FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd [2005] FCA 860 AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v BAXTER HEALTH CARE PTY LTD AND ORS NSD 1153 of 2002 ALLSOP J 29 JUNE 2005 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1153 of 2002 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: BAXTER HEALTHCARE PTY LTD FIRST RESPONDENT THE STATE OF WESTERN AUSTRALIA SECOND RESPONDENT THE STATE OF SOUTH AUSTRALIA THIRD RESPONDENT THE STATE OF NEW SOUTH WALES FOURTH RESPONDENT JUDGE: ALLSOP J DATE OF ORDER: 29 JUNE 2005 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The applicant pay the first respondent's costs, other than the costs of the argument as to costs. 2. Each of the applicant and the first respondent pay its own costs of the argument as to costs. 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 NSD 1153 of 2002 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT AND: BAXTER HEALTHCARE PTY LTD FIRST RESPONDENT THE STATE OF WESTERN AUSTRALIA SECOND RESPONDENT THE STATE OF SOUTH AUSTRALIA THIRD RESPONDENT THE STATE OF NEW SOUTH WALES FOURTH RESPONDENT JUDGE: ALLSOP J DATE: 29 JUNE 2005 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I published my reasons in this matter on 16 May 2005. The parties have considered the reasons and issues of confidentiality. The reasons have now been distributed as not confidential. 2 I have made an order providing that the applicant pay the costs of the second, third and fourth respondents of the proceedings. 3 Each of the applicant and the first respondent seeks a variation to the usual order for party/ party costs. The first respondent seeks costs on a party/ party basis up to 23 December 2002 (being the date of the delivery of an offer of compromise) and indemnity costs thereafter. The applicant resists that course and also, for itself, seeks a variation to the usual order, to the effect that the applicant should not pay the first respondent's costs on the question of market definition, and that the first respondent should pay the applicant's costs in relation to the question of market definition from the time of the filing of the defence or from 29 August 2003. 4 The parties have filed careful and detailed submissions. They will remain on the file. I do not propose to deal with all aspects of them and all authorities referred to therein. Nevertheless, I am grateful to counsel for their assistance. I have sought to deal with the essence of the submissions in these reasons. The first respondent's claim for indemnity costs 5 The primary submission of the first respondent was that it offered to settle the proceeding shortly after its commencement on 23 December 2002, in substance, on the following basis: (a) a section 87B undertaking in substance not to engage in the challenged conduct prospectively; (b) compliance orders as sought by the applicant (ACCC); and (c) payment of the ACCC's costs. 6 No undertakings were offered about contracts on foot. 7 It is unnecessary to deal with the letter in detail. The letter followed earlier detailed submissions putting the first respondent's position. Well before 23 December 2002, the first respondent had raised what I might call the "Bradken point" (Bradken Consolidated Ltd v BHP (1975) 149 CLR 107). 8 Obviously, the first respondent achieved a better result than the offer it made. But this is not ordinary civil litigation. Important public policy questions may arise in the settlement of penalty proceedings. Were it not for the Bradken point, I would have found not inconsequential contraventions of the Trade Practices Act 1974 (Cth). I am not prepared to characterise the decision of the applicant not to accept the offer of 23 December 2002 as unreasonable. 9 It was said also that the case could have been divided by an order under Order 29 of the Rules providing for a preliminary issue. In the light of the matters referred to in [694] to [699] of my reasons of 16 May 2005, it may have been difficult to frame factual issues in a clear way to underpin a Bradken separate issue, and not risk difficulties of the kind referred to in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334. Counsel for the applicant, Mr Tonking, said that consideration was given to these issues. I accept that. I can well understand the difficulties that were perceived. In any event, the first respondent could have brought a motion to separate out issues. The first respondent was a party to these proceedings. If it wished to say that the case should have taken a particular course it could and should have taken steps designed to bring that course about. 10 I accept that there is a huge burden on the first respondent as a successful party in a long, hard-fought piece of litigation such as this. It should be recognised by legal representatives and their clients that litigation is a stressful and costly, but at times necessary, process. The cost is both private and public. It is in this context that it is to be recognised that the categories of cases in which the award of indemnity costs is appropriate are not closed. Unnecessary stubbornness, unreasonable taking of points and a refusal to co-operate in the efficient running of litigation (including penalty litigation) should be able to be dealt with in a flexible way by orders for costs. The duty upon the profession to assist the Court in carrying out the Court's public obligation of the resolution of disputes by reference to what fairly is, or should be, in dispute has been stated often, but always bears repetition: see Ashmore v Corporation of Lloyds [1992] 1 WLR 446, 453 and Hayne J in a speech entitled 'Judicial Case Management and the Duties of Counsel' 24 February 1999 (located on the High Court website under the link 'Publications'). 11 It would, however, be grossly unfair to diligent and responsible counsel who are ready and willing to fulfil their duty to the Court in these respects, if there were no freely recognised power in the Court to enforce the same obligation on clients by orders for costs when points are taken, and proceedings are run, in a manner that does not display a reasonable recognition of the cost, private and public, of litigation. This is not to say legitimate points need to be abandoned, but if every point is to be taken in a way that requires parties to prove every jot and tittle of a case, the possibly appropriate award of costs, including in some cases, indemnity costs should not be prevented by the defensive mantra of "putting a plaintiff to proof" or by an applicant raising every conceivable ground for relief, good, bad and indifferent. (Section 190(3) of the Evidence Act 1995 (Cth) should not be ignored in this context.) 12 Even taking these considerations into account, I do not see any unreasonable conduct of the applicant in running the case as it did. A rejection of an offer in a penalty case such as this brings with it considerations of public responsibility for the administration of an important piece of Commonwealth legislation that do not attend an offer in a civil suit. I am not prepared to criticise the assessment or decision of the applicant in running the case in the face of the offer to settle it, in particular in the light of Bass. 13 Submissions were put based on the position of the applicant as a model litigant. The applicant should behave as such. I see no basis for concluding other than it has so conducted itself in this litigation. The applicant's claim in relation to market definition 14 The applicant asserts that the first respondent should pay the costs of the litigation of the market definition issue from the time of filing the defence, or at the latest, by 20 August 2003. 15 The first respondent put up no contrary positive pleaded case to the various alternative markets pleaded by the applicant. It did, however, through Mr Ergas, posit a combined national sterile fluids market including PD. 16 Much of the evidence necessary to found the market issue was not the subject of cross-examination. It was, however, material which was necessary to bring forward in order that the applicant discharge the onus of proof that it carried. 17 Whilst there is a degree of force in the complaint of the applicant that the market issues could have been the subject of concession, the matters surrounding the market were not entirely free from doubt. 18 In all the circumstances, I do not think that the first respondent has displayed unreasonable conduct in dealing with this issue. It was not merely putting the applicant "to proof". Market definition issues can be difficult judgmental issues, not free from doubt. That was the case here, where there was a sufficient degree of judgment required to entitle the first respondent to conduct the case as it did. 19 For the above reasons, the applicant should pay the costs of the first respondent, other than the costs of this argument, in respect of which the parties should bear their own costs. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop J. Associate: Dated: 29 June 2005 Counsel for the Applicant: Mr A I Tonking Solicitor for the Applicant: Australian Government Solicitor Counsel for the First Respondent: Mr I S Wiley Solicitor for the First Respondent: Blake Dawson Waldron Date of Hearing: 20 June 2005 Last Submission received: 23 June 2005 Date of Judgment: 29 June 2005