FEDERAL COURT OF AUSTRALIA Fubilan Catering Services Limited v Compass Group (Australia) Pty Ltd [2007] FCA 1497 COSTS - cross-claim – indemnity and contribution in relation to principal proceedings – cross-claimant successful in principal proceedings – cross-claim dismissed – whether notwithstanding dismissal cross-respondents and applicant in principal proceedings should pay cross-claimants' costs – no punitive basis for departure from the ordinary rule – respondents considered principal proceedings hopeless – cross-claim warranted but not necessary – cross-respondents awarded costs against cross-claimants – first applicant to indemnify cross-claimants in respect of costs order against cross-respondents Gladstone Park Shopping Centre Pty Ltd v Ross Wills (1984) 6 FCR 496 Edginton v Clark [1964] 1 QB 367 Thomas v Times Book Co Ltd [1966] 1 WLR 911 FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA) AND MINERAL RESOURCES STAR MOUNTAINS LIMITED (INCORPORATED IN PAPUA NEW GUINEA) v COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125), EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA), COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM), COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125), EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA), COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM), MOROCCO HOLDINGS PTY LTD AND WILLIAM FENWICK WAD 252 OF 2003 FRENCH J 26 SEPTEMBER 2007 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 252 OF 2003 BETWEEN: FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA) First Applicant MINERAL RESOURCES STAR MOUNTAINS LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Applicant AND: COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Respondent EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Respondent COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM) Third Respondent COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Cross-Claimant EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Cross-Claimant COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM) Third Cross-Claimant MOROCCO HOLDINGS PTY LTD First Cross-Respondent WILLIAM FENWICK Second Cross-Respondent JUDGE: FRENCH J DATE OF ORDER: 26 SEPTEMBER 2007 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The cross-claimants are to pay the cross-respondents' costs of the cross-claim. 2. The first applicant is to pay to the cross-claimants the costs which they are required to pay to the cross-respondents pursuant to the preceding order. 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 WAD 252 OF 2003 BETWEEN: FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA) First Applicant MINERAL RESOURCES STAR MOUNTAINS LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Applicant AND: COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Respondent EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Respondent COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM) Third Respondent COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Cross-Claimant EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Cross-Claimant COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM) Third Cross-Claimant MOROCCO HOLDINGS PTY LTD First Cross-Respondent WILLIAM FENWICK Second Cross-Respondent JUDGE: FRENCH J DATE: 26 SEPTEMBER 2007 PLACE: PERTH REASONS FOR JUDGMENT ON OUTSTANDING COSTS ISSUES 1 On 9 August 2007 I dismissed the application and the cross-claim in these proceedings. The parties were given liberty to apply in respect of the costs of the cross-claim. Written submissions were filed pursuant to the liberty given. 2 Before turning to the costs of the cross-claim it is necessary to deal with a submission by the respondents that they should be given a certificate for second counsel in the principal proceedings. The short answer to that submission is that there is no provision in the Federal Court Rules for a certificate for two counsel. The costs, charges and expenses allowable on taxation are those which appear to the taxing officer "… to have been necessary or proper for the attainment of justice or for maintaining or defending the rights of a party …" (O 60 r 19). The question whether the fees of two counsel were necessary or proper within the meaning of the Rule is a matter for the taxing officer. 3 Although the cross-claim was dismissed the respondents as cross-claimants seek an order for costs in their favour. They seek those costs on an indemnity basis not only against the cross-respondents, but also against the first applicant, Fubilan Catering Services Limited (Fubilan). 4 The Court has a wide discretion in determining how to award costs upon the conclusion of proceedings. Ordinarily, costs will follow the event. There may be circumstances where that course is not followed. But there must be good reasons for so doing. If the usual course is not to be followed the alternatives are: 1. No order for costs. 2. An order for costs against the successful party. In the case of a cross-claim in the nature of third party proceedings, a successful respondent can obtain an order that the applicant pay the cross-respondent's costs of the cross-claim or an order that the applicant indemnify the cross-claimant in respect of costs which the cross-claimant is ordered to pay to the cross-respondent. 5 When a successful respondent to a claim has also cross-claimed against a third party on the hypothesis that liability is established in the principal claim, the dismissal of the cross-claim upon the dismissal of the principal proceedings does not displace the ordinary rule that costs follow the event. So much was made clear by the Full Court in Gladstone Park Shopping Centre Pty Ltd v Ross Wills (1984) 6 FCR 496. In that case the lessee of a shopping centre lease sued the owners for misleading or deceptive conduct inducing entry into the lease. The owners cross-claimed for an indemnity against the leasing agents who were said to have engaged in the relevant conduct. The application against the owners was dismissed. As a consequence the cross-claim was dismissed. Jenkinson J ordered that the respondent-cross-claimants pay the cross-respondents' costs of the cross-claim. He also ordered that the applicant pay to the respondent-cross-claimants the costs which they were ordered to pay to the cross-respondents. The latter order was of little benefit as the applicant was impecunious. 6 The respondent-cross-claimants appealed to the Full Court and the appeal was dismissed. Beaumont J, with whom Northrop and Davies JJ agreed, said (at 510): The learned judge was of the view, correctly I think, that, because the [owners], as principals, had brought suit against their agents, and the [lessees] had failed in their suit, they should pay the costs in the absence of any sufficient reason to displace the ordinary rule in the event of such failure. In my opinion, this was a proper exercise of the judicial discretion in the events which happened. The Court, in that instance, was referred to cases in which orders had been made that an applicant pay the successful cross-respondent's costs. But that was on the basis that the "real and only fight was between the plaintiff … and third parties": Edginton v Clark [1964] 1 QB 367 at 384 (Upjohn LJ). See also Thomas v Times Book Co Ltd [1966] 1 WLR 911. As in Gladstone Park Shopping Centre 6 FCR 496, the present case is not one in which the real fight was between the applicants and the cross-respondents. The cross-respondents were firmly in the applicants' camp. 7 The cross-claim in the present case related principally to one aspect of the many claims which the first applicant, in particular, brought against the respondents. It concerned the submission to Ok Tedi Mines Ltd (OTML) by Eurest (South Pacific) Limited (Eurest) of what was referred to as the "Varied Tender Proposal". Claims for unconscionable conduct, misleading or deceptive conduct, breach of fiduciary duty and negligence were all made on the basis of the Varied Tender Proposal. 8 In their cross-claim the respondents pleaded the agreement of 18 June 1999 between Mineral Resources Star Mountains Limited (MRSM) and Morocco Holdings Pty Ltd (Morocco Holdings) under which Mr Fenwick was to provide consultancy services to MRSM in relation to the catering contract tender. They alleged that the scope of the agency of Mr Fenwick and Morocco Holdings in relation to the OTML tender was to represent and safeguard the interests of MRSM and Fubilan after its incorporation, and to advise them in negotiations with the respondents and any of them and with OTML in relation to the OTML tender. The cross-respondents were also to advise the applicants about the formation of the tender proposal. The respondents alleged in their cross-claim that Mr Fenwick and Morocco Holdings owed the applicants a duty of care to provide their services with due skill, care and diligence. They also owed duties to the applicants to advise and assist them with regard to the OTML tender maximising the financial returns from the consequent catering contract. 9 The respondents pleaded in the cross-claim that if the interests of the applicants or either of them had been adversely affected by reason of the Varied Tender Proposal or the purchase of vehicles in February 2000 and if the applicants had suffered loss as pleaded, then Mr Fenwick and Morocco Holdings had been in breach of their duties owed to the applicants. They sought indemnity and/or contribution from Mr Fenwick and Morocco Holdings. 10 In this case the primary basis upon which the respondents as cross-claimants seek a departure from the normal rule is that the cross-claim was warranted. They say that the cross-claim would not have been necessary at all if not for the fact that Fubilan had instituted the principal proceedings which were orchestrated to a significant degree by the cross-respondents. They say that due to their joint overall involvement in hopeless proceedings, Fubilan, Morocco Holdings and Mr Fenwick should be ordered to pay the costs jointly on an indemnity basis. 11 The cross-claim was a reasonable but not a necessary step to be taken by the respondents. It was open to them to make the judgment which they now offer that the principal proceedings were "hopeless". I do not think that it would be an appropriate exercise of my discretion to order that Mr Fenwick and Morocco Holdings pay the respondents' costs of the cross-claim as some kind of punitive exercise. 12 Given the involvement of Mr Fenwick and Morocco Holdings in the development of the tender proposal and his involvement in, and knowledge of, material circumstances relevant to the Varied Tender Proposal, it is not surprising that the cross-claim was made against him and Morocco Holdings. There is nevertheless no reason to depart from the ordinary rule that the costs of the cross-claim should follow the event. However, in my opinion, the first applicant, having made the claims about the Varied Tender Proposal, notwithstanding the involvement of Mr Fenwick and Morocco Holdings through the provision of their consultancy services in connection with the preparation of the tender, ought to be ordered to indemnify the respondents in respect of the costs order which I will make against them on the cross-claim. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. Associate: Dated: 26 September 2007 Counsel for the Applicants: Mr P Clifford Solicitor for the Applicants: Alan Rumsley, Commercial Disputes Lawyer Counsel for the Respondent: Mr I Curlewis Solicitor for the Respondent: Lavan Legal Counsel for the Cross Respondents: Mr T Retallack Solicitor for the Cross Respondents: Maxim Litigation Consultants Date of last written submissions: 11 September 2007 Date of Judgment: 26 September 2007