Essendon Health Care Pty Ltd v Moylan [ 1998] FCA 94

FEDERAL COURT OF AUSTRALIA PRACTICE AND PROCEDURE - COSTS - appropriate orders as to costs where proceedings are discontinued - applicant discontinued proceedings because respondent revoked the decision the subject of the proceedings - factors relevant to exercise of discretion - relevance of the merits of the case. ADMINISTRATIVE LAW - natural justice - whether a tribunal is under a duty to disclose the substance of legal advice obtained by it on the merits of a case. Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469 cited Gribbles Pathology Pty Ltd v Health Insurance Commission and Ors (Finklestein J, 10 December 1997, unreported) considered Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 cited Re Tiki Village International Limited [1994] 2 Qd R 674 considered ESSENDON HEALTH CARE PTY LTD v THE HONOURABLE JUDI MOYLAN VG 480 of 1997 JUDGE: MERKEL J DATE: 3 FEBRUARY 1998 PLACE: MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA GENERAL DISTRIBUTION

DISTRICT REGISTRY VG 480 of 1997

betweeN: ESSENDON HEALTH CARE pty ltd

and the honourable judi moylan

JUDGE: MERKEL J

DATE OF ORDER: 3 FEBRUARY 1998

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT: 1. The applicant be granted leave to discontinue the proceeding. 2. The respondent pay two-thirds of the applicant's taxed costs of and incidental to the proceeding. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA GENERAL DISTRIBUTION

DISTRICT REGISTRY vg 480 of 1997

BETWEEN: ESSENDON HEALTH CARE pty ltd

AND: THE HONOURABLE JUDi MOYLAN

JUDGE: MERKEL J

DATE: 3 FEBRUARY 1998

PLACE: MELBOURNE

REASONS FOR JUDGMENT

On 20 August 1997 the applicant commenced a proceeding in the Court for the review of a decision of the delegate of the Minister made under s 40AEF of the National Health Act 1953 (Cth). The grounds of review related primarily to alleged errors of law made by the delegate in the course of the decision. The applicant sought an order setting aside the decision. The decision referred to legal advice which had been obtained by the delegate but had not been disclosed to the parties. As a result of a request made on behalf of the applicant it obtained a copy of the legal advice on 22 August 1997. A directions hearing was held on 10 October 1997 at which directions were given for trial which was fixed for 11 December. In its contentions of fact and law filed on 2 December 1997 the applicant indicated that it proposed to rely on the failure of the delegate to disclose the substance of the legal advice prior to the delegate's decision as a denial of natural justice. As a result of the new ground sought to be raised by the applicant the trial was adjourned to 3 February 1998 because, inter alia, the respondent wished to consider her position in relation to it. On 15 January 1998 the solicitor for the respondent informed the applicant's solicitor that the decision had been revoked and the matter was to be relisted. At the hearing today the applicant sought leave to discontinue the proceeding and an order that the respondent pay its costs of the proceeding. It contended that as the respondent had rectified the situation which prevailed at the time the proceeding was commenced the plaintiff no longer had any need for or entitlement to the remedy it was seeking. Accordingly it contended that costs should be awarded against the respondent: Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469 at 473 per Kaye J. The respondent did not oppose the grant of leave to discontinue but opposed the order for costs. Counsel for the respondent submitted that - · the respondent acted reasonably and fairly in setting aside the decision upon becoming aware of the natural justice ground; · the respondent set aside the decision, not because she conceded there was any breach of duty but because policy reasons and general fairness made further litigation inappropriate; · whether there was a breach of duty was a complex issue of fact and law which was inappropriate for the Court to determine; · in similar circumstances the Court has ordered that each party pay their own costs: see Gribbles Pathology Pty Ltd v Health Insurance Commission and Ors (Finklestein J, 10 December 1997, unreported) at 4-5; · such an order is appropriate in the present case as it is wrong to discourage the course taken by the Minister to avoid unnecessary litigation by imposing the penalty of a costs order upon her when she has acted reasonably. The Court has a broad discretion as to costs. In my view in the present case the following considerations are of particular significance as to the manner in which the discretion should be exercised: 1. The applicant has obtained the equivalent of the relief it sought as a result of the decision of the respondent to set the delegate's decision aside. 2. The applicant acted reasonably in commencing and continuing with its proceeding. 3. The respondent acted reasonably in defending the proceeding until the natural justice ground was raised and then acted reasonably in determining to set aside the decision. 4. Although it is generally inappropriate to determine a case on the merits on a costs application (see Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201), it does not follow that some consideration of the merits is irrelevant to the question of costs. When turning to the merits of the present case it is common ground that the delegate, in arriving at the decision sought to be impugned, acted in reliance upon legal advice in relation to the merits of the matter without affording the applicant an opportunity to deal with the substantive matters raised by the advice which were adverse to the applicant's case. Even if, as is contended by the respondent, the applicant was aware that advice was to be sought and took no objection to it, it does not follow that the delegate was not under a duty to disclose the substance of so much of the advice that was or might be adverse to the applicant's case. In my view the relevant principle was correctly stated by Byrne J in Re Tiki Village International Limited (1994) 2 Qd R 674 at 680 who said, in respect of undisclosed legal advice obtained by an arbitrator: "[T]he absence of an opportunity to comment on the advice might perhaps have mattered. The arbitrator's silence as to the content of the advice means that there is a chance - one not so slight it can be ignore -, that the applicants have not had a fair opportunity to comment on points adverse to their case first raised by the arbitrator's solicitor. A procedural irregularity has therefore occurred which possibly has led to a miscarriage of justice, unless what happened at the preliminary conference, when the arbitrator adverted to taking legal advice, precludes objection." (Footnote omitted) The present case is analogous. It is sufficient for present purposes for me to conclude that the claim for the relief the applicant sought - to set aside the decision on the ground of denial of natural justice - is a strong one. The advice in question (which was fifteen pages in length) was detailed and appears to have been comprehensive on the questions of law raised by the applicant's case. To fail to afford the applicant an opportunity to deal with the substance of matters adverse to its case was analogous to hearing part of the case in the applicant's absence. It was open to the applicant to raise the natural justice ground, at the latest, by the first directions hearing in October 1997 but it failed to do so until December 1997. As a consequence, assuming the same response of the respondent, it is likely that the costs incurred by the parties in relation of the proceeding would have been less had the ground been raised earlier. Having considered the matters raised by counsel and the particular matters to which I have referred it is appropriate that the following orders be made: 1. The Court grant the applicant leave to discontinue the proceeding. 2. The respondent pay two-thirds of the applicant's taxed costs of and incidental to the proceeding.