FEDERAL COURT OF AUSTRALIA Pegasus Gold Inc v Bateman Project Engineering Pty Ltd [2000] FCA 201 PEGASUS GOLD INC & ORS v BATEMAN PROJECT ENGINEERING PTY LIMITED & ORS NG 471 OF 1998 JUDGE: MATHEWS J DATE: 24 FEBRUARY 2000 PLACE: SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 471 OF 1998 BETWEEN: PEGASUS GOLD INC FIRST APPLICANT PEGASUS GOLD CORPORATION SECOND APPLICANT PEGASUS GOLD AUSTRALIA PTY LIMITED THIRD APPLICANT AND: BATEMAN PROJECT ENGINEERING PTY LIMITED FIRST RESPONDENT KINHILL PACIFIC PTY LIMITED SECOND RESPONDENT KILBORN ENGINEERING PACIFIC PTY LIMITED THIRD RESPONDENT SVEDALA AUSTRALIA LIMITED CROSS-RESPONDENT TO FIRST CROSS-CLAIM AUSTRALIAN MINING CONSULTANTS CROSS-RESPONDENT TO SECOND CROSS-CLAIM GARCHEL CROSS-RESPONDENT TO THIRD CROSS-CLAIM KNIGHT PIESOLD CROSS-RESPONDENT TO FOURTH CROSS-CLAIM MINING & RESOURCE TECHNOLOGY CROSS-RESPONDENT TO FIFTH CROSS-CLAIM RESOURCE SERVICE GROUP CROSS-RESPONDENT TO SIXTH CROSS-CLAIM JUDGE: MATHEWS J DATE OF ORDER: 24 FEBRUARY 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. BKK pay Svedala's costs of and incidental to the notice of motion filed on 27 September, but to include only one-third of Svedala's costs of attending at court on 6 and 7 December 1999. 2. BKK to pay the costs forthwith. Svedala be granted leave pursuant to order 62 rule 3(iii) of the Federal Court Rules to proceed to a taxation of costs forthwith. 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 471 OF 1998 BETWEEN: PEGASUS GOLD INC FIRST APPLICANT PEGASUS GOLD CORPORATION SECOND APPLICANT PEGASUS GOLD AUSTRALIA PTY LIMITED THIRD APPLICANT AND: BATEMAN PROJECT ENGINEERING PTY LIMITED FIRST RESPONDENT KINHILL PACIFIC PTY LIMITED SECOND RESPONDENT KILBORN ENGINEERING PACIFIC PTY LIMITED THIRD RESPONDENT SVEDALA AUSTRALIA LIMITED CROSS-RESPONDENT TO FIRST CROSS-CLAIM AUSTRALIAN MINING CONSULTANTS CROSS-RESPONDENT TO SECOND CROSS-CLAIM GARCHEL CROSS-RESPONDENT TO THIRD CROSS-CLAIM KNIGHT PIESOLD CROSS-RESPONDENT TO FOURTH CROSS-CLAIM MINING & RESOURCE TECHNOLOGY CROSS-RESPONDENT TO FIFTH CROSS-CLAIM RESOURCE SERVICE GROUP CROSS-RESPONDENT TO SIXTH CROSS-CLAIM JUDGE: MATHEWS J DATE: 24 FEBRUARY 2000 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 15 December 1999, I ordered that the respondents, Bateman Project Engineering Pty Ltd, Kinhill Pacific Pty Ltd andKilborn Engineering Pacific Pty Limited (jointly known as "BKK"), provide security for costs to the cross-respondents in the first cross-claim, Svedala Australia Limited ("Svedala"). The notice of motion seeking this order was filed by Svedala on 27 September 1999. This followed quite lengthy correspondence between the solicitors for Svedala and the solicitors for BKK. The correspondence commenced in June 1999 when Svedala's solicitors expressed concern about BKK's ability to meet any adverse costs orders and sought information relating to BKK's financial position. 2 Eventually, on 20 August 1999, BKK's solicitors said that the information requested would not be provided. Accordingly, a notice of motion seeking that BKK provide security for costs was taken out by Svedala, as mentioned, on 27 September 1999. On 30 September 1999, Svedala served a notice to produce on BKK, seeing information as to the latter's financial position. The notice remained unmet, despite further correspondence between the parties' solicitors. 3 Eventually, on 19 November 1999, BKK's solicitors made a limited admission as to the company's inability to meet any costs order in favour of Svedala. Svedala's solicitor's response, dated 26 November 1999, claimed that the admission was deficient and sought an unqualified admission to the same effect. Eventually, on 1 December 1999, after further correspondence between the solicitors, an admission was made in the form requested by Svedala. This admission obviated the need for the production of documents as to BKK's financial position and Svedala's notice to produce was thereafter not pressed. 4 A number of matters relating to the conduct of the proceedings generally had been listed for hearing on 6 and 7 December. Amongst these were applications for security for costs, and these applications proceeded on those days. There were three contested issues relating to security, one of which was Svedala's notice of motion taken out on 27 September. Mr Collins QC appeared with Mr Freeman for Svedala in relation to this notice of motion. It was the only matter before the Court during those two days in which Svedala had any interest. All other issues involved the applicants and BKK only. 5 Mr Collins' submissions in support of Svedala's application were made at the end of the first hearing day, 6 December. The application was based on the admission contained in BKK's solicitor's letter dated 1 December 1999. The next morning, 7 December, after taking evidence by video link from a witness in the United States of America, we returned to the question of security for costs. Mr McDougall QC, who appeared for BKK at the hearing, opposed the making of an order as sought by Svedala. However, he had little to say in support of his opposition. The amount of security sought by Svedala was opposed, but that was not a material issue, given that the amount of security is, in any event, normally to be determined by the Registrar of the Court. 6 On 7 December 1999, I reserved my judgment on all issues relating to security for costs. This was not because of any complexity in relation to Svedala's claim against BKK, but because of other contentious issues which had been raised between BKK and the applicants in relation to security for costs. Had the only issue as to security been that between Svedala and BKK, I would not have reserved my judgment but would have made the order sought by Svedala then and there. For, as I later observed in my judgment, the evidence was all one way in relation to this application, namely that in the light of the admission made by BKK's solicitors on 1 December 1999, Svedala was entitled to security for costs in an amount to be determined by the Registrar. 7 In my judgment of 15 December I deferred the question of costs. Various other issues in the proceedings had already been listed for hearing yesterday, on 23 February 2000, and I left it open for any party to make submissions as to costs on that occasion. In response to this invitation, Svedala's counsel lodged written submissions on 22 February 2000, seeking two orders: first, that BKK pay Svedala's costs of and incidental to the notice of motion filed on 27 September 1999, and secondly that BKK pay the costs forthwith, and that Svedala be granted leave to proceed immediately to a taxation of such costs. 8 Svedala's submissions in support of its application set out the history of the matter, including the lengthy correspondence between the solicitors for BKK and for Svedala as described earlier. Mr Freeman, who appeared for Svedala at the hearing of the costs application, pointed out that there was a delay of nearly six months between Svedala's first approach relating to security for costs and the admission made by BKK's solicitors on 1 December. The responsibility for this delay, Mr Freeman asserted with some force, was directly sheeted home to BKK's solicitors. Thereafter, as Mr Freeman pointed out, BKK, notwithstanding the terms of this admission, continued to oppose the making of an order as sought by Svedala. In the event, Mr McDougall, as I have already mentioned, had little to say in support of this approach. But the fact that the application was opposed meant that Mr Collins, QC and Mr Freeman, who had no other interest in the matters debated on 6 and 7 December 1999, had to spend much of those two days in court. As Mr Freeman pointed out, none of this should have happened. It put Svedala to unnecessary expense to which it should not have been subjected and which it should not now have to pay. 9 Mr Castle, who appeared for BKK on the costs application yesterday, urged that separate consideration apply in relation to two stages of last year's proceedings. The first stage consisted of the correspondence between the solicitors up to the time that the admission was made on 1 December 1999. The second stage involved Svedala's attendance at the hearing on 6 and 7 December 1999. Mr Castle conceded that some basis had been shown for ordering that BKK pay Svedala's costs in relation to the correspondence culminating in the admission of 1 December. However, he said that different issues applied in relation to the costs of attending at the hearing. In particular, Svedala's legal team had no interest in any of the other issues ventilated during those two days and it was not necessary that they remain in court for most of that time. The fact that some of Svedala's legal representatives did remain in court throughout the two days of hearing was not at all attributable to any action of BKK, Mr Castle urged. Svedala's representatives were probably using the hearing as a familiarising process for the purpose of acquainting themselves with details of this large and complex piece of litigation, according to Mr Castle. He repeated that their attendance during much of the two day period was unnecessary and was certainly not attributable to any action of BKK. 10 There is considerable force in Mr Castle's argument in relation to Svedala's claim for its entire costs of attending at the hearing on 6 and 7 December. On the other hand, had it not been for BKK's refusal to acknowledge the strength of Svedala's claim for security for costs and therefore to concede Svedala's entitlement to such an order, Svedala's legal team would not have had to attend court at all during that two day period. 11 In the normal course of events, Svedala's costs of obtaining an order for security for costs would have been costs in the cause. But the course of events here could not be described as normal. BKK, through its lawyers, took a confrontationist stand in relation to an issue which should have been dealt with very quickly and with the expenditure of a minimum of costs. After all, it was BKK which had the knowledge, throughout this series of months, that its financial position was such that Svedala was, prima facie, entitled to an order for security for costs. This information was withheld for as long as possible and, even afterwards, Svedala's representatives opposed the making of an order for security for costs. 12 I propose to deal with the matter in the following way. I propose to make the primary order sought by Mr Freeman, but Svedala will be entitled to receive only one-third of its costs of attending at court on 6 and 7 December. This is in fact larger than the proportion of time which was devoted to that issue during those two days. 13 As to the second order sought by Mr Freeman, order 62, rule 3(iii) of the Federal Court Rules would, in the absence of the granting of leave, mean that Svedala could not tax or recover these costs until the conclusion of the principal proceedings. This is likely to be a very long time. The principal proceedings are, as I have mentioned, long and complex. The time that they will take to reach conclusion, subject to earlier settlement, is certain to be measured in years. This is a relevant factor, as acknowledged by the Full Court in Allstate Life Insurance Company v ANZ Banking Group (Lockhart, Lindgren and Tamberlin JJ, unreported 17 August 1995). 14 The overarching consideration is whether the demands of justice require that there be a departure from the normal rule, namely that a party will not be entitled to have costs of interlocutory proceedings until the conclusion of the principal proceedings. 15 Had the likelihood of a lengthy delay until the conclusion of the proceedings been the only consideration favouring the granting of leave, I would probably not have been disposed to make the order sought by Mr Freeman. But there are other considerations which, in my view, are highly relevant here. The first and most important is the necessity to apply a brake, as Mr Freeman described it, to unnecessarily obstructive behaviour, such as occurred here. 16 Mr Castle urges that this consideration, which was relevant to my determination in relation to the making of a costs order, should not be used again in relation to this issue. However, I do not accept this proposition. The mere fact that BKK's conduct of the litigation is relevant to the awarding of costs in the first place does not make it irrelevant to the question of when those costs might be recoverable. 17 This is, as I have already observed, a long and complex piece of litigation. It will be difficult enough to manage, even with full co-operation and helpfulness from all parties and their legal advisers. Without that co-operation and helpfulness, it will be very difficult indeed, with consequent increases in the costs of all parties. This is something to be avoided if at all possible. 18 Svedala has incurred costs in seeking an order for security to which it should not have been put. It is continuing to incur costs in the course of the litigation. In my view, the demands of justice are such that it should not have to wait for the conclusion of these proceedings in order to receive its costs. Accordingly, I propose to make the second order sought by Mr Freeman. 19 The orders I make are: 1. BKK pay Svedala's costs of and incidental to the notice of motion filed on 27 September, but to include only one-third of Svedala's costs of attending at court on 6 and 7 December 1999, and 2. BKK to pay the costs forthwith. Svedala be granted leave pursuant to order 62, rule 3(iii) of the Federal Court Rules, to proceed to a taxation of costs forthwith. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mathews. Associate: Dated: 24 February 2000 Counsel for the Cross-Respondent to First Cross-Claim CD Freeman Solicitor for Cross-Respondent to First Cross-Claim Clayton Utz Counsel for the Respondent: T Castle Solicitor for the Respondent: Tress Cocks & Maddox Date of Hearing: 23 February 2000 Date of Judgment: 24 February 2000