Bookarelli Pty Ltd v Katanga Developments Pty Ltd (No 2)

1. [1]

   THE COURT: The Court gave judgment in this appeal on 5 April 2017. [1] The following orders were made:

2. [2]

   The judgment gave the following reasons for making Order 3: [2]

3. [3]

   The applicant has filed written submissions contending that the Court should not make an order requiring it to pay indemnity costs. The written submissions contend that if the applicant’s challenge to the decision of the primary Judge had succeeded on both grounds, it would have been better off by nearly $80,000, rather than the $50,000 referred to in the Principal Judgment. We are prepared to proceed on the basis that the amount in dispute, at least in theory, was in the order of $80,000.

4. [4]

   Counsel for the applicant, Mr Jones, submitted that the characterisation of the applicant’s argument as “plainly without merit” does not cause the case to fall within the line of authority that enables a court to order indemnity costs against a moving party where that party, properly advised, should have known that it had no chance of success. Mr Jones submitted that the applicant should not be subjected to an order for indemnity costs “simply because the Constitution leaves further room, apart from the statutory procedures, to challenge the decision of the primary judge for jurisdictional error”. Mr Jones also contended that any procedural inconveniences identified in the Principal Judgment were the product of the legislation or the operation of the Constitution. An order for indemnity costs should not be used to correct any perceived deficiencies in the principles governing the availability of judicial review of decisions of costs assessors and of inferior courts.

5. [5]

   Section 98(1) of the Civil Procedure Act 2005 (NSW) (CP Act) provides as follows:

6. [6]

   The general rule is that if the court makes any order as to costs, the court is to order that the costs should follow the event, unless it appears to the court that some other order should be made. [6]

7. [7]

   UCPR r 42.2 states that:

8. [8]

   UCPR r 42.2 makes it clear that the ordinary rule is that where an order is made that one party to litigation pay the costs of another party, the order is for payment of costs on the ordinary basis. Nonetheless, r 42.2 contemplates that the Court may order otherwise.

9. [9]

   As Mr Jones pointed out, there is a well-established line of authority that a moving party should be required to pay costs on an indemnity basis if it appears that proceedings have been commenced or continued in circumstances where that party, properly advised, should have known that it had no chance of success. [8] As Lindgren J has observed, however, this principle may not be easy to apply given that the Court addressing the question of costs will always have the benefit of hindsight. Furthermore, depending on the circumstances, it may be necessary to make assumptions about the party’s knowledge of the facts and the nature and level of legal advice given to that party. [9]

10. [10]

    It is important to appreciate that pursuing a hopeless case is not the only situation in which it may be appropriate to order the unsuccessful moving party to pay costs on an indemnity basis. In Colgate-Palmolive Company v Cussons Pty Ltd (Colgate-Palmolive), [10] a decision often cited with approval, [11] Sheppard J referred to many different circumstances in which courts have made orders that the unsuccessful party pay costs on an indemnity basis. [12]

11. [11]

    Sheppard J explained the general principles as follows: [13]

12. [12]

    In NMFM v Citibank, Lindgren J pointed out that although the discretion to award indemnity costs must be exercised in accordance with principle, its exercise is not confined to particular categories of cases in which such orders have been made in the past. His Honour also observed that statements in cases where indemnity costs have been awarded are not to be read as if they are statutes marking the outer limits of the exercise of a judicial discretion. [15]

13. [13]

    Mr Jones was correct to submit that Bookarelli should not be ordered to pay indemnity costs simply because it has been unsuccessful in its application for judicial review of the decision of the District Court. Bookarelli was entitled to invoke the supervisory jurisdiction of the Court. This is so notwithstanding that the application constitutes Bookarelli’s third attempt to challenge the original costs assessment and that the dispute concerns a relatively modest monetary sum. Equally, however, Bookarelli’s entitlement to invoke the supervisory jurisdiction of the Court does not render it immune from an indemnity costs order if the circumstances are sufficiently unusual to warrant a departure from the ordinary rule. The question is whether such circumstances exist.

14. [14]

    Bookarelli’s argument in this Court essentially rested on its construction of the Consent Costs Order. It contended that the Consent Costs Order should be understood as implicitly embodying the so-called “rule of thumb”. Bookarelli also submitted that the Consent Costs Order, properly construed, does not oblige Bookarelli to pay the costs of the application for Freezing Orders.

15. [15]

    Bookarelli’s contentions have varied at different stages of the costs dispute. Bookarelli did not submit to the Costs Review Panel (Panel) that the Consent Costs Order was intended to incorporate the rule of thumb. That argument was made for the first time in the District Court proceedings, but was rejected by the primary Judge on the ground that the argument did not raise a question of law. His Honour might have added that, in any event, Bookarelli could hardly have been dissatisfied with the Panel’s decision as to a matter of law [16] when Bookarelli did not put the relevant argument to the Panel.

16. [16]

    The Principal Judgment noted that Bookarelli’s construction of the Consent Costs Order as incorporating the rule of thumb was “to say the least, elusive”. [17] To put the matter another way, the construction of the Consent Costs Order advanced on Bookarelli’s behalf in this Court was not reasonably arguable. Bookarelli’s legal advisors should have appreciated the weakness of the argument before the judicial review proceedings were commenced.

17. [17]

    Bookarelli’s contention that the Consent Costs Order was not intended to cover the costs of the Application for Freezing Orders also fell well short of being reasonably arguable. It is difficult to understand how the Consent Costs Order could be read in any way other than as requiring Bookarelli to pay Katanga’s costs of the application for Freezing Orders. No plausible argument to the contrary was put to this Court.

18. [18]

    If Bookarelli is ordered to pay costs on the usual basis, Katanga would be required to bear some of the costs it has incurred in defending the judicial review proceedings. This is because Katanga would not be reimbursed for the difference between its solicitor and client costs and the costs recoverable on a party and party basis. Bookarelli’s two previous unsuccessful challenges to the original costs assessment [18] caused the parties to incur substantial costs in connection with a dispute over a relatively modest amount of costs. Some of the costs incurred by Katanga, at least in the District Court proceedings, are not recoverable from Bookarelli since the costs order made by the primary Judge in Katanga’s favour was on the usual basis. [19]

19. [19]

    The following circumstances warrant making an order that Bookarelli pay Katanga’s costs of the judicial review application in this Court on an indemnity basis:

Order

1. [20]

   The following order should be made: