FEDERAL COURT OF AUSTRALIA Australian Competition & Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 163 COSTS – whether costs should be granted on an indemnity basis – whether refusal of Calderbank offer sufficient to warrant indemnity costs Trade Practices Act 1974 (Cth), s 45(2)(b)(i) Federal Court of Australia Act 1976 (Cth), s 43(2) Federal Court Rules,O 62, r 4 Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151 applied Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 discussed J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers – Western Australian Branch (No 2) (1993) 46 IR 301 cited Davids Holdings Pty Ltd v Coles Myer Ltd (1995) ATPR ¶41-383 discussed John S Hayes & Associates Pty Ltd v Kimberley-Clark Australia Pty Ltd (1994) 52 FCR 201 cited Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd (Lehane J, 11 February 1998, unreported) cited AUSTRALIAN COMPETITION & CONSUMER COMMISSION v AMCOR PRINTING PAPERS GROUP LTD & ORS NG 1245 OF 1998 SACKVILLE J 25 FEBRUARY 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1245 OF 1998 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: AMCOR PRINTING PAPERS GROUP LTD (ACN 005 146 350) FIRST RESPONDENT VISY PAPER PTY LTD (ACN 005 803 234) SECOND RESPONDENT ANTHONY NOTT THIRD RESPONDENT WILLIAM GUTHRIDGE FOURTH RESPONDENT JUDGE: SACKVILLE J DATE OF ORDER: 25 FEBRUARY 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The applicant pay the costs of each of the first to fourth respondents on a party and party basis. 2. The applicant pay the costs of David Roach, previously the fifth respondent, on a party and party basis. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1245 OF 1998 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: AMCOR PRINTING PAPERS GROUP LTD (ACN 005 146 350) FIRST RESPONDENT VISY PAPER PTY LTD (ACN 005 803 234) SECOND RESPONDENT ANTHONY NOTT THIRD RESPONDENT WILLIAM GUTHRIDGE FOURTH RESPONDENT JUDGE: SACKVILLE J DATE OF ORDER: 25 FEBRUARY 2000 WHERE MADE: SYDNEY REASONS FOR JUDGMENT 1 By a judgment delivered on 19 January 2000, I made orders dismissing the application against the four respondents remaining in the proceedings. As the judgment explains (par [3]), the proceedings against a fifth respondent ("Mr Roach") were terminated when the applicant ("the ACCC") was granted leave to discontinue the proceedings against him. The only issue that remains is the question of costs. The Submissions 2 The parties have filed written submissions setting out the orders they seek. Their submissions have attached the correspondence and other documents upon which they seek to rely. None of the parties has objected to this sensible approach, which avoids the need for a further hearing. 3 The ACCC accepts that, given that the application has been dismissed against four of the respondents and discontinued against a fifth, it is appropriate that an order be made requiring it to pay the costs of each of the respondents. However, the ACCC submits that there is no basis for a departure from the general rule that costs should be paid on a party and party basis. 4 Mr Roach seeks an order that his costs be paid on an indemnity basis. He submits that the proceedings should never have been commenced against him, as there never was any evidence to support the pleaded claim that he was knowingly concerned in or party to a contravention by the first respondent ("Amcor") of s 45(2)(b)(i) of the Trade Practices Act 1974 (Cth) ("TP Act"). Alternatively, Mr Roach seeks an order for indemnity costs as from two alternative dates when (so he argues) the ACCC should have terminated the proceedings or accepted so-called Calderbank offers to settle the proceeding on the basis that Mr Roach would bear his own costs. 5 Amcor and the third respondent ("Mr Nott") seek an order that their costs be paid on an indemnity basis as from 20 September 1999 or, alternatively, 3 December 1999. They rely on Calderbank offers to settle the proceedings on the basis that the ACCC would withdraw and they would bear their own costs. They say that the actual outcome has proved less favourable to the ACCC than would have been the position had either of the offers been accepted. They submit that it was unreasonable for the ACCC to have declined to accept the offers. 6 The second respondent ("Visy") and fourth respondent ("Mr Guthridge") are somewhat bolder. They submit that their costs should be paid on an indemnity basis because the action should not have been commenced or continued in circumstances where the ACCC, properly advised, should have known that it had no chance of success. Alternatively, they contend that the ACCC should pay their costs on an indemnity basis as from 29 September 1999 or, at the latest, 3 December 1999. Their alternative claim rests on the rejection by the ACCC of offers by them to pay their own costs if the ACCC agreed to discontinue the proceedings. The Principles 7 By s 43(2) of the Federal Court of Australia Act 1976 (Cth), the award of costs is in the discretion of the Court or Judge. See also Federal Court Rules,O 62, r 4. In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, at 152-153, Black CJ stated the principles applicable to a claim for indemnity costs: "…it is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which will fall short of complete indemnity. Nevertheless, the court has an absolute and unfettered jurisdiction in awarding costs, although the discretion must be exercised judicially. So, indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the court exercising its discretion in that way: see John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 at 203 per Hill J… But as Hill J pointed out in John S Hayes (at 203): '…care must be taken not to circumscribe the discretion by reference to closed categories. It is not a necessary condition of the power to award costs that a collateral purpose be shown. The categories warranting the exercise of the discretion are not closed…. In each case it will be necessary to look at the particular facts and circumstances to see whether an exercise of discretion to order costs on an indemnity basis is warranted.'" See also at 156-157, per Cooper and Merkel JJ. 8 In Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, at 232-234, Sheppard J set out circumstances in which costs may be appropriately awarded on a basis other than a party and party basis. The circumstances identified by his Honour include the making of allegations that ought never to have been made, the undue prolongation of a case by groundless contentions and an imprudent refusal of an offer to compromise. Other decisions have recognised that it is sufficient to enliven the discretion to award costs on an indemnity basis that a party, for whatever reason, persists in what should have been seen to be a hopeless case: J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch (No 2) (1993) 46 IR 301, at 303, per French J. In Davids Holdings Pty Ltd v Coles Myer Ltd (1995) ¶ATPR 41-383, at 40,303, Drummond J said that if a respondent, at an appropriate stage, puts an applicant on notice that it regards the action as misconceived and sets out detailed reasons for so thinking, and if the applicant nevertheless proceeds and fails, there may be good reason to consider an order for indemnity costs. 9 The authorities in this Court have accepted that the rejection of a Calderbank offer (in the sense of an offer to settle specifically made with a view to being used, if not accepted, in relation to a costs application) does not of itself justify an order for costs on an indemnity basis if the offeree fails to secure a more favourable outcome in the proceeding: John S Hayes & Associates Pty Ltd v Kimberley-Clark Australia Pty Ltd (1994) 52 FCR 201, at 206, per Hill J. The significance to be attached to a Calderbank offer depends on its terms and the circumstances of the litigation, including the time at which the offer is made and the understanding of the parties as to the strengths and weaknesses of their respective cases: Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd (Lehane J, 11 February 1998, unreported), at 3. Mr Roach 10 The ACCC's case against Mr Roach was pleaded in the statement of claim filed on 18 November 1998. On 22 March 1999, Mr Roach's solicitors notified the ACCC that it considered that the statement of claim did not plead a cause of action against him (or, indeed, against Amcor and Mr Nott, the other Amcor respondents). The basis for the objection to the pleading against Mr Roach was developed in a letter of 30 March 1999. 11 In consequence of these complaints, the case against Mr Roach was repleaded in an amended statement of claim filed on 5 May 1999. The fresh pleading alleged that Mr Roach had knowledge of the alleged arrangement or understanding between Amcor and Visy and that, by withdrawing the offer made by Amcor to Flagstaff (a supplier of waste paper products), Mr Roach knew that he would be involved in giving effect to the arrangement. 12 On 13 September 1999, Mr Roach's solicitors, in a letter without prejudice save as to costs, asserted that the evidence available to the Court did not support the allegations contained in the amended statement of claim filed on 5 May 1999. The letter did not, however, differentiate between the position of Mr Roach and that of the other Amcor respondents. It stated that none of the Amcor respondents would seek an order for costs if the ACCC discontinued the proceeding on or before 20 September 1999. In the event that the ACCC elected to continue with the proceeding after that date, it was put on notice that the Amcor respondents would, at the appropriate time, seek costs on an indemnity basis. 13 Later correspondence indicates that the ACCC offered to consider discontinuing the proceedings against Mr Roach if he could establish to its satisfaction that he had no knowledge that the termination of the offer was because of an arrangement or understanding between Visy and Amcor. The ACCC invited Mr Roach to attend an interview to discuss his knowledge of the reasons and circumstances surrounding the termination of the offer. It appears that Mr Roach did not respond to that proposal until 22 November 1999. In fact, a "with prejudice" interview took place between Mr Roach and counsel representing the ACCC on 3 December 1999. The ACCC notified him very shortly after the interview that it proposed to discontinue the proceeding against him. 14 As I explain in relation to the Visy respondents (Visy and Mr Guthridge), there is some force in the submission that the ACCC should have realised, when the bulk of its evidence in chief had been filed, that its case was bound to fail. But on balance, I think that the course of events does not warrant the conclusion that the ACCC should have appreciated at a relatively early stage that this would inevitably be the result. 15 It is true that a careful study of the amended statement of claim would have suggested to the ACCC that it faced formidable difficulties in making out a case against Mr Roach. However, there is no evidence that his solicitors ever explained in detail to the ACCC why they considered that the case against him was doomed. Nor, in the circumstances of this case, do I draw the inference that the filing of the notice of discontinuance demonstrates that the case was hopeless from the outset. As Mr Catterns QC points out on behalf of the ACCC, the discontinuance occurred after the "with prejudice" interview took place on 3 December 1999, suggesting that the information elicited at the interview may well have played a part in the ACCC's decision. Compare Davids Holdings, at 40,303. 16 Accordingly, subject to considering the significance of the Calderbank letters, I think the appropriate orders are that the ACCC pay Mr Roach's costs on a party and party basis. The Amcor Respondents' Calderbank Letters 17 The three Amcor respondents (Amcor, Mr Nott and Mr Roach) rely principally on the letter of 13 September 1999. In that letter, their solicitors asserted as follows: "The evidence available to the Court does not support the allegations contained in the further amended statement of claim filed on behalf of the [ACCC] on 5 May 1999." The letter continued: "We are instructed that Amcor, Mr Nott and Mr Roach will not seek an order for costs with respect [to] the proceeding if the [ACCC] discontinues the proceeding on or before Monday 20 September 1999. In the event that the [ACCC] elects to continue with the proceeding after 20 September 1999, it is put on notice that Amcor, Mr Nott and Mr Roach will, at the appropriate time, seek costs against the [ACCC] on an indemnity basis from that date." 18 This is not a case where an offer of settlement was or could have been made in monetary terms. Even so, had the letter analysed the ACCC's evidence in chief and made the point that it was incapable of establishing the pleaded case against any of the Amcor respondents, I would have been inclined to the view that the ACCC should pay the Amcor respondents' costs on an indemnity basis after 20 September 1999. However, the letter did not undertake an analysis of this kind. Indeed, reading the letter as a whole, it is not clear whether the assertion made on behalf of the Amcor respondents was based on the inadequacy of the ACCC's evidence in chief or whether it relied on the exculpatory evidence filed on behalf of the Amcor respondents. The expression "[t]he evidence available to the Court" is ambiguous in this respect. 19 In my opinion, the failure of the ACCC to accede to the terms proposed in the letter of 13 September 1999, does not warrant a departure from the ordinary rule that costs should be payable on a party and party basis. I appreciate that acceptance of the offer made by the Amcor respondents would have led to the ACCC securing a less unfavourable outcome, in that it would not have incurred any liability for costs. However, as I have explained, the letter did not spell out the Amcor respondents' position in detail. It also required the ACCC to respond within a short time, without providing an analysis of the deficiencies in the case the ACCC proposed to make out. It did not make clear that a no-case submission would be made and that the ACCC therefore might not have the opportunity of cross-examining witnesses called by the respondents. In the circumstances, I am not prepared to characterise the refusal of the ACCC to withdraw in response to the letter of 13 September 1999 as an imprudent or unreasonable refusal to compromise. I therefore do not think that the ACCC's refusal to accept the offer justifies an order for costs on an indemnity basis. 20 Nor do I think that there should be a departure from the usual order as to costs by reason of the further letter of 2 December 1999 sent by the solicitors for the Amcor respondents to the ACCC's solicitors. It is true that by this stage the ACCC had received the Amcor respondents' submissions and should have appreciated that it was most unlikely to overcome the hurdle of a no-case submission. (The submissions are dated 1 December 1999.) But the letter was sent less than a week before the hearing and required the ACCC to discontinue the proceedings by the following day in order to take advantage of the Amcor respondents' offer not to seek costs. In my opinion, because of the proximity of the offer to the trial and the short period required for a response, the fact that the offer was not accepted should not lead to an order for costs on an indemnity basis against the ACCC. The Visy Respondents 21 The Visy respondents say that the ACCC should have realised at an early stage that its circumstantial case was bound to fail for the reasons given in the judgment. Given the need to adduce evidence giving rise to a reasonable and definite inference that the Visy respondents had been party to or knowingly involved in an arrangement in contravention of the TP Act, they say that it should have been obvious to the ACCC at least by July 1999 (when most of the ACCC's evidence had been filed) that the evidence was insufficient to support the allegations. 22 There is some force in this submission. However, it may be that the ACCC assumed (wrongly as it turned out) that a no-case submission would not be made or, if made, would not be entertained by the Court. In either of those events, the respondents may have gone into evidence and the opportunity may have arisen to elicit material favourable to the ACCC's case in cross-examination. 23 Had the Visy respondents (or, for that matter, the Amcor respondents) at an early stage explained that the ACCC's circumstantial case fell well short of establishing the alleged breaches of the TP Act and that a no-case submission would be made at the hearing, I think that there would have been a powerful case for the award of costs on an indemnity basis. It seems to me, as a general proposition, that the more specific a party is in identifying the insurmountable obstacles said to be faced by his or her opponent in litigation, the greater the likelihood that an order for indemnity costs will be made if the obstacles indeed prove to be insurmountable. The Visy respondents limited themselves to general assertions about the inadequacy of the ACCC's evidence. In the circumstances, I do not think that the Visy respondents sufficiently drove home the weaknesses of the ACCC's case to warrant an order for indemnity costs. 24 For much the same reasons as I have given in relation to the Amcor respondents, I do not think that the offers made by the Visy respondents warrant a departure from the usual position that costs be awarded on a party and party basis. The letter of 22 September 1999, on which the Visy respondents rely, merely said that "[i]n light of the affidavit evidence which has been filed" they would not seek a costs order if the ACCC discontinued the proceedings by 29 September 1999. The letter went on to state that an indemnity costs order would be sought if the ACCC did not discontinue by the specified date. In the absence of a more detailed explanation as to the deficiencies in the ACCC's case against the Visy respondents. I do not think that the ACCC's refusal to accept the offer should be characterised as imprudent or unreasonable. 25 The solicitors for the Visy respondents sent a second Calderbank letter to the ACCC on 30 November 1999. Like the letter on behalf of the Amcor respondents, this letter was dispatched shortly before the hearing. The written submissions prepared on behalf of the Visy respondents were not sent to the ACCC until late on 1 December 1999. The ACCC was given only two days after receipt of the Visy respondents' submissions to accept the offer. On balance, I think that the offer came too late in the day to warrant an order for indemnity costs being made in favour of the Visy respondents. Publicity 26 The Visy respondents drew attention to the fact that the ACCC had issued a media release concerning the institution of proceedings against the respondents. They said that the media release had been given wide publicity, adversely reflecting on the reputations of individual and corporate respondents. Although it was not submitted that this factor, of itself, warranted an order for indemnity costs, the Visy respondents' submissions appeared to argue that it was a factor that should be taken into account. It was not suggested that the media release was inaccurate. 27 There was no evidence as to what, if anything, the respondents had done to publicise the outcome of the proceedings or whether there was any inhibition on them taking this course. Nor was there evidence as to whether the ACCC had issued a media release to publicise the dismissal of the proceedings (although such a course of action might be thought inherently unlikely). In any event, I do not think that the fact that the ACCC announced the institution of proceedings against the respondents, in terms that were factually correct, is a factor that has any material bearing on the appropriate costs order. Conclusion 28 In my opinion, the ACCC should pay the costs of all respondents on a party and party basis. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville. Associate: Dated: 25 February 2000 Counsel for the Applicant: Mr D K Catterns QC with Mr V F Kerr Solicitor for the Applicant: Australian Government Solicitor Counsel for the First and Third Respondents: Mr C Scerri QC with Mr A I Tonking Solicitor for the First and Third Respondents: Arthur Robinson & Hedderwicks Counsel for the Second and Fourth Respondents: Mr N Young QC with Mr N O'Bryan Solicitor for the Second and Fourth Respondents: Minter Ellison Date of Hearing: 8-9 December 1999 Date of Judgment: 25 February 2000