FEDERAL COURT OF AUSTRALIA Hoyts Multi-Plex Cinemas Pty Ltd v Fox Entertainment Precinct Pty Ltd [2003] FCA 1347 COSTS – application for an order of preliminary discovery under O 15A r 6 – matter resolved by agreement before final determination – basis upon which exercise of discretion as to costs should be exercised. Federal Court of Australia Act 1976 (Cth) s 43 Federal Court Rules O 15A r 6 Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 cited C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 referred to Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 cited Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 cited Yates Property Corp Pty Ltd v Boland (2000) 179 ALR 664 cited HOYTS MULTI-PLEX CINEMAS PTY LTD ACN 006 564 585 v FOX ENTERTAINMENT PRECINCT PTY LTD ACN 081 288 520 AND LEND LEASE DEVELOPMENT PTY LIMITED ACN 000 311 277 N 819 of 2003 BRANSON J 21 NOVEMBER 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 819 of 2003 BETWEEN: HOYTS MULTI-PLEX CINEMAS PTY LTD ACN 006 564 585 APPLICANT AND: FOX ENTERTAINMENT PRECINCT PTY LTD ACN 081 288 520 FIRST RESPONDENT LEND LEASE DEVELOPMENT PTY LIMITED ACN 000 311 277 SECOND RESPONDENT JUDGE: BRANSON J DATE OF ORDER: 21 NOVEMBER 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT:6+ 1. The applicant pay the respondents' costs of the application to the extent only that such costs were incurred after the directions hearing of 5 August 2003. 2. Subject to paragraph 1, there be no order as to the costs of the application. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 819 of 2003 BETWEEN: HOYTS MULTI-PLEX CINEMAS PTY LTD ACN 006 564 585 APPLICANT AND: FOX ENTERTAINMENT PRECINCT PTY LTD ACN 081 288 520 FIRST RESPONDENT LEND LEASE DEVELOPMENT PTY LIMITED ACN 000 311 277 SECOND RESPONDENT JUDGE: BRANSON J DATE: 21 NOVEMBER 2003 PLACE: SYDNEY REASONS FOR JUDGMENT introduction 1 By an application dated 10 July 2003 the applicant sought orders under O 15A r 6 of the Federal Court Rules requiring the respondent to make discovery of fourteen categories of documents as identified in a schedule to the application. 2 The parties subsequently accepted that the documents of which discovery was sought could be divided into two broad categories. Discovery of the documents in the first of these broad categories was ultimately not opposed by the respondents. Discovery of the documents in the second broad category was opposed. This second category comprised the documents identified in paragraphs 10, 12, 13 and 14 of the schedule to the application. 3 At the commencement of the hearing of the application, the Court was asked to note an agreement between the parties concerning discovery of the documents in the first of the broad categories referred to above. During the course of the hearing a further agreement was reached between the senior counsel for the applicant and the senior counsel for the first respondent pursuant to which discovery of certain additional documents would be provided to the applicant. The application was then dismissed by consent. The Court thereafter heard argument on the question of costs and reserved judgment on that question. 4 For the reasons set out below I have concluded that the appropriate order to be made as to costs is that the applicant pay the respondents' costs of the application to the extent only that those costs were incurred after the completion of the directions hearing held on 5 August 2003. The intended effect of this order is that each party will bear its own costs of the application up to and including the costs of the directions hearing held on 5 August 2003. Thereafter the applicant is to pay the respondents' taxed costs. relevant principles 5 Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a wide discretion to award costs. In the absence of special circumstances the exercise of the discretion vested in the Court by s 43 is guided by the principle that costs should follow the event (Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748). 6 In an appropriate case the Court will make an order for costs even where there has been no hearing on the merits and the parties do not wish to proceed to a hearing (Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194; Yates Property Corp Pty Ltd v Boland [2000] FCA 1106; (2000) 179 ALR 664). In such a case it will rarely be appropriate for the Court, in determining how the cost of the proceeding should be borne, to endeavour to determine what would have been the outcome had there been a full hearing on the merits (Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-5 per McHugh J). For this reason in a case of this kind the Court will ordinarily seek to determine whether the applicant acted reasonably in commencing the proceeding and whether the respondent acted reasonably in defending the proceeding. 7 The ordinary rule that costs should follow the event cannot be applied in this case because agreement between the parties allowed the application to be dismissed without a determination on the merits. However, the principles developed to guide the exercise of the Court's discretion as to costs where there has been no hearing on the merits are not entirely appropriate to the circumstances of this case either. Here there was a partial hearing; the evidence on which the applicant relied had been received and counsel had commenced, but not concluded, their respective addresses. The Court is thus in a better position to determine the likely outcome of the proceeding had there been a full hearing than would ordinarily be the case where a matter is settled. Nonetheless, the Court suffers from the disadvantage of not having received all of the assistance normally provided by counsel. 8 In my view, it is appropriate for me, in considering the appropriate order to be made as to costs, to have regard to the evidence received on the application. I also consider it appropriate to consider that evidence in the context of the requirements of O 15A r 6. In doing so, however, I bear in mind that I did not have the benefit of counsel's full submissions on that evidence or on the application generally. The ultimate determining consideration, as it seems to me, remains one of the reasonableness of the conduct of the parties. the appropriate order 9 Order 15A r 6 provides: 'Where - (a) there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained; (b) after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and (c) there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision - the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).' 10 The respondents contend that the applicant did not make 'all reasonable inquiries' within the meaning of O 15A r 6(b) before instituting this proceeding. They draw attention to the short notice (approximately three working days) that they were given of the applicant's intention to apply to the Court under O 15A r 6 if the respondents did not provide them with the extensive discovery requested. The applicant, on the other hand, contends that there were circumstances of urgency which required it to act with the speed that it did. I am not satisfied that the applicant acted unreasonably in instituting this proceeding within a few days of making its demands for discovery by the respondents. I am satisfied that there were circumstances that suggested that, if it were to institute a proceeding against the respondents, it should do so promptly. 11 However, in my view, the pre‑application demand that the applicant made on the respondents was unreasonably wide. The applicant initially sought discovery of documents in 14 broadly expressed categories. These categories were not qualified so as to ensure that the documents sought were relevant to the two potential causes of action on which the applicant ultimately relied. As is mentioned above, the applicant subsequently acknowledged that its claim for discovery could be expressed in terms of two categories of documents only. The respondents thereafter consented to give discovery of the document in the first of these two categories. 12 By the time of the hearing the applicants had filed three separately sworn affidavits by Wayne Douglas Smith ('Mr Smith'), the General Manager – Property of Hoyts Cinemas Limited. Mr Smith's cross‑examination was completed before the application was dismissed by consent. As is mentioned above, the premature termination of the hearing meant that I did not receive the benefit of full submissions from counsel concerning Mr Smith's evidence. I therefore consider it inappropriate to reach a concluded view as to Mr Smith's credibility. However, during the course of his cross‑examination Mr Smith acknowledged, or his answers demonstrated, significant problems with his affidavit evidence. Mr Smith's evidence was the only evidence relied on by the applicant in support of its application. 13 In my view it is not unfair to proceed on the basis that the agreement reached between the senior counsel for the applicant and the senior counsel for the first respondent reflected a recognition by the applicant that it would probably be unable to justify its demand that the respondents make discovery of all of the documents identified in paragraphs 10, 12, 13 and 14 of the schedule to the application. In the circumstances I consider it appropriate to proceed on the basis that the applicant acted unreasonably in maintaining that demand through to the time of hearing. It seems to me to be more likely than not that had the applicant made an appropriately limited demand there would have been no need for the matter to proceed to a hearing. 14 In my view, the appropriate outcome so far as the costs of this matter are concerned is that each party should bear its own costs of the application up to and including the costs of the directions hearing held on 5 August 2003. Although the demand for discovery made by the applicant was, I consider, unreasonably wide, I do not conclude that it was unreasonable of the applicant to institute this proceeding. Nor do I conclude that it was unreasonable of the respondents to defend it. However, following the institution of the proceeding, significant discovery was agreed to be provided to the applicant by the respondents. As is mentioned above, I consider that it was thereafter unreasonable of the applicant to continue to press its remaining claims as formulated in the schedule to the application. I conclude that it was reasonable for the respondents to continue to defend those claims. 15 In my view, it is likely that a reasonable, limited request for documents within the second broad category of documents would not have been rebuffed had it been made at or about the time of the direction hearing held on 5 August 2003. For this reason I conclude that the applicant should pay the respondents' cost of the application as taxed to the extent that such costs were incurred after the directions hearing of 5 August 2003. It is for this reason unnecessary for me to give consideration to the appropriateness, either generally or in the particular circumstances of this application, of an order that might make the costs of an O 15A r 6 application dependent upon the institution of a substantive proceeding between the parties or even the eventual outcome of any such proceeding (see C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 per Gyles J at [50]). I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson. Associate: Dated: 21 November 2003 Counsel for the Applicant: Mr B W Walker SC, Mr T D Castle Solicitor for the Applicant: Atanaskovic Hartnell Lawyers Counsel for the 1st Respondent: Mr A J L Bannon SC, Mr J M Hennessy Solicitor for the 1st Respondent: Carroll & O'Dea Counsel for the 2nd Respondent: Mr M C L Dicker Solicitor for the 2nd Respondent: Allens Arthur Robinson Date of Hearing: 8 August 2003 Date of Judgment: 21 November 2003