FEDERAL COURT OF AUSTRALIA Ford Motor Company of Australia Limited v Jefferson Ford Pty Ltd [2007] FCA 998 FORD MOTOR COMPANY OF AUSTRALIA LIMITED, FORD MOTOR COMPANY OF CANADA LIMITED AND FORD MOTOR COMPANY v JEFFERSON FORD PTY LTD VID1427 OF 2007 JESSUP J 4 JULY 2007 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID1427 OF 2007 BETWEEN: FORD MOTOR COMPANY OF AUSTRALIA LIMITED First Applicant FORD MOTOR COMPANY OF CANADA LIMITED Second Applicant FORD MOTOR COMPANY Third Applicant AND: JEFFERSON FORD PTY LTD AND: Respondent Ford motor company of Australia limited First Cross Respondent Thomas joseph Gorman Second Cross Respondent Bruce ian Mcdonald Third Cross Respondent Stephen Kruk Fourth Cross Respondent FBIS INTERNATIONAL ISSUES MANAGEMENT PTY LTD Fifth Cross Respondent CLAUDIO MINISINI Sixth Cross Respondent JUDGE: JESSUP J DATE OF ORDER: 4 JULY 2007 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The respondent pay two-thirds of the costs of the applicants and the 1st, 2nd, 3rd and 4th cross-respondents of their Notice of Motion filed on 26 April 2007. 2. The respondent pay the costs of the 5th and 6th cross-respondents of the Cross-Claim and of their Notice of Motion filed on 26 April 2007, to be taxed on an indemnity basis if not otherwise agreed. 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 VID1427 OF 2007 BETWEEN: FORD MOTOR COMPANY OF AUSTRALIA LIMITED First Applicant FORD MOTOR COMPANY OF CANADA LIMITED Second Applicant FORD MOTOR COMPANY Third Applicant AND: JEFFERSON FORD PTY LTD AND: Respondent Ford motor company of Australia limited First Cross Respondent Thomas joseph Gorman Second Cross Respondent Bruce ian Mcdonald Third Cross Respondent Stephen Kruk Fourth Cross Respondent FBIS INTERNATIONAL ISSUES MANAGEMENT PTY LTD Fifth Cross Respondent CLAUDIO MINISINI Sixth Cross Respondent JUDGE: JESSUP J DATE: 4 JULY 2007 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 6 June 2007, I gave judgment upon two Notices of Motion which had been filed on 26 April 2007. The applicants, FBIS and Mr Minisini have sought costs. The applicants seek their costs of their motion, and FBIS and Mr Minisini seek their costs of the proceeding, including their motion. All costs are sought on an indemnity basis. On 29 June 2007, the respondent sought and was granted leave to discontinue its Cross-Claim as against FBIS and Mr Minisini. It accepts that they are entitled to their costs. The respondent resists the application for those costs to be assessed on an indemnity basis. The respondent also resists the applicants' application for costs generally, and submits that, as between itself and the applicants, either there should be no order as to costs, or costs should be in the cause. 2 Dealing first with the question arising as between the applicants and the respondent, the applicants were wholly unsuccessful in their attack on the respondent's Defence. On the other hand, only in one respect (that relating to pars 41(c) and 42) did the applicants fail in their attack on the respondent's Cross-Claim. The greater part of the applicants' motion was concerned with the question arising under s 31A of the Federal Court of Australia Act 1976 (Cth), and that part was successful. In all the circumstances, I think that justice would be done if the respondent were required to pay two-thirds of the applicants' costs of their motion filed on 26 April 2007. 3 Turning to the matter of indemnity costs, I was referred to the following passage from the judgment of Woodward J in Fountain Select Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397, 401: I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion. That passage was referred to with approval by Gray J, giving the judgment of the Full Court, in Hamod v New South Wales (2002) 188 ALR 659, 664-665. Having referred to Fountain, Gray J continued (at [20]): Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs. 4 I would not hold that it was unreasonable for the respondent to have subjected the applicants to their expenditure on costs associated with so much of the Cross-Claim as was the subject of summary judgment under s 31A of the Federal Court Act. It is true that I held that the respondent had, in relevant respects, no reasonable prospect of success, but that holding arose from a consideration of the operation of s 51AC(9) of the Trade Practices Act 1974 (Cth), in the particular circumstances of the ongoing commercial relationship between the respondent and the first applicant. I am not prepared to hold that the respondent's advisers necessarily acted unreasonably in failing to appreciate that the point arising under s 51AC(9) would be decided in the way that it was. Merely to have lost the point on an interlocutory occasion does not, I consider, inevitably lead to that conclusion. I am, therefore, unpersuaded that I should take the unusual course of requiring the respondent to pay the applicants' costs on an indemnity basis. Although there were aspects upon which the applicants succeeded other than those arising under s 31A, to an extent they were offset by the respondent's limited success on the applicants' motion, and are not, overall, such as would affect that conclusion. 5 I turn finally to the costs claim of FBIS and Mr Minisini. As I have said, the respondent accepts that it should pay their costs. The basis upon which I granted their motion was that I took the view that the respondent's allegation under s 52 of the Trade Practices Act was not fairly open, as a matter of inference, on the facts known to the respondent as set out in the particulars to that allegation. In effect, I held that the respondent had speculated that Mr Minisini may have said, or by his conduct given the impression, that the respondent had been engaging in trading in counterfeit motor vehicle parts. The evidence went no further than to establish that Mr Minisini stated the purpose of the FBIS investigation in a way which carried no such imputation. Counsel for the respondent submitted that the allegation under s 52 was one which might responsibly have been made, as it might legitimately have been inferred that Mr Minisini's conduct of the investigation carried the malignant implication to which their client's pleading referred. However, this is not a case in which the court has held that an inference ought not to be drawn. It is a case in which the court has held that the inference was not open. FBIS and Mr Minisini were parties with whom the respondent, apparently, had no prior commercial or other relevant relationship, and who it had no reason to suspect, much less to infer, would conduct an investigation other than objectively and professionally, and without engaging in misleading representations. In relation to its claim against FBIS and Mr Minisini under s 52, I consider that, in the words of Woodward J in Fountain, the respondent, properly advised, should have known that it had no chance of success unless further evidence, which was not then available to it and which it had no reasonable grounds to suppose would be uncovered as a result of discovery or other interlocutory processes, emerged. In the words of Gray J in Hamod, I likewise consider that FBIS and Mr Minisini should be regarded as innocent parties in relevant respects, and that it was unreasonable for the respondent to have subjected them to the costs involved in participation in the present litigation. 6 There is one respect in which the respondent's Cross-Claim against FBIS and Mr Minisini did not involve an allegation of deceptive or misleading conduct under s 52 of the Trade Practices Act. It arose under the second of the three aspects of par 33 of the Cross-Claim which was picked up by par 53 thereof, where it was alleged that FBIS and Mr Minisini aided and abetted (etc) the applicants in their conduct in contravention of s 51AC of the Trade Practices Act. I granted the motion of FBIS and Mr Minisini substantially because I proposed to grant the applicants' motion under s 31A in relation to relevant aspects of par 33 of the Cross-Claim. I have not awarded the applicants indemnity costs in relevant respects, and, if this was all that was involved as between the respondent and FBIS and Mr Minisini, I would not order that the latter's costs be paid on an indemnity basis here either. However, this aspect of par 53 was a very minor dimension of the respondent's Cross-Claim against FBIS and Mr Minisini, and was the subject of very little attention at the hearing of the motions. It was not submitted on behalf of the respondent that I should make any particular discrimination by reason of having struck out this aspect of the Cross-Claim under O 11 r 16, and I am inclined to think that it does not constitute a sufficient basis to qualify or limit the kind of order I would otherwise be disposed to make in relation to the main claim by the respondent against FBIS and Mr Minisini, namely, that arising under s 52 of the Trade Practices Act. 7 For the above reasons, I propose to order that the respondent pay two-thirds of the applicants' costs of their motion filed on 26 April 2007, and that the respondent pay the costs of FBIS and Mr Minisini, to be taxed on an indemnity basis if not otherwise agreed. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. Associate: Dated: 4 July 2007 Counsel for the Applicant: Mr P Wallis Solicitor for the Applicant: Allens Arthur Robinson Counsel for the Respondent: Mr AK Panna SC & Mr A Phillips Solicitor for the Respondent: Macpherson & Kelly Solicitor for the Fifth and Sixth Cross Respondents: Mr M Wise Solicitor for the Fifth and Sixth Cross Respondents: Home Wilkinson Lowry Date of Hearing: 29 June 2007 Date of Judgment: 4 July 2007