FEDERAL COURT OF AUSTRALIA WU V AVIN OPERATIONS PTY LTD [2007] FCA 882 JUN XUE WU V AVIN OPERATIONS PTY LTD &ORS VID 187 OF 2006 RYAN J 14 JUNE 2007 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID187 OF 2006 BETWEEN: JUN XUE WU Applicant AND: AVIN OPERATIONS PTY LTD (ACN 076 956 913) BARRIE ARMITAGE CHRISTOPHER JAMES ARMITAGE JOAN DOROTHY ARMITAGE ASIA PACIFIC COATING PTY LTD (ACN 089 840 728) Respondents JUDGE: RYAN J DATE OF ORDER: 14 JUNE 2007 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Unless the costs of the applicant, Jun Xue Wu, of and incidental to the hearing of 18 May 2006, have been comprehended by the consent order made on 26 February 2007 in proceedings numbered (P) VID 372 of 2003, the said costs, in default of agreement be taxed before the conclusion of the principal proceeding and paid by the second respondent, Barrie Murdoch Armitage, forthwith upon taxation or agreement. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID187 OF 2006 BETWEEN: jun xue wu Applicant AND: AVIN OPERATIONS PTY LTD (ACN 076 956 913) BARRIE ARMITAGE CHRISTOPHER JAMES ARMITAGE JOAN DOROTHY ARMITAGE ASIA PACIFIC COATING PTY LTD (ACN 089 840 728) Respondents JUDGE: RYAN J DATE: 14 JUNE 20077 PLACE: MELBOURNE REASONS FOR JUDGMENT ON COSTS 1 There was before the Court an application for an extension of time in which to seek to appeal from certain orders made by Kenny J on 3 February 2006, in proceeding numbered VID 327 of 2003 involving the same parties before this Court. Her Honour's orders were in these terms: "1. The applicant prepare a bill of costs in respect of the motion, notice of which was filed on 4 August 2004, and such bill of costs be taxed by Registrar Bardsley at 10.15am on 13 February 2006. 2. The first and second respondents pay forthwith the applicant's costs of and incidental to the motion, notice of which was filed on 4 August 2004, on an indemnity basis, to be taxed pursuant to paragraph 1 hereof. 3. If the first and second respondents do not pay the applicant's taxed costs within 14 days from the date of service upon them of a certificate of taxation, then the applicant have leave to enter judgment against the first and second respondents for $334,000 and interest thereon. 4. The motion, notice of which was filed on 4 August 2004, be otherwise dismissed." 2 The motion on notice dated 4 August 2004 referred to in paras 1 and 2 of those orders was by the present respondent, Ms Wu, the applicant in the substantive proceedings for leave to enter judgment against the first respondent Avin Operations Pty Ltd ("Avin") and the second respondent, Barrie Armitage, who brought the application for an extension of time within which to seek leave to appeal. 3 It is accepted by Mr Armitage that the orders of Kenny J were interlocutory and that pursuant to s 24 of the Federal Court of Australia Act 1976 ("the Act") he requires leave to appeal from those orders. It is also accepted that his application for leave to appeal has been filed outside the seven day time limit imposed by O 52 r 10(1)(b) of the Rules of this Court, and on 27 March 2006 he filed an application for extension of time to apply for leave to appeal, together with a supporting affidavit sworn 27 March 2006. The power to grant such an extension under O 52 r 10(2A) is discretionary. As with other discretions of a similar kind a powerful factor to be taken into account is the applicant's prospects of success if the extension of time were granted; see Pitmann v AAT [2005] FCA 1540. 4 In the present case the orders in respect of which leave to appeal was sought were themselves made in the exercise of a wide general discretion. Accordingly, they would only be set aside on appeal if the primary judge's discretion is shown to have miscarried in accordance with the oft cited principles enunciated by the High Court in House v R (1976) 55 CLR 499 at 504. 5 Counsel for Ms Wu submitted that Mr Armitage had not pointed to any wrong principle applied by her Honour in making the orders of 3 February 2006. Nor could it be suggested that her Honour failed to take into account some material consideration or that she had been influenced by some extraneous or irrelevant matter. It must be borne steadily in mind that, if one puts to one side the self-executing mechanism in para 3 of her Honour's order, all that she did, in effect, was require the first and second respondents to pay forthwith Ms Wu's costs of her motion on notice dated 4 August 2004. Her Honour clearly took the view that the institution or prosecution of that motion was necessary to obtain the limited interlocutory progress of the matter which was subsequently achieved. 6 In these circumstances, I considered that Mr Armitage would, if granted leave, be unable to satisfy the requirements identified by a Full Court of this Court in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397. In that case the Full Court, at 398 adopted the two limbs of the test enunciated by a Full Court of the Supreme Court of Victoria in Niemann v Electronic Industries Ltd [1978] VR 431: "[t]he first test, which relates to the prospects of the proposed appeal, is 'whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its being reconsidered by the Full Court.' The second 'is whether substantial injustice would result if leave were refused, supposing the decision to be wrong.'" However, it appeared that a more appropriate option for Mr Armitage to follow was to apply in the substantive proceeding before Kenny J, pursuant to O 35 r 7 of the Rules of this Court for an order setting aside or varying her Honour's order of 3 February 2006. I therefore indicated this to Mr Armitage at a directions hearing on 22 March 2006, and subsequently adjourned his application for an extension of time in which to seek leave to appeal. On 12 April 2006 I made the following orders: '1. The application for extension of time for leave to appeal filed 27 March 2006 be adjourned to 18 May 2006. 2. The costs of the respondent, Ms Wu, of this day be reserved. 3. Liberty be reserved to either party to apply on not less than 48 hours notice in writing to the other party.' 7 On 26 April 2006 the parties appeared at a callover before Black CJ, where it was noted that the matter could not proceed until the respondent's application to extend time had been resolved, and an order was made that costs be reserved. 8 On 16 May 2006, Mr Armitage issued a notice of motion, returnable on 15 June 2006, in the substantive proceeding before Kenny J, seeking to have the orders of her Honour of 3 February 2006 set aside. On 18 May 2006, at the hearing of the application for an extension of time to seek leave to appeal in the present proceeding, I made the following orders: '1. The application for an extension of time for leave to appeal be adjourned to a date to be fixed, before 28 July 2006. 2. Costs be reserved.' 9 After the return of the notice of motion before Kenny J on 15 June 2006, her Honour made orders on 27 June 2006, amongst others, that orders 2 and 3 of the orders of 3 February 2006 be set aside, and substituted new orders, affirming the costs order against the first and second respondents, but not requiring payment until a date to be fixed after judgment in the substantive proceeding. 10 In the light of the orders made by Kenny J on 27 June 2006 in the substantive proceeding, the Court wrote on 3 July 2006 to the parties, requesting written submissions in relation to proposed orders dismissing the application for an extension of time within which to seek leave to appeal and dealing with costs of the hearing on 18 May 2006. The parties informed the Court that they agreed to the dismissal of the application for an extension of time and, on 17 July 2006, I ordered that the respondent's application for leave to appeal purportedly made by notice of appeal filed on 24 February 2006 be dismissed. Written submissions of Mr Armitage 11 In his written submissions dated 18 July 2006, Mr Armitage submitted that the following orders should be made: '1. the application of Mr Barrie Armitage filed 27 March 2006 for an extension of time for leave to appeal be dismissed; 2. on a date to be fixed after judgment in the main proceeding herein Mr Barrie Armitage pay the costs of the Respondent, Jun Xue Wu, of the hearing on 18 May 2006.' 12 Mr Armitage contended that although a notice of appeal had been filed, there was no appeal on foot pending the outcome of the application for an extension of time. He also claimed that he had expressed his concern at the Full Court callover that there would be no utility in dealing with the matter at that time as was later shown to be so. 13 Mr Armitage acknowledged that the orders sought were interlocutory in nature and referred to the definition of "proceeding" in s 4 of the Act, and submitted that the application for an extension of time in which to seek leave to appeal should be seen as an incidental proceeding in the course of or in connection with the main proceeding. It followed, he said, that any costs ordered against him should be payable only upon or after the determination of the substantive proceeding. 14 Mr Armitage further submitted that, if costs were ordered against him and payment were required before the determination of the substantive proceeding, it would "render ineffective" the orders made on 27 June 2006 by Kenny J, as it would "lock [him] out" from defending the substantive proceeding. Written submissions of Ms Wu 15 In the course of written submissions furnished on behalf of Ms Wu on 7 July 2006, it was submitted that the Court should make the following orders: '1. The application of Mr Barrie Armitage filed 27 March 2006 for an extension of time for leave to appeal be dismissed. 2. The Notice of Appeal filed 24 February 2006 by Mr Barrie Armitage be dismissed. 3. Mr Barrie Armitage pay the costs of Ms Wu of and incidental to the Notice of Appeal and the Application for extension of time for leave to appeal, to be taxed and paid forthwith.' 16 It was contended that Ms Wu had incurred costs of and incidental to the notice of appeal and the application for an extension of time in which to seek leave to appeal, including the costs of two court appearances on the notice of appeal and two court appearances on the application for an extension of time in which to seek leave to appeal. Some of those costs had been after the hearing of the application on 18 May 2006, and accordingly, where Ms Wu's costs, in relation to the appearances on the notice of appeal and on the application, had been reserved those costs should be dealt with in any orders which I should be persuaded to make. 17 Ms Wu contends that had Mr Armitage taken the appropriate step of moving in the substantive proceeding for the orders of 3 February 2006 to be set aside or varied, none of the costs of and incidental to the notice of appeal and the application for an extension of time in which to seek leave to appeal would have been incurred. 18 As to the orders to be made, by the Court as presently constituted, it is submitted on behalf of Ms Wu that they will not be interlocutory but final. The present proceeding was initiated by way of notice of appeal, should be brought to an end by a positive order. The present proceeding has been allocated a separate file number and has different parties from the substantive proceeding before Kenny J. These factors are said to distinguish the two proceedings from each other and require that any costs that are ordered in the present proceeding should be payable as soon as they have been taxed or agreed; see Meehan & Ors v Glazier Holdings Pty Limited [2005] NSWCA 24. 19 The solicitors for Ms Wu also referred to s 4 of the Act, which defines 'proceeding' as "a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connection with, a proceeding, and also includes an appeal." The inclusion of "appeal" in the definition was said to indicate that an appeal is in itself a proceeding, or a concurrent proceeding. Further, as the proceeding was initiated by way of notice of appeal, rather than by applying for an extension of time in which to seek leave to appeal as required by s 24(1A) of the Act, the proceeding has remained on foot, as evidenced by the necessary court appearances and court orders. 20 Alternatively, it was contended on behalf of Ms Wu that the Court should exercise its discretion under O 62 r 3(3) of the Rules of this Court, and order that the costs of and incidental to the notice of appeal and the application to extend time be taxed and payable forthwith. The time and money expended in responding to the notice of appeal and the application, would not have been incurred, had Mr Armitage initially sought appropriate relief in the substantive proceeding; see McKellar v Container Terminal Management Services Ltd [1999] FCA 1639. Reasoning on the question of costs 21 As the issue raised in the notice of appeal has been dealt with in the substantive proceeding, and the application for an extension of time in which to seek leave to appeal has been dismissed, the only issue remaining is in relation to costs. Each party accepts that Mr Armitage should pay Ms Wu's costs of the hearing on 18 May 2006. However, Mr Armitage submits that the payment of costs should be deferred until after the conclusion of the substantive proceeding, whereas Ms Wu contends that costs of and incidental to the hearing of 18 May 2006 should be awarded against Mr Armitage, and that they should be payable forthwith. 22 Order 62 r 3 of the Rules of this Court provides: "3 (1) The Court may in any proceeding exercise its powers and discretions as to costs at any stage of the proceeding or after the conclusion of the proceeding. (2) Where the Court makes an order in any proceeding for the payment of costs the Court may require that the costs be paid forthwith notwithstanding that the proceeding is not concluded. (3) An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order. The general principle implicit in that rule is that the costs of an interlocutory proceeding are not taxed until the principal proceeding has been concluded. A departure from that principle may be warranted where a party in whose favour the costs order has been made was required by the interlocutory proceeding to incur significant costs beyond those which would have been incurred had the opposing party acted with competence and diligence; see Life Airbag Co of Australia Pty Ltd v Life Airbag Co (New Zealand) Ltd (unreported, 22 May 1998). Another instance of a departure from the general rule may occur where the proceeding is complex and its final resolution is some time away; see Allstate Life Insurance Co v ANZ Banking Group Ltd (unreported 18 August 1995), or where the interlocutory application has the effect of removing one of several causes of action in its entirety; see Mitanis v Pioneer Concrete (Vic) Pty Ltd (1998) ATPR 41-623. 23 Weinberg J in McKellar v Container Terminal Management Services Ltd at [38] considered that the "discretion which is vested in the Court to order that a party's costs be taxed and paid forthwith should be exercised only where the interests of justice in the particular case require that there be a departure from the general practice." However his Honour also opined at [41] that: "the power to order that costs be paid forthwith should perhaps be used less sparingly than it has been in the past. That is particularly so in lengthy and complex cases where substantial costs have been thrown away as a result of ill-considered pleadings being drawn. Such costs should be capable of being recovered without the innocent party having to wait, possibly years, for that to occur." 24 It may be doubted whether this proceeding is properly described as interlocutory in the sense used in O 62 r 3(3). Although the relief sought was interlocutory in nature, as noted by the solicitors for Ms Wu, it was initiated by a notice of motion and further application, with a separate file number and different parties from the substantive proceedings. In any event, even if this proceeding is so closely related to the substantive proceeding that it should be regarded as interlocutory, the circumstances of this case warrant a departure from the general practice envisaged by O 62 r 3 of the Rules. There is no reason why Ms Wu should be required to wait for potentially one to two years before she can recover her costs of the hearing of an application for an extension of time in which to seek leave to appeal, which application itself was entirely unnecessary and should not have been instituted. 25 In Courtney v Medtel Pty Ltd (No 3) [2004] FCA 347 Sackville J noted at [21] that O 62 r 3(3): "has generally been interpreted as conferring a discretion which should be exercised in favour of a party who establishes that the demands of justice require a departure from the general practice envisaged by the sub-rule, namely that an order for costs of an interlocutory proceeding should not entitle a party to have a bill of costs taxed until the principal proceedings are concluded." I consider that the circumstances of the present case warrant a departure from the usual practice, as the notice of appeal should not to have been filed as a separate proceeding, but Mr Armitage, as he ultimately did, should have taken the proper course of seeking relief in the substantive proceeding pursuant to O 35 r 7 of the Rules of this Court. As the notice of appeal and subsequent application were unnecessary, and imposed an unwarranted burden upon Ms Wu, she should be permitted to tax her costs of the hearing of 18 May 2006 immediately and not be required to wait until the determination of the substantive proceeding. 26 In exercising the Court's discretion in that way, I have been influenced by a belief that Mr Armitage's ability to present his defence in the substantive proceeding will not be unfairly unfairly prejudiced by a requirement to pay forthwith the costs to which he has acknowledged Ms Wu is entitled. 27 However, doubt has been cast on the need for any order as to the costs of the purported proceeding numbered VID 187 of 2006 by the following orders which were made by consent in the principal proceeding on 26 February 2007; '1. The proceeding against the Second Respondent, Barrie Armitage, be dismissed. 2. There be no Order as to costs in respect of the dismissal of the proceeding against the Second Respondent, Barrie Armitage.' I shall therefore order that, unless comprehended by the consent orders made on 26 February 2007 in proceedings numbered (P) VID 372 of 2003, Ms Wu's costs of the hearing dated 18 May 2006, in default of agreement, be taxed before the conclusion of the principal proceeding and be paid forthwith after taxation or agreement. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan. Associate: Dated: 14 June 2007 Counsel for the Appellant: Self represented Solicitor for the Appellant: Counsel for the Respondent: A.Krycer Solicitor for the Respondent: Pryles & Co. Lawyers Date of Hearing: 18 May 2006 Written Submissions as to costs filed: 7 and 21 July 2006 Date of order as to costs: 14 June 2007