# 4, AUSTRALIA 4b Attention: Judgments Clerk With the Compluments of Please find herewith Full Court Judgment delivered in Brisbane On Monday 7 November, 1994 by Mr. Justice Cooper, together with a disk containing a copy of same. , 5 ip JUDGES' CHAMBERS FEDERAL COURT OF AUSTRALIA 119 NORTH QUAY BRISBANE 4000 AUSTRALIA JUDGMENT No. S.3Scoud Ot... CATCHWORDS Appeal - competence of appeal - notice of appeal filed after reasons for judgment but before cunal orders of tnal judge to give effect to reasons for judgment - purported amendment of notice of appeal more than 21 days after making of cunal orders Trade Practices - contravention of section 52 of Trade Practices Act 1974 - agreement for sub-lease - guarantee of lease and relief available Costs - nature of discretion - the operation of Order 62 rule 36A of the Federal Court Rules. Federal Court Rules Order 52 rule 21; Order 62 rule 36A Federal Court of Australia Act section 42 Trade Practices Act 1974 Section 87 Donald Campbell & Co, Lid. v, Pollak [1927] AC 732 No. QG14 of 1994 Neaves, Olney and Cooper JJ., Brisbane, 7 November, 1994 GENERAL DIVISION No, QG 14 of 1994 BETWEEN. SAILBAY PTY. LTD. First Appellant AND ANTHONY JOHN WHITE Second Appellant AND THE TUBBY TROUT PTY. LTD. First Respondent AND: DAVID MARSDEN McINTYRE AND CATHRYN MARY McINTYRE Second Respondents JUDGES MAKING ORDER: Neaves, Oiney and Cooper JJ. WHERE MADE: Brisbane DATE OF ORDER: 7 November, 1994 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay the respondents costs of and incidental to the appeal to be taxed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. THE FEDERAL F_ AUST N D RI REGISTR No. QG 14 of 1994 wee we NE IVISION ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: SAILBAY PTY LTD First Appellant ANTHONY JOHN WHITE Second Appellant g TH BBY T ¥ First Respondent DAVID MARSDEN MCINTYRE and CATHRYN MARY Mc INTYRE Second Respondent CORAM: Neaves, Olney and Cooper JJ. RATE: 7 November 1994 REASONS FOR JUDGMENT I have had the advantage of reading the judgment to be delivered by Olney J. I agree that, for the reasons given by his Honour, the appeal should be dismissed with costs. I certify that this page is a true copy of the Reasons for Judgment herein of the Honourable Justice Neaves. Associate Dated: 7 November, 1994 GENERAL DIVISION ) No. QG 14 of 1994 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: First Appellant and Second Appellant and First Respondent and Second Respondents Coram: Neaves, Olney and Cooper JJ Place: Brisbane Date: 7 November, 1994 REASONS FOR JUDGMENT Olney J: This is an appeal from a decision of a single judge of the Federal Court of Australia sitting at Brisbane. COMPETENCE OF THE APPEAL On 14 January 1994, Drummond J delivered reasons for judgment -2- which expressed his Honour's conclusions upon the claims by the present respondents against both the present appellants and the solicitors who acted for the respondents. His Honour concluded that the respondents were entitled to certain relief against the appellants, indicating that he was prepared to make an order pursuant to s 87(2)(a) of the Trade Practices Act 1974 (Cth) declaring both an agreement for sub-lease and a Deed of Guarantee of Lease void ab initio and a further order pursuant to s 87(2)(c) of that Act directing that the appellants refund to the first respondent an amount of $26,556.00 plus interest. The Court, however, did not make orders to that effect but, at the request of the parties, adjourned the proceeding until 17 January 1994, and subsequently to 8 February 1994, so that the question of costs could be argued. On 4 February 1994, that is to say within the period of 21 days after 14 January 1994 but before the curial orders to give effect to his Honour's reasons for judgment were made, the appellants filed a document described as a notice of appeal. It purported to institute an appeal "from those parts of the judgment" given on 14 January 1994 by which "orders" pursuant to s 87(2)(a) and 87(2)(c) were made. The document bore a notation that the papers in the appeal were to be settled before the Registrar "at 9.30am on 18.2.94". The date was subsequently altered to 24.2.94 and the notation amended accordingly. The date for settlement of the appeal papers was again changed to 8 March 1994 but, so far as -3- appears, the date shown in the notation on the document purporting to be a notice of appeal was not again altered. The document filed on 4 February 1994 was not served on any person. The document was filed to protect the position of the appellants pending consideration by them of the question whether the appeal was to proceed in the light of the orders for costs that might be made. On 8 February 1994, Drummond J dealt with the question of costs and delivered reasons for his decision on the matters then argued. His Honour pronounced orders in accordance with his reasons for judgment published on 14 January 1994 and 8 February 1994. The formal order of the Court, which was entered on 10 March 1994, records that on 8 February 1994 the Court made orders in the following terms: 1. The Agreement for Sub-Lease and the Deed of Guarantee of Lease both executed by the Applicants on 9 November 1988 be set aside ab initio. 2. Judgment be entered for the Applicants against the First and Second Respondents for $44,648.00. 3. The First Respondent pay to the Applicants two-thirds of the taxed costs, including reserved costa, of their application against the First Respondent. 4. The Second Respondent pay to the Applicants their taxed costs, including reserved costs, of their application against the Second Respondent. 5. The First Reespondent''s cross-claim against the Applicants be dismissed. 6. The First Respondent pay the Applicants' taxed costs, including reserved costs, of that cross-claim. 7. The Applicants' action against the Third Respondents be dismissed and that the Applicants pay the Third Respondents' taxed costs, including reserved costs, of that application. The references in the order to the applicants are references ~4- to the present respondents; the references to the first and second respondents are references to the first and second appellants; and the references to the third respondents are references to the solicitors who acted for the present respondents. A document described as a supplementary amended notice of appeal was filed on behalf of the appellants on 3 March 1994 and served on the same day at the respondents' address for service in the proceeding, being the address of the Brisbane agents of the solicitors for the respondents. That document was filed more than 21 days after the date, viz. 8 February 1994, on which the curial orders were made. The filing of the supplementary amended notice of appeal was said to have been authorised by Order 52, r.21 of the Federal Court Rules. That rule provides that a notice of appeal may be amended without leave by filing a supplementary notice "before the date of the appointment made under rule 24". The latter rule provides: {1) The appellant shall, on filing his notice of appeal, get from the proper officer in the Registry, an appointment to @ettle the appeal papers. (2) The appellant shall serve notice of the appointment on each person on whom the appeal is served. The situation is quite unsatisfactory. The supplementary amended notice of appeal assumes that the document filed on 4 February 1994 was effective to institute an appeal notwithstanding that no curial orders had then been made. But even if that assumption be correct, the supplementary -5- amended notice of appeal will only have been filed in accordance with the Federal Court Rules if it is proper to regard "the date of the appointment made under rule 24" as being 8 March 1994. In all the circumstances, the appropriate course is to order that the document described as a supplementary amended notice ef appeal be treated as a substantive notice of appeal and that the time within which that notice of appeal might be filed and served be extended up to and including 3 March 1994. THE PROCEEDINGS In the proceedings at first instance, the first respondent (Tubby Trout) and the second respondents (the McIntyres) sought damages against the first and second appellants (Sailbay and White respectively) pursuant to s 82 of the Trade Practices Act 1974 and orders pursuant to s 87. The respondents also sought damages against three solicitors against whom allegations of negligence were made. Sailbay cross-claimed against the respondents in respect of moneys said to be payable (in the case of Tubby Trout) under an agreement for sub-lease made between Sailbay and Tubby Trout and (in the case of the McIntyres) pursuant to a quarantee given by them to Sailbay in respect of Tubby Trout's liability under the agreement for sub-~lease. The respondents initially pleaded a number of allegations of conduct in contravention of s 52 of the frade Practices Act -6- against the appellants but at trial only two such allegations were pressed. The background to the proceedings is as follows: Early in 1988 the McIntyres decided to move to Australia from New zealand. They became aware that White intended to open a restaurant on the Gold Coast. White was known to them, both personally and by reputation. He was a very successful restaurant operator in New Zealand and the McIntyres let him know they were interested in becoming involved with him. White had it in mind to establish a restaurant in a refurbished squash courts building in Broadbeach. In May 1988 White made it known to the McIntyres that his plan was to establish two restaurants in the squash courts building. A proposal emerged that White would operate a steakhouse style restaurant on the ground floor and the McIntyres would operate a seafood restaurant on the mezzanine floor. The suggestion was that a company to be established by the McIntyres would take a lease of the mezzanine floor from Sailbay, a company in which White was involved together with two brothers named Parker. One of the brothers (John Parker) was an accountant, the other (David Parker) a civil engineer. They had been in business together, and from time to time with others (including White), as property developers in New Zealand. The refurbishment of the squash courts building was the Parkers' first venture into property development in Australia. The firstnamed second respondent (McIntyre) regarded White's proposal as an opportunity to establish a new business in -7- Australia in which he would be associated with a successful operator. The Parkers were initially reluctant to become involved with the McIntyres. Their preference was for another person to be the lessee of the mezzanine floor restaurant. However, in late September or early October 1988 White finally prevailed upon the Parkers to agree to grant the sublease of the mezzanine floor to the McIntyres' company (Tubby Trout). White and the Parkers had set 7 or 8 November 1988 as the opening date for the ground floor restaurant and expected that the McIntyres' restaurant would open at the same time. Before the sub-lease was signed on 9 November 1988 the McIntyres had spent over $166,000 on the fitting-out of the mezzanine area as a restaurant. Both restaurants opened on 9 November 1988 after an agreement for sub-lease in respect of the mezzanine area had been entered into on the same day by Tubby Trout, and the McIntyres had guaranteed the performance of the sub-lease. The project, so far as the McIntyres were concerned, proved to be a disaster. By late December 1988 the restaurant was running at a substantial operating loss. The turnover fell far short of the amount anticipated. On 10 January 1989, having expended all their available capital and credit resources, the McIntyres were confronted by their bank manager with the fact that the restaurant was a financial disaster and that keeping -8- it open would only lead to further loss. The restaurant closed on 13 January 1989 only 8% weeks after opening. The McIntyres alleged that contravention of s 52 of the frade Practices Act had occurred in two respects. First it was said that representations were made by White concerning the turnover of the restaurant proposed to be opened by the McIntyres. The respondents were unsuccessful on this issue and have not sought to appeal against that part of the judge's decision. In those circumstances it is unnecessary to say anything more concerning that matter. Further, the respondents' claim for damages for negligence against their solicitor (McRae) and his employers was dismissed. The trial judge held that McRae had not breached his duty of care to the respondents. The second alleged contravention of s 52 had to do with the licensing arrangements for the two proposed (and later the two operating) restaurants. For convenience the alleged representation is referred to as the licence representation. The respondents were partially successful on this issue in that they obtained an order setting aside ab initio the agreement for sub-lease and judgment for $44,648 (being the total of rent paid under the agreement for sub-lease and interest) but they failed to recover their costs of fitting- out the restaurant premises. In addition, the guarantees given by the McIntyres were set aside. -g- Sailbay's cross-claim for the recovery of moneys due under the agreement for sub-lease and guarantees was accordingly dismissed. FINDINGS OF FACT CONCERNING THE LICENCE REPRESENTATION In order to place in perspective the issues raised in this appeal it is necessary to examine in some detail the findings of fact made at first instance concerning the licence representation, including the context in which the representation was made and the conduct of the respondents in relation to it. It is common cause that it was at all times intended that the two restaurants should be licensed to sell liquor under the relevant Queensland legislation. The following findings of fact have been extracted from the trial judge's reasons: 1. In May 1988 White made an application for a restaurant licence for the premises. On 3 October 1988 the Licensing Commission advised that subject to being satisfied as to certain matters, it would grant the licence. Pending finalisation of the grant of the licence White was able to make temporary arrangements under a booth permit, issued to him in early November 1988. A licence was ultimately issued on 28 November 1988 in respect of the whole of the premises including the mezzanine area. (AB 8.678) -10- On or about 20 September 1988 White made a representation to McIntyre in terms as set out in two paragraphs of an affidavit sworn by McIntyre on 31 January 1992 namely: At about this time, and possibly at this meeting with White I asked him about getting a liquor licence for "The Tubby Trout". He told me that he would look after the obtaining of liquor licences. In particular he told me that he would get a licence for the building which would cover the two restaurants, that is "The Queens Head" steakhouse to be operated downstairs by White, and "The Tubby Trout" seafood restaurant to be Operated separately upstairs by my wife and I. He algo told me that once the restaurants were up and running he would transfer the licence in respect of "The Tubby Trout" into my name. (Para 49) During the course of the week following the 20 September I asked White, on numerous occasions, how things were going generally and I can recall asking him on a number of occasions whether everything would be O.K. in respect of a liquor licence for "The Tubby Trout" into my name. (Para 63) (AB 8.678) White repeated the licence representation to Dean and Ian Howard (friends of the McIntyres) both prior to and after the restaurants were opened and confirmed that a single licence would authorise both restaurants to trade as licensed establishments. (AB 8.679) After September 1988, and before the agreement was executed the Howards had on a number of occasions voiced concern that McIntyre may not be able to trade under White's licence. Mcintyre discounted the Howards' concerns and preferred to accept what White had told him at the end of September and his later reassurances. (AB 8.683). On 14 October 1988 McRae told McIntyre that he should -l1- have a separate licence. McIntyre replied that the matter of obtaining his own licence would be looked after later on, after the business was established. What McRae told him was not put with sufficient force to shake his faith in what White told him. (AB 8.683). McIntyre trusted White implicitly and believed throughout that what White told him at the end of September 1988 about the licence meant that he would be able to trade lawfully as a licensed restaurant. (AB 8.683). On a number of occasions after September 1988 McIntyre sought and received White's reassurance that he would be able to trade lawfully under White's licence for a time. McIntyre's concerns, provoked by what the Howards and McRae were saying, were allayed by White's reassurances. McIntyre relied on the representation at least up until the agreement was signed. (AB 8.684). The licence representation was false. (AB 8.681) The McIntyres did not become aware of the falsity of the representation until after the restaurant opened, and probably not until early January 1989 when the premises were visited by a Licensing Commission inspector. (AB 8.684). The McIntyres relied upon the licence representation in ~-12- deciding to commit themselves to the venture in early October 1988. (AB 8.682). The initial effect the representation had on the McIntyres in causing them to commit themselves to the project in early October 1988 continued to influence them in favour of the project until after the agreement and guarantees were signed. (AB 8.685). The McIntyres' reliance on the licence representation in committing themselves to the project and in executing the agreement for sub-lease and guarantees was not a cause of them suffering loss in the form of the fitting-out expenses. (AB 8.687-8). Even if the licence representation had not been made they would still have incurred all the fit-out costs. (AB 8.689) On 9 November 1988 the McIntyres were reluctant to sign the agreement for sublease due to a dispute with the Parkers over fit-out costs. McRae tried to negotiate on their behalf but was unsuccessful. He told them that they were "over a barrel" and if they wanted to open that night they would have to sign the agreement, which they did. (AB. 8.684). On the same day, before the agreement was signed, McRae expressed his concern that McIntyre was proposing to open a restaurant without the appropriate licence but McIntyre replied to the effect that White had the matter under -13- control. (AB 8.710). McRae warned McIntyre that he could not lawfully sell liquor in reliance on White's licence but he ignored the warning and proceeded to sign the agreement. (AB 8.711). The licence representation operated as an inducement to the McIntyres to execute the agreement and _ the guarantees. (AB 8.692). Throughout the whole time that the McIntyres' restaurant was in business it traded as if it were a licensed restaurant and all liquor sold was purchased on orders which quoted the number of the licence obtained by White. (AB 8.679). The failure of the restaurant, and thus the incurring of trading losses was not due to the absence of a liquor licence (AB 8.685) nor was it related to the licence representation. (AB 8.686). Tubby Trout suffered loss by White's conduct. The conduct was one of the things that caused it to incur liability to Sailbay under the sub-lease agreement for the rent it paid and in respect of other obligations imposed by the agreement. (AB 8.692-3). The McIntyres suffered loss by reason of the liability they assumed on their guarantees in reliance on the licence representation. (AB 8.693). -14- THE APPEAL The appellants have appealed against the orders declaring the agreement for sub-lease and the guarantees void, the judgment for $44,648 against the first appellant and the order dismissing Sailbay's cross-claim. In addition, the appellants have appealed against the costs order made at first instance, but that matter will best be dealt with separately. The grounds upon which the appellants base their appeal are set out in paragraphs 2 to 6 (inclusive) of the supplementary amended notice of appeal thus: 2. The learned primary judge erred in fact or in law in finding that the First Respondent was induced to enter into a sub-lease with the First Appellant and that the Second Respondents were induced to give guarantees in favour of the First Appellant by conduct of the Appellants in contravention of s 52 of the Trade Practices Act 1974, 3. The finding of the learned primary judge that what His Honour described as "the licence representation" operated as an inducement to the respondents to execute the said wub-lease agreement and guarantees was contrary to Lis Honour's own findings of primary facts. 4. The learned primary judge erred in fact or in law in finding that the Appellants suffered or were likely to suffer any loss or damage by reason of conduct of the Appellants in contravention of s 52 of the Trade Practices Act 1974. sS. The finding of the learned primary judge that the licence representation caused the respondents to suffer a loss was contrary to His Honour's own findings of primary facts, the effect of which was that the respondents would have entered into the sub-lease agreement and guarantee even in the absence of the licence representation. 6. The learned primary judge erred in law in finding that an order declaring void ab initio the sub-lease agreement and guarantees was appropriate to compensate' the respondents for loss or damage which they had suffered or were likely to suffer by contravention by the Appellants of s 52 of the Trade Practices Act 1974. The appellants seek orders that the respondents' action against the appellants be dismissed with costs and that there -15- be judgment for Sailbay against the respondents on the cross- claim with costs. AN_ANALYSIS OF THE PRIMARY JUDGE'S FINDINGS The primary judge found that the licence representation was first made on or about 20 September 1988 and that the McIntyres relied upon that representation at least until the agreement for sub-lease was signed on 9 November 1988. His Honour further held that the McIntyres relied upon the licence representation in deciding to commit themselves to the venture in early October 1988, and that the representation continued to influence them in favour of the project until after the agreement for lease and guarantees were signed. In the period intervening between early October 1988 and 9 November 1988 the respondents expended something in excess of $166,000 in fitting-out the mezzanine area. They did so without having entered into any formal, or indeed any informal, agreement with the appellants. Although it appears that they manifested their commitment to the project by expending a large sum of money to fit-out the proposed restaurant, his Honour found that their reliance on the licence representation was not a cause of them suffering loss in the form of fit-out expenses because (as he found) they would have incurred all of the fit-out costs even if the licence representation had not been made. Another manifestation of the McIntyres' commitment to the -16- Project was their execution of the agreement for sub-lease and the guarantees. On that day they were warned by their solicitor that they could not lawfully sell liquor in reliance on White's licence. They were however prepared to proceed in reliance upon White's earlier assurances that the licensing arrangements could be regularised later. On 9 November 1989 the McIntyres had to make a decision. Either they walked away from a project into which they had sunk a large sum of money without at that stage any contractual commitment from the appellants or they signed the agreement for sub-lease and guarantees. The latter option in fact meant that they would be trading illegally so far as the sale of liquor was concerned but nevertheless they drew comfort from what White had told them over a long period. And White was a person they trusted. It is a necessary inference to be drawn from the trial judge's finding that the McIntyres did not become aware of the falsity of the licence representation until after the restaurant opened and that the influence of White's repeated representations and assurances dominated their thinking to the exclusion of the last minute warning given by McRae. There was a significant difference between McRae''s advice that it would not be lawful to sell liquor without their own licence and White's assurances that everything could be put right once the restaurant was underway. It was the falsity of the latter representation which the McIntyres became aware of after the restaurant opened. In this context the judge at first instance found that the licence representation operated as an inducement to the McIntyres to ~17- execute the agreement for sub-lease and the guarantees. Clearly, the phrase "operated as an inducement" was intended to convey that the McIntyres had relied upon' the representation. In dealing with the respondents' claim against the solicitors his Honour said (AB 8.711): I do not accept the McIntyres' evidence to the effect that if they had known that The Tubby Trout could not lawfully sell liquor in reliance on Mr White's licence, they would not have signed the sub-lease agreement. Mr McIntyre was on 9 November adequately warned about that by what Mr McRae then said to him, yet he ignored that warning and went ahead and signed the agreement. Nor do I accept his evidence that if he had known that before commencing to incur costs on fit-out, he would not have proceeded with the project. I have already given my reasons for this conclusion in explaining why I considered that even if Mr White had never made his licence representation, the McIntyres would still have incurred the fit-out costs and the trading losses they also suffered. This passage does not amount to a finding that the respondents did not rely on the licence representation in deciding to sign the agreement for sub-lease. Rather it confirms the earlier finding that at the point in time when they had to make the critical decision as to whether or not they should sign the documents, they preferred to accept White's assurance that once the restaurant was up and running the licence could be transferred into their name. There is no inconsistency in the findings of the primary judge. The assertion contained in paragraph 5 of the supplementary amended notice of appeal misstates the substance of the judge's finding. There was no finding that the respondents would have entered into the sublease agreement and guarantees even in the absence of the licence representation. -18- Whilst the primary judge rejected the McIntryes' evidence that had they known the Tubby Trout could not lawfully sell liquor they could not have signed the agreement, the licence representation found to have been made and relied upon was not an assurance that it would be lawful for Tubby Trout to trade on White's licence but rather that once the restaurant was established a licence would be transferred to Tubby Trout. The appellants have not demonstrated any error in fact or in law on the part of the primary judge in arriving at the conclusion that the respondents were induced to enter into the agreement and guarantees in reliance on the misleading and deceptive conduct of the appellants. The primary judge's conclusion is entirely consistent with his findings of primary fact. THE RELIEF Having found that the licence representation operated as an inducement to the McIntyres and their company to execute the agreement for sub-lease and the personal guarantees, the judge dealt with the question of the relief to which they were entitled in these terms: Since the execution of both the sub-lease agreement and the guarantees was induced in part by the licence representation, which was conduct by Mr White on behalf of Sailbay that contravened s 52 of the frade Practices Act, and since I have found that this representation was deliberately made by Mr White for his own purposes and those of Sailbay in order to ensure that the opening of the whole project would not be delayed by delay on the part of the McIntyres in obtaining the issue of a licence for themselves, I think it is appropriate to grant relief pursuant to s 87 of the Trade Practices Act in respect of the agreement for sub-lease and the Deed of Guarantee of Lease. The McIntyres' company has suffered loes "by" Mr White's conduct: I find that that conduct was one of -19- the things that caused it to incur liability to Sailbay on the sub-lease agreement for the rent it has paid and in respect of the other obligations imposed by that agreement, upon which Sa.ilbay's cross-claim 16 based. The McIntyres themselves have similarly suffered loss by reason of the liability they assumed on their guarantees in reliance on the licence representation. Such relief ig within the scope of the applicants' application and pleading and was the subject of argument in closing submissions by counsel for the applicants. All the matters necessary to eatablish an entitlement to relief under s 87 are made out to my satisfaction. I am therefore prepared to make an order pursuant to s 87({2)(a) declaring both the agreement for sub-lease and the Deed of Guarantee of Lease void ab initio and a further order pursuant to s 87(2)(c) directing each of Mr White and Sailbay to refund to the first applicant the amount of rent actually paid to Sailbay, viz, $26,556.00. It is also entitled to interest on that amount from 13 January, 1989, as loss flowing from Mr White's conduct in breach of s 52, in the sum of $17,804.00. It is clear from the foregoing that the judge had regard to the provisions of s 87 of the Trade Practices Act and based his conclusion upon facts found. In the circumstances no error of law has been demonstrated. costs The primary judge published his reasons for judgment on 14 January 1994 but at the request of the parties the matter was then adjourned so that the question of costs could be argued. The order made on 8 February 199 is set out in full earlier in these reasons. In the supplementary amended notice of appeal the appellants appeal against: (e) The order that the First Appellant pay to the Respondents two-thirds of the taxed costs, including reserved costs, of their application against the First Appellant. (f£) The order that the Second Appellant pay to the Respondents their taxed costs, including reserved costs, of the application against the Second Appellant. -20- The grounds of the appeal against the costs order are set out in paragraphs 7 - 9 of the notice: 7. The learned primary judge erred in law or in the exercise of his discretion in failing to find that: (a) litigation of issues upon which the Respondents totally failed substantially increased the length and cost of the proceedings; (b) the Respondents unreasonably pursued claims in respect of issues upon which the Respondents totally failed including issues relating to the turnover representation; (¢) consequently, the Appellants ought to have their costs of the proceedings in respect of those issues. Alternatively, the learned primary judge erred in law or in the exercise of his discretion in finding that the First Appellant was entitled to no more than one-third reduction in the costs payable by the First Appellant to the Respondent. (sic) Alternatively, the learned primary judge erred in law or in the exercise of his discretion in finding that the conduct of the Second Appellant was a proper basis for making an order that the Second Appellant pay the full costs of the Respondents notwithstanding the provisions of Order 62 rule 36A of the Federal Court Rules. Alternatively, in the event that their appeal against the judgment fails: «ee the Appellants seek orders that the Respondents pay three- quarters of the Appellants' costs, and the Appellants pay one- quarter of the Respondents' costs, or alternatively no order as to costs. the Second Appellant seeks an order that the Second Appellant pay two-thirds of the Respondents' costs of the action. In his reasons published on 14 January 1994 the primary judge, no doubt anticipating that the question of costs would be a live issue, said: In view of Order 62, rule 36A, it is also desirable that I make certain further findings that are relevant to the question of the coats order to be made as between the applicants and Mr White. As is apparent from what I have written already, I do not regard Mr White as a credible witness except where his evidence is confirmed by reliable independent evidence. I also find that Mr White did offer a $10,000.00 bribe to Mr Ian Howard to arm Mr White with a letter expressing Mr Howard's -21- opinion that the losses the McIntyres suffered were not due to any action on the part of Mr White. Mr White was I think well aware how vulnerable Mr McIntyre's will to preas on with this litigation would have been 1f his friend, Mr Howard, who had been closely involved in the project, were to tell him he thought he had no case against Mr White. Mr Howard 18 a witnese who was at times unnecessarily aggressive under cross- examination; at other times he was so highly sengitive to questioning about aspects of his conduct in New Zealand as to suggest a consciousness on his part that that conduct did not do him credit, although he denied the suggestions of ampropriety in that regard that were put to him. But I am not prepared to find, even though Mr Howard spent a weekend in jail in Auckland after being arrested on what appears to have been a bankruptcy warrant, that his life is characterised by episodes of dishonest behaviour and that, in consequence, I should be reluctant to accept his oath on this issue, in preference to Mr White's. Mr Howard proved himself to be a good friend to the McIntyres in their time of need immediately following the opening of the restaurant: he sought no payment for his extensive assistance. He obviously remains a good friend of theirs. But I do not think he has fabricated the bribe allegation, I am prepared to accept his detailed evidence on that matter in preference to Mr White's denial that he hag ever discussed the litigation with Mr Howard. I have already listed some of the reasons why I find Mr White an unimpressive witness, which have assisted me in reaching this conclusion. Order 62 Rule 36A(1) of the Federal Court Rules provides: 36A(1) Where a party is awarded judgment for less than $100,000 on a claim (not including a cross-claim) for a money sum or damages any costs ordered to be paid, including disbursements, will be reduced by one-third of the amount otherwise allowable under this Order unless the Court or a Judge otherwise orders. At judgment the respondents sought orders for all of their costs against Sailbay and White on the ground they had been successful against those parties. However, Sailbay and White submitted a contrary view on the grounds first, that the present respondents had persisted up until trial with allegations of misleading conduct which they only abandoned at the start of the trial; second, that they had failed completely in respect of the turnover representation; and third, that O 62 r 36A applied. As to the first matter his Honour was of the view that it was ~22- likely that the abandonment of the other allegations of misconduct had only a very minor impact on the costs incurred in preparing to defend the claim. As to the second, his Honour was of the view that the present respondents were not entitled to recover all their costs although they were entitled to a substantial part of same. In his reasons published on 8 February 1994 his Honour said that Sailbay and White were each prima facie entitled to the benefit of the one-third reduction in costs provided for in O 62 r 36A. In the case of Sailbay he was of the view that even though the applicant recovered relief not sounding in damages as well as judgment for a money sum, the non-monetary relief was so intimately connected with the limited amount of damages recovered as not to warrant the exercise of his discretion to exclude the operation of the rule. His Honour went on to say that even if 0 62 r 36A was not applicable because of the applicant having recovered both non-monetary and monetary relief, a reduction of one-third in the costs ordinarily recoverable by the applicants was appropriate. Although White was also prima facie entitled to the benefit of O 62 r 36A, the judge was of the view that, with respect to the one-third reduction provided for the rule, he was in a position analogous to that of a respondent who has successfully defended a claim and is prima facie entitled to his costs. -23- It would not be appropriate to attempt to identify all of the circumstances in which it would be appropriate for the Court or a judge to "otherwise order" for the purpose of O 62 r 36A. The rule confers a clear discretion and provided that the discretion is exercised judicially it cannot be open to attack on appeal. It seems well within the bounds of reason and logic that an analogy should be drawn between the exercise of a discretion to deprive a successful party of his costs, and a discretion to deprive a party of the benefit conferred by 0 62 r 36A. And this 1s how the primary judge approached the matter. At first instance his Honour referred to and adopted a statement made by Viscount Cave LC in Donald Campbell & Co Ltd vy Pollak (1927) AC 732, when his Lordship said at pp 811: A successful defendant in a non-jury case has no doubt, in the absence of special circumstances, a reasonable expectation of obtaining an order for the payment of his costs by the Plaintiff; but he has no right to costs unless and until the Court awards them to him, and the Court has an absolute and unfettered discretion to award or not to award them. This discretion, like any other discretion, must of course be exercised judicially, and the judge ought not to exercise it against the successful party except for some reason connected with the case. In this context his Honour said: I have found that Mr White attempted to procure false evidence by a bribe which, if successful, may have caused the McIntyres to give up a case that could not be said to be without a prospect of success and which has in fact yielded them a judgment against Mr White for a significant sum. If a litigant procures or attempts to procure another to give false evidence likely to have a real impact on the case, then, even if at the end of the day he has a prima facie entitlement in respect of costs, that conduct is sufficient to justify the exercise of the discretion with respect to costs against him. I think this conduct by Mr White, intimately connected with the way he went about preparing to run his case at trial, is sufficient to entitle me to exercise the discretion I have under O 62, r 36A to deprive him of the benefit of the -24- reduction in liability in costs to the applicants to which he 18 prima facie entitled by the rule. If O 62, r 36A is inapplicable, I would also decline, for the same reasons, to exercise the discretion I have pursuant to s 42 of the Act to depart in his favour from the general rule that costs ordinarily follow the event. It is clear that in the exercise of his several discretions his Honour had regard to the outcome of the litigation, its conduct and the provisions of the relevant rule of Court. But for the view he formed of White's behaviour it seems likely that he may have deprived the present respondents of some part of their costs, but he had a discretion; and having exercised it judicially for reasons which appear both relevant and cogent it ié not appropriate for this Court to interfere with the conclusion reached. CONCLUSION The appellants have failed to demonstrate any error on the part of the primary judge either as to the finding of liability, the nature of the relief granted or as to the costs order made in favour of the respondents. The appeal should be dismissed with costs. I certify that this and the preceding 23 pages are a true copy of the Reasons for Judgment of the Honourable Mr Justice Olney e Associate: Neko deloee Dated: 7 November, 1994 GENERAL DIVISION No, OG 14 of 1994 BETWEEN: SAILBAY PTY, LTD. Erst Appellant AND ANTHONY JOHN WHITE Second Appellant AND: THE TUBBY TROUT PTY, LTD. Est Respondent AND DAVID MARSDEN McINTYRE AND CATHRYN MARY MCINTYRE Second Respondents CORAM: Neaves, Olney and Cooper JJ. PLACE: Brisbane DATE: 7 November, 1994 REASONS FOR JUDGMENT Cooper J, I have had the opportunity to read the draft reasons for judgment of Olney 3. For the reasons his Honour has given, | would dismiss the appeal with costs. I certify that this page is a true copy of the reasons for judgment herein of his Honour Justice Cooper. Date: 7 November, 1994 buila K Maar. Associate Counsel for the Appellant: Solicitors for the Appellant: Counsel for the Respondent: Solicitors for the Respondent: Date of Hearing: Place of Hearing: Date of Judgment: Mr. S Couper Gadens Ridgeway Mr. R. Bain Primrose Couper Cronin Rudkin 4 May, 1994 Brisbane 7 November, 1994