FEDERAL COURT OF AUSTRALIA Byrnes v Jokona Pty Ltd [2002] FCA 121 COSTS Federal Court of Australia Act 1976 (Cth) s 51A Federal Court Rules Cretazzo v Lombardi (1975) 13 SASR 4 referred to Cummings v Lewis (1993) 41 FCR 559 referred to Mark Peter Byrnes and Ors v Jokona Pty Limited N 1074 of 1997 ALLSOP J SYDNEY 22 FEBRUARY 2002 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1074 of 1997 BETWEEN: MARK PETER BYRNES FIRST APPLICANT AND FIRST CROSS RESPONDENT BRETT KEVIN TAPRELL SECOND APPLICANT AND SECOND CROSS RESPONDENT UNDERSEIGE INDOOR PAINTBALL CENTRES OF AUSTRALIA PTY LIMITED ACN 067 047 303 THIRD APPLICANT AND: JOKONA PTY LIMITED ACN 001 696 073 RESPONDENT AND CROSS CLAIMANT JUDGE: ALLSOP J DATE OF ORDER: 15 FEBRUARY 2002 WHERE MADE: SYDNEY THE COURT ORDERS THAT: Order 4 of the orders pronounced on 31 January 2002 be vacated. 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 N 1074 of 1997 BETWEEN: MARK PETER BYRNES FIRST APPLICANT AND FIRST CROSS RESPONDENT BRETT KEVIN TAPRELL SECOND APPLICANT AND SECOND CROSS RESPONDENT UNDERSEIGE INDOOR PAINTBALL CENTRES OF AUSTRALIA PTY LIMITED ACN 067 047 303 THIRD APPLICANT AND: JOKONA PTY LIMITED ACN 001 696 073 RESPONDENT AND CROSS CLAIMANT JUDGE: ALLSOP J DATE OF ORDER: 22 FEBRUARY 2002 WHERE MADE: SYDNEY THE COURT ORDERS THAT: The respondent pay two thirds of the costs of the applicants of the whole proceedings. 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 N1074 of 1997 BETWEEN: MARK PETER BYRNES FIRST APPLICANT AND FIRST CROSS RESPONDENT BRETT KEVIN TAPRELL SECOND APPLICANT AND SECOND CROSS RESPONDENT UNDERSEIGE INDOOR PAINTBALL CENTRES OF AUSTRALIA PTY LIMITED ACN 067 047 303 THIRD APPLICANT AND: JOKONA PTY LIMITED ACN 001 696 073 RESPONDENT AND CROSS CLAIMANT JUDGE: ALLSOP J DATE: 22 FEBRUARY 2002 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 31 January 2002 I made orders in this matter disposing of the substance of the proceedings. I stood over the question of costs. The applicants were successful in obtaining an order for judgment. On 31 January I ordered that there be judgment entered in favour of the first and second applicants jointly in the sum of $132,731.00 which included interest under s 51A of the Federal Court of Australia Act 1976 (Cth). That total sum was the equivalent of judgment for $80,000, plus pre-judgment interest. 2 On 15 February 2002 I discussed with the parties the view that I had formed that the existence of order 4 pronounced on 31 January 2002 may be productive of unnecessary costs in the working out of different costs orders. The orders of 31 January had not been entered. I vacated order 4 indicating to the parties that I would make a simplified order dealing with the costs of the whole proceedings, without the need to differentiate between the cross claim and application. The aim of this change in approach was not to amend the intended effect of the orders, but to simplify matters and to avoid unnecessary expense being visited on the parties should disagreements arise in connection with taxation. 3 The applicants had claimed over $10,000,000. In support of this claim they tendered evidence of an accountant expressing her opinion that the damages were over $10,000,000. That report, as I indicated in [122] of my reasons, had a deduced pre-tax internal rate of return of 2,500 percent for the business in question. As I indicated in my reasons, I did not place any reliance whatsoever upon the accountant's opinions beyond those reflecting her interpretation of the available accounting records. I should add at this point that the report was one authored by the person mentioned in my earlier reasons and by another person in the firm. Only the former was called to give evidence. 4 Before 15 February 2002, when I made clear my desire to vacate order 4, the parties provided me with written submissions as to costs. I thank counsel for their assistance. All these submissions were relevant to a simplified global costs order dealing with the whole proceedings. 5 The respondent submitted that in the circumstances each party should pay its and his own costs of the application as distinct from the cross claim with which I had dealt in order 4. The applicants sought all their costs of the proceedings. 6 The respondent identified six bases to support the argument that costs should be as submitted by it. The first basis was Order 62 Rule 36A(2) of the Federal Court Rules. That rule empowers me to reduce costs by one third if I am of the opinion that the proceedings could more suitably have been brought in another court or tribunal and I so declare. There was a procedural history in this matter in which the suitability of the claim for the District Court of New South Wales was raised. However, after the filing of the expert report from the accountants it was thought appropriate to keep the matter in this Court. I do not propose to rely upon the provisions of Order 62 Rule 36A(2). I will say something more about the accountant's report in a moment. However, I do not think that I should assess the matter as if that report had not been filed. 7 The next matter raised by the respondent was the presentation by the applicants of their video evidence which lengthened the hearing for one day. That this occurred is probably uncontroversial. However, there was evidence as to the making of these videos and while the presentation was less than smooth, I do not think I should visit on the applicants the consequences of the technical deficiencies in the making of the evidence. 8 The third matter raised concerns the outdoor land case. The submission was that the case was inherently improbable, based on asserted conversations which never took place, grimly adhered to regardless of the difficulties which emerged and added very significantly to the time which the matter took to hear. These complaints are related to the fourth matter raised by the respondents, that is, it was said, the totally unsatisfactory nature of the way in which many of the applicants' witnesses gave their evidence. I think there is real force in these complaints. It is true that I was of the view that witnesses on both sides were less than entirely satisfactory; it is also true that the necessity for some proceedings was caused by the wrongful conduct of the respondent which it contested. However, I think that the proceedings were significantly lengthened and made more significantly complex by the way Mr Byrnes and many of the witnesses for the applicants gave evidence, being matters to which I have adverted in [11] to [25], in particular, of my earlier judgment. I propose to place some significant weight upon these considerations in assessing the question as to whether I should make an order for costs less than one reflecting the usual rule of costs following the event. 9 The fifth matter raised by the respondent is that the applicants failed in a number of the issues concerning the topic of quiet enjoyment. At this point I should indicate that I recognise the warning of Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 as to apportioning costs according to issues. See also Cummings v Lewis (1993) 41 FCR 559, 602-603. I am reluctant to give any real weight to a proposition that I should disentangle too much the factual matters decided one way or the other under the successful claim for breach of the covenant. Although, overall in the taking into account of the fourth matter referred to above, there is room to recognise the unsatisfactory nature of some of this evidence. 10 I do not propose to deal with every matter raised in the submissions. I have been assisted by them and have examined them carefully. 11 I do not think it appropriate to minutely examine the time taken in the trial to deal with each issue and then examine who won each issue. Litigation is not such a precise activity. However, I do think that the costs of this case were significantly increased by the way the evidence put forward by the applicants was given and by what they said in their evidence. I do not propose to repeat anything I said in my earlier judgment. However, I also recognise that there is a heavy cost in beginning and setting up any litigation which cost was necessary to undertake. 12 The expert evidence on quantum was a matter which clearly inflamed the proceedings. It was on its face unrealistic. It emanated from a respectable firm of accountants. However, I do not see why the respondent should pay for all of its production, especially in circumstances where the respondent was responsible for placing before the Court the only reliable parameters of evidence concerning quantum. 13 In my view, there should be a reduction of costs to which the applicants are entitled. I do not propose to engage in any precise analysis as to additional time taken up because of the outdoor land issue or the way unsatisfactory evidence was given. However, in my view, these matters significantly lengthened the trial and significantly extended the costs of the trial. The outdoor land issue was an issue which lacked merit in the manner and respects I discussed in my earlier judgment. It may well be that the psychological reasons for why this occurred were as put forward by Mr DeBuse in his submissions. I am prepared to, and do, give weight to notions that inexperience, anxiety, hostility, ignorance and mistrust of the process and lack of sophistication may have affected some aspects of the evidence of the applicants and those who gave evidence for them. However I think it is only, at the very best, a partial explanation. In saying this, I should not be taken as resiling from the criticisms I made in my reasons published on 31 January 2002. 14 As to the expert accounting report prepared on behalf of the applicants, a significant part of that report dealt with accounting information and interpretation of records which was of some utility in the proceedings. But it included an extrapolation of wholly unrealistic income expectations and the formulation of opinions based on those. 15 In those circumstances and in the light of all the other matters which have been submitted to me I propose to order that the respondent pay two thirds of the costs of the applicants of the whole proceedings. I think this is a fair measure of costs reflecting the success of the applicants in the light of the way the case was conducted. I had discussed an order of 50% with the parties on 15 February. Notwithstanding the careful and helpful submissions of Mr Jones I have come to the view that two thirds is a fairer assessment to reflect the matters which I have discussed in these reasons. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop. Associate: Dated: 22 February 2002 Counsel for the Applicant Mr B DeBuse and Cross-respondents: Solicitor for the Applicant Marsdens and Cross-respondents: Counsel for the Respondent and Cross-claimant: Mr P Jones Solicitor for the Respondent and Cross-claimant: Parry Carroll Kanjian Date of Hearing: 15 February 2002 Date of Judgment: 22 February 2002