FEDERAL COURT OF AUSTRALIA BP Australia Pty Limited v Nyran Pty Limited [2003] FCA 1308 COSTS – application for construction of fuel supply agreement – respondent wholly successful on application – respondent partially successful on cross-claim – whether costs should follow the event – whether scale of costs should be varied Federal Court Act 1976 (Cth) s 43 Federal Court Rules 62 r 4(2), O 62 r 12(1), O 62 r 22 Australia China Business Bureau Pty Ltd v MCP Australia Pty Ltd [2003] FCA 1121 applied Cretazzo v Lombardi (1975) 13 SASR 4 cited Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 cite Donald Campbell & Co v Pollack [1927] AC 732 cited Forster v Farquhar [1893] 1 QB 564 cited Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 cited Ritter v Godfrey [1920] 2 KB 47 cited BP AUSTRALIA PTY LIMITED v NYRAN PTY LIMITED W144 of 2002 RD NICHOLSON J 14 NOVEMBER 2003 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W144 OF 2002 BETWEEN: BP AUSTRALIA PTY LIMITED (ACN 004 085 616) (FORMERLY BP AUSTRALIA LIMITED) APPLICANT AND: NYRAN PTY LIMITED (ACN 056 571 530) RESPONDENT NYRAN PTY LIMITED (ACN 056 571 530) CROSS CLAIMANT BP AUSTRALIA PTY LIMITED (ACN 004 085 616) (FORMERLY BP AUSTRALIA LIMITED) CROSS RESPONDENT JUDGE: RD NICHOLSON J DATE OF ORDER: 14 NOVEMBER 2003 WHERE MADE: PERTH MINUTE OF ORDERS IN RELATION TO COSTS: 1. The applicant pay: (a) the respondent's costs on the applicant's application (save for the costs in relation to the enquiry ordered on 22 August 2003, which costs are reserved pending the conclusion of the enquiry), including any reserved costs; and (b) 50 per cent of the respondent's costs on its cross-claim (including the costs of all reserved decisions in which the respondent was successful); forthwith, to be agreed or in default of agreement taxed subject to: (a) the respondent's costs including the reasonable fees of two counsel (not limited to their fees at trial); (b) the taxing officer making reasonable allowance for: (i) the briefing of senior and junior counsel to appear at trial; (ii) fees for the settling of pleadings by senior and junior counsel; (iii) other fees rendered by senior and junior counsel in respect of advice and other work reasonably undertaken by counsel. (iv) fees payable to solicitors; (v) the cost of transcript; (vi) the attendance of 3 instructing solicitors at the trial (from time to time). Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W144 OF 2002 BETWEEN: BP AUSTRALIA PTY LIMITED (ACN 004 085 616) (FORMERLY BP AUSTRALIA LIMITED) APPLICANT AND: NYRAN PTY LIMITED (ACN 056 571 530) RESPONDENT NYRAN PTY LIMITED (ACN 056 571 530) CROSS CLAIMANT BP AUSTRALIA PTY LIMITED (ACN 004 085 616) (FORMERLY BP AUSTRALIA LIMITED) CROSS RESPONDENT JUDGE: RD NICHOLSON J DATE: 14 NOVEMBER 2003 PLACE: PERTH REASONS FOR JUDGMENT R D NICHOLSON J 1 Reasons for judgement in this proceeding were delivered on 28 May 2003, attaching draft orders. Final orders were made on 22 August 2003. Those orders reserved costs. It is now necessary that orders be made relating to that issue. 2 It is common ground that s 43 of the Federal Court Act 1976 (Cth) gives the Court the discretion to award costs in a matter and that the discretion must be exercised judicially: Donald Campbell & Co v Pollack [1927] AC 732, Cretazzo v Lombardi (1975) 13 SASR 4. It is also accepted that O 62 r 12(1) of the Federal Court Rules provides for taxation to be by reference to the Second Schedule of those Rules unless otherwise ordered. Order 62 r 4(2) provides that the Court may order that instead of taxed costs a person shall be entitled to a proportion specified in the order of the taxed costs or costs calculated in other ways. 3 It is also common ground that normally the proper exercise of the discretion is that the successful party is entitled to costs from the unsuccessful party so far as they were reasonably and properly incurred: Ritter v Godfrey [1920] 2 KB 47. Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that such party bear the expense of litigating that portion upon which he or she has failed: Forster v Farquhar [1893] 1 QB 564. Additionally such a party may be ordered to pay the other party's costs of them: Cretazzo v Lombardi (1975) 13 SASR 4 at 12. These principles are summarised in the oft quoted passage in the reasons of Toohey J in Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 at 48,136 approved by the Full Court in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261. costs of the application 4 When this matter went to trial it was on the basis of the applicant's Amended Application filed on 3 October 2002 and the Further Amended Statement of Claim filed on 8 October 2002. On the eighth day of the trial the applicant abandoned claims based upon rectification and claims of misleading and deceptive conduct ('the abandoned claims'). In consequence, on 22 November 2002 the applicant filed in Court a Further Amended Application ('the application'). On 28 November 2002 the applicant filed a Second Further Amended Statement of Claim ('the statement of claim') amended pursuant to orders made on 22 November 2002. It was on these latter documents that the matter went to judgement. 5 Two main issues were raised by the application and the statement of claim. The first concerned the construction of cl 23 of the Restated Fuel Supply Agreement ('RFSA'). The issue was whether, if new prices are not agreed during a price negotiation period, the prices specified by the applicant during the price negotiation period would apply to the fuel to be supplied pursuant to the RFSA for the next twelve months or the price applicable prior to the price negotiation period would continue ('the price construction issue'). The second issue concerned the Clean Fuels Quality Premium ('CFQP'). The issue was whether, if a new CFQP payable as part of the prices of fuel is not agreed during a price negotiation period the CFQP specified by the applicant during the price negotiation period will apply to the fuel to be supplied pursuant to the RFSA for the next twelve months, provided that the CFQP charged to the respondent does not exceed the CFQP charged to any of the applicant's other customers in Western Australia ('the CFQP construction issue'). submissions for the applicant 6 It is accepted for the applicant that it failed on the price construction issue. 7 For the applicant it is submitted that it succeeded on the second issue. The submissions for the applicant rely on the following matters in support: '(a) During the course of the hearing in October and November 2002 the second issue was admitted by Gull (see paragraph 13(a) of Gull's Defence to Further Amended Statement of Claim and Amended Cross Claim filed on 9 October 2002 ("the Defence")); (b) Following delivery of the judgment and before entry of final orders BP contended, because of the admission of the second issue, that it was entitle to a declaration permitting it to increase the CFQP in the circumstances set out in paragraph 2.1(b) above; (c) Following BP's advice to Gull as referred to in paragraph 2.2(b) above, Gull filed a Notice of Motion on 20 June 2003 seeking leave to amend its Defence to withdraw the admission in paragraph 13(a) of its Defence, in the form of the Proposed Amended Defence to Second Further Amended Statement of Claim and Further Amended Cross Claim filed on 12 June 2003 ("Proposed Amended Defence"); (d) The parties ultimately agreed to dispose of Gull's Notice of Motion on the following basis: (i) BP and Gull entered into a Deed of Amendment of the RFSA on 21 August 2003, which amended the RFSA to provide that BP was entitled to increase the CFQP in the circumstances referred to in paragraph 2.1(b) above (see paragraph 3(a)(i) of the Deed of Amendment); and (ii) An order was made by his Honour on 22 August 2003 that, inter alia, Gull have leave to amend its Defence in terms of the Proposed Amended Defence.' As this is an instance where it is easy to identify the issue on which the respondent failed, it is submitted that the respondent is only entitled to 50 per cent of its costs of the action. submissions for the respondent 8 It is submitted for the respondent that the applicant failed in respect of each and every paragraph of the relief sought by it with the Court ordering that its claim be dismissed in its entirety. It is said that this is not a case in which the applicant was partially successful on discreet issues. Therefore it is contended that no sufficient cause has been shown for departing from the ordinary rule that costs follow the event: cf Australia China Business Bureau Pty Ltd v MCP Australia Pty Ltd [2003] FCA 1121. 9 Additionally it is submitted that most of the preparation for and conduct of the case related to the applicant's abandoned claims in relation to which the costs alone would be significantly in excess of 50 per cent of the respondent's costs. 10 Further it is said that the issue of the CFQP did not arise on the application; rather it arose on the respondent's cross claim. The applicant's success on the point is said not to be germane to costs because the respondent admitted it in its defence and so it could not have occasioned work. In addition it is said to be wrong to apply the concept of the respondent having 'failed' on the issue when it was never contested. reasoning 11 I consider the submissions for the respondent accurately reflect the position arising at trial on the pleadings. There is no proper case made in relation to the application for accepting the applicant's proposed variation to the normal rule that costs of the application should follow the event. respondent's cross claim submissions for applicant 12 For the applicant it is submitted that the respondent raised four issues on its cross-claim which were argued at the hearing. The first was whether the words 'any other customer in Western Australia' have their ordinary meaning, that is 'any customer of the applicant in Western Australia'. It is said this was a false issue as the applicant did not so contend at trial. 13 The second issue was the meaning of the word 'charged' in cl 81 of the RFSA. On this the applicant claims to have been largely successful although the Court accepted that there was a charge when it was 'as a matter of substance' imposed or asked for. 14 The third issue was whether cl 81 of the RFSA permitted the applicant to continue charging the respondent a premium for clean fuel even if the applicant made no such charge to some or all of its other customers in Western Australia. The applicant claims to have succeeded on this issue. 15 The fourth issue was a misleading and deceptive conduct claim. This was withdrawn by the respondent on the last day of the hearing. 16 These issues being easy to identify and having occupied substantial time at the hearing, and the respondent having only been partially successful on its cross-claim, it is submitted that the respondent should only be entitled to 20 per cent of its costs on the cross-claim. submissions for the respondent 17 In relation to the first issue, it is submitted for the respondent that the issue was an important issue, having been raised by applicant's counsel in opening, evidence being led on it and attracting reference in the reasons for judgement. 18 In relation to the third issue, it is accepted that the applicant succeeded but it is said that this was an issue on which there was no discovery, on which no evidence was led and which was dealt with solely by argument, adding no material time to the preparation or hearing of the case. 19 In relation to the fourth issue, it is said that the pleadings withdrawn by the respondent were responsive to the trade practices pleadings in the applicant's abandoned claims. It is contended that they added little to the preparation for or the conduct of trial as the respondent's witnesses would have been cross-examined in any event on these issues as the applicant sought to rely on that evidence for the purposes of the price construction issue. 20 The case for the respondent on this issue is that it was substantially successful and should not be deprived of its costs, given that the third issue cannot be construed as taking up 80 per cent of the time spent on the cross-claim. reasoning 21 The respondent's cross-claim was allowed in part. I do not accept the submission for the applicant that 20 per cent adequately represents that part. I do accept, however, that some significant apportionment is dictated by the circumstances. I consider this would be met by an order that the applicant pay 50 per cent of the respondent's costs on its cross-claim (including the costs of all reserved decisions in which the respondent was successful). form of orders scale of costs 22 The submissions and proposed orders for the respondent seek an order that the respondent's costs be taxed and allowed without being constrained by the limits and rates in the Second Schedule. This is supported by contentions that the trial was of significant size and conducted at short notice; there were 14 interlocutory matters; combined discovery ran to 8 lever arch files and was conducted on a piecemeal basis; the matter was one of great importance to both parties and affected other oil companies and consumers of fuel in Western Australia. Additionally it is said that the Second Schedule was last amended on 1 October 2002 so that the hourly rate of solicitors for some attendances is less than half that permitted by the tariff applicable in the Supreme Court of Western Australia and considerably less than are being charged by most solicitors. 23 Submissions for the applicant point to O 62 r 22 where the matters the taxing officer shall take into consideration in the exercise of the discretion to allow a fee or allowance the following matters: (a) other fees and allowances to the solicitor or counsel; (b) the nature and importance of the proceeding; (c) the amount involved; (d) the principle involved; (e) the I interest of the parties; (f) the fund, estate or person to bear the costs; (g) the general conduct and cost of the proceeding; and (h) all other relevant circumstances. Here it is said the circumstances relied upon do not distinguish this proceeding from most other commercial cases. 24 I accept the applicant's submissions that the reasons given for the respondent are not sufficient reason to make the variation sought. I take this to extend also to the scale of costs for counsel's fees. other matters 25 The respondent also made submissions concerning briefing of senior and junior counsel; settling of pleadings by senior and junior counsel; other fees rendered by senior and junior counsel; transcript and attendance of three instructing solicitors from time to time. Those submissions are not opposed, although affidavit evidence corrects the factual foundation of the applicant in relation to the last of these matters. 26 There is no proper foundation upon which to order that the applicant pay the respondent's costs on an indemnity basis from 13 October 2002. conclusion 27 For these reasons I consider the costs orders should be in the form of the respondent's minute of proposed orders filed 22 September 2003 as amended to reflect the above reasons as appears in the draft accompanying these reasons. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson. Associate: Dated: 14 November 2003 Counsel for the Applicant: Mr S Wang Solicitor for the Applicant: Clayton Utz Counsel for the Respondent: Mr DR Goodman Solicitor for the Respondent: Freehills Date of Last Written Submission: 3 November 2003 Date of Judgment: 14 November 2003