 October 2016: Zhao v T R & K R Shipton Pty Ltd [2016] TASSC 54. The Chief Justice set aside orders made by the magistrate dismissing the appellants' counterclaim as beyond the jurisdiction of the Magistrates Court, and ordered that the respondent's claim and the counterclaim be transferred to the Supreme Court. There were further orders that the respondent pay the appellants' costs of and incidental to the appeal, and that the respondent be granted an indemnity certificate pursuant to the Appeal Costs Fund Act 1968.
2. Leaving aside the order made under the Appeal Costs Fund Act, the orders made by the Chief Justice were effectively the orders sought by the appellants. In other words, their appeal to the primary judge was successful. They achieved the result they wanted and obtained an order for costs in their favour. Despite this, the appellants filed a further appeal to this Court. For obvious reasons the appeal was a futile exercise, and on 6 March 2017, it was dismissed. The respondent applies for an order that the appellants pay its costs on an indemnity basis. For the following reasons that order should be made.
3. The jurisdiction of this Court to award costs is provided for by the Supreme Court Civil Procedure Act 1932, s 12(1). Subject to any statutory provision to the contrary, costs are in the discretion of the Court or judge: s 12(2). The discretion is to be exercised judicially and not in an arbitrary or capricious way: Cretazzo v Lombardi (1975) 13 SASR 4, per Bray CJ at 11. The factor which carries the greatest weight in the exercise of the discretion is the result of the litigation: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. Ordinarily, a successful party should obtain an order for costs. There is no reason to depart from that position here. The respondent was the successful party and has done nothing to disentitle it to the benefit of an order in its favour.
4. Costs are normally ordered on a party and party basis. However the respondent applies for an order for its costs of the appeal on an indemnity basis. A court may order indemnity costs, or costs assessed on a basis lying somewhere between indemnity costs and party and party costs, in an appropriate case. Such an order is generally only made if "there is some special or unusual feature in the case to justify the court exercising its discretion in that way": Preston v Preston [1982] 1 All ER 41 at 58. It is only in a special case that the discretion to depart from the normal rule will be properly exercised: NMFM Property Pty Ltd v Citibank Ltd (No 2) [2001] FCA 480, 109 FCR 77; Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 152-153, and 158; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 at [22]; Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 536; (1993) 46 FCR 225 at 232-233; Ruddock v An Vadarlis (No 2) [2001] FCA 1865, 115 FCR 229 at 234; Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 1844.
5. Counsel for the respondent made detailed written submissions, by reference to authority and the circumstances of this case, about the principles to be applied to the exercise of the discretion. The submissions should be accepted. Our reasons can be stated relatively briefly. In Hamod v State of New South Wales [2002] FCA 424, 188 ALR 659, the Full Court of the Supreme Court of New South Wales said at 20:

"Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs."

1. Throughout the proceedings in the Magistrates Court, before the primary judge and before this Court, the appellants have been unrepresented. It is proper to allow for that fact. In general, courts are more reluctant to make orders for indemnity costs against unrepresented litigants: Ogawa v The University of Melbourne (No 2) [2004] FCA 1275; Bhagat v Royal & Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159. Litigants in person generally lack knowledge of the law, are unfamiliar with court practice and lack objectivity: Spalla v St George Motor Finance Ltd (No 8) [2006] FCA 1537. However, as the Court of Appeal in Western Australia pointed out in Tey v Optima Financial Group Pty Ltd [2012] WASCA 192, "[l]itigants in person have the capacity to inflict a great deal of unnecessary expense and hardship on other parties and the court should not stay its hand where such censure is properly called for". The reference to the term "censure" should not be misunderstood. Costs orders are primarily compensatory and not punitive. The position is as explained by Gaudron and Gummow JJ in Oshlack v Richmond River Council at 89 [44], that in a case involving some relevant delinquency on the part of an unsuccessful party, the result of an order for "solicitor and client" or indemnity costs is "more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part". Subject to that qualification, the approach in Tey should be adopted.
2. The appellants' notice of appeal was filed on 17 October 2016, four days after the primary judge's reasons were published. On the following day counsel for the respondent sent a letter to the appellants explaining that the orders sought on the appeal would make no material difference to the effect of the orders made by the primary judge. The appellants' response shed no light on the reason for their appeal. They prepared a lengthy appeal book and written submissions which still did not reveal any relevant advantage to be achieved by prosecuting the appeal. The respondent's counsel wrote to them again on 4 January 2017 to the effect that the reason for the appeal, and what might be achieved by it, was still not apparent. An email to the same effect was sent on 12 January 2017. That email included a suggestion that the appellants, if they required further guidance, should obtain legal advice and a warning about the possible costs consequences of unreasonably continuing with the appeal. Instead, the appellant filed further lengthy submissions, thus indicating their intention to proceed. Still no sensible basis for doing so was disclosed. The respondent filed its submissions to the Full Court on 16 January 2017. On 23 January 2017 the appellants filed a third set of submissions. On 31 January 2017 counsel for the respondent again wrote to the appellants, attempting to persuade them to not proceed with the appeal and to seek some legal advice, but again to no effect. The appellants responded by filing further lengthy submissions.
3. The appeal came before this Court on 6 March 2017. Counsel for the respondents, as he was obliged to do, appeared. The appellants advanced no argument of any merit. The appeal was dismissed. The appellant's written various submissions repeatedly refer to their "application for a new trial". The reference betrays the futility of the appeal. There had never been a trial of the proceedings, and the effect of the Chief Justice's order was that the trial of the claim and the counterclaim would be conducted in the Supreme Court. That order coincided with the wishes of the appellants. All of the appellants' submissions to the primary judge are characterised by references to irrelevancies, including the alleged merits of their counterclaim and allegations against the magistrate and court officers of conspiracy, fraud and fabrication of evidence. The submissions in opposition to the costs application are also dominated by irrelevant allegations of fraud made against the magistrate, court officers and counsel for the respondent. They persistently maintain that their "consent" to the Magistrates Court dealing with their counterclaim, although it exceeded the jurisdiction of that court, was obtained by fraud. The arguments are irrelevant. All of the appellants' complaints about procedural deficiencies or errors of law in the Magistrates Court proceedings are remedied by the Chief Justice's order. It was not until the hearing of the appeal that it became apparent to this Court that the appellants' other main concern appeared to be the Chief Justice's order that the respondent have an indemnity under the Appeal Costs Fund Act. Not only was the making of that order a proper exercise of the primary judge's discretion, it was an order in which the appellants had no interest.
4. By the instigation and prosecution of this appeal the appellants put the respondent to a great deal of unreasonable and unnecessary expense based on misconceived and groundless contentions. Such conduct properly forms the basis of an adverse special costs order: Colgate-Palmolive Company v Cussons Pty Limited at [24].The appellants displayed an obstinate persistence to press on, despite the pointlessness of their appeal. They dismissed the repeated attempts of counsel for the respondent, from an early stage, to point this out to them. They resisted the suggestion to obtain guidance through legal advice. Their conduct is not explained by lack of understanding arising from language difficulties. Their primary language is Mandarin. They have always had the assistance of an interpreter who translated English into Mandarin and vice versa. All of their lengthy submissions are in English. We are satisfied that, despite being unrepresented, they have sufficient intelligence, knowledge and insight to appreciate the possible costs consequences of their actions if they had taken the time and trouble to think about them fairly. The respondent has done nothing which should deprive it of the benefit of the order it seeks.
5. It would be unjust if the respondent was not fully compensated for the cost of resisting an appeal which was, from the outset, so obviously misconceived and unmeritorious. There will be an order that the appellants pay the costs of the appeal on an indemnity basis.