FEDERAL COURT OF AUSTRALIA Dye v Commonwealth Securities Limited (No 2) [2012] FCA 407 Citation: Dye v Commonwealth Securities Limited (No 2) [2012] FCA 407 Parties: VIVIENNE LOUISE DYE v COMMONWEALTH SECURITIES LIMITED, RALPH NORRIS and MICHAEL BLOMFIELD VIVIENNE LOUISE DYE v COMMONWEALTH BANK OF AUSTRALIA and BARBARA CHAPMAN File numbers: NSD 1165 of 2008 NSD 1526 of 2010 Judge: BUCHANAN J Date of judgment: 20 April 2012 Catchwords: COSTS – application for indemnity costs – proceedings were unjustified and should not have been commenced – offer of compromise – Calderbank letters COSTS – lump sum order for the payment of costs – willingness to forego certain costs – impecunious party – burden and additional cost of taxation process Legislation: Federal Court Rules 2011 Cases cited: Dye v Commonwealth Securities Limited [2012] FCA 242 Date of hearing: Heard on the papers Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 23 Counsel for the Applicant: No appearance Solicitor for the Applicant: No appearance Counsel for the Respondents: Mr P Gray SC Solicitor for the Respondents (NSD 1165 of 2008): Freehills Solicitor for the Respondents (NSD 1526 of 2010): Clayton Utz IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1165 of 2008 BETWEEN: VIVIENNE LOUISE DYE Applicant AND: COMMONWEALTH SECURITIES LIMITED First Respondent RALPH NORRIS Second Respondent MICHAEL BLOMFIELD Third Respondent JUDGE: BUCHANAN J DATE OF ORDER: 20 APRIL 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Costs ordered by the Supreme Court of New South Wales are not affected by these orders. 2. Costs ordered by the Full Court of this Court are not affected by these orders. 3. Previous costs orders made at first instance in either of the proceedings in this Court are revoked. 4. The applicant is to pay the respondents' costs in both proceedings, assessed overall at $5,850,000. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1526 of 2010 BETWEEN: VIVIENNE LOUISE DYE Applicant AND: COMMONWEALTH BANK OF AUSTRALIA First Respondent BARBARA CHAPMAN Second Respondent JUDGE: BUCHANAN J DATE OF ORDER: 20 APRIL 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Costs ordered by the Supreme Court of New South Wales are not affected by these orders. 2. Costs ordered by the Full Court of this Court are not affected by these orders. 3. Previous costs orders made at first instance in either of the proceedings in this Court are revoked. 4. The applicant is to pay the respondents' costs in both proceedings, assessed overall at $5,850,000. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1165 of 2008 BETWEEN: VIVIENNE LOUISE DYE Applicant AND: COMMONWEALTH SECURITIES LIMITED First Respondent RALPH NORRIS Second Respondent MICHAEL BLOMFIELD Third Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1526 of 2010 BETWEEN: VIVIENNE LOUISE DYE Applicant AND: COMMONWEALTH BANK OF AUSTRALIA First Respondent BARBARA CHAPMAN Second Respondent JUDGE: BUCHANAN J DATE: 20 APRIL 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 16 March 2012 I dismissed each of the proceedings commenced by the applicant (Dye v Commonwealth Securities Limited [2012] FCA 242 ("the earlier judgment")). In the earlier judgment I found that each of the proceedings commenced by the applicant (one in the Supreme Court of New South Wales ("the Supreme Court proceedings") and one in this Court ("the Federal Court proceedings")) were without any relevant factual foundation or any legal substance. There were many reasons why all of the causes of action raised in the two proceedings were rejected. I shall not summarise them here. 2 At the same time I ordered that the applicant pay the respondents' costs in each proceedings, while leaving undisturbed any earlier costs orders. I left open the possibility that some special or further order for costs might be sought. The respondents have now sought such an order. 3 When the earlier judgment was delivered I made it clear (at [743]) that any application regarding costs was to be made within 14 days of judgment (i.e. by 30 March 2012) and that any response was to be made in writing within a further 14 days (i.e. by 13 April 2012). I also made it clear that no extensions of time would be granted and that applications or submissions not filed within the time allowed would be disregarded. The application by the respondents complied with these requirements. The applicant did not provide any written response to the respondents' application. Accordingly, the present application will be determined on the basis of the material furnished by the respondents. 4 The respondents have sought an order that the applicant pay the respondents' costs on an indemnity basis. The respondents rely on three possible foundations for such an order. Principally the respondents seek indemnity costs in relation to the whole of the costs of both proceedings from their inception on the basis of the findings made in the earlier judgment that the applicant's case was, in all relevant respects, based on falsehood. The respondents also rely on two alternative bases to ground an order for indemnity costs. First, they contend that they are entitled to indemnity costs from the expiry date of an Offer of Compromise made in the Federal Court proceedings on 20 March 2009 in accordance with the Federal Court Rules. Secondly, the respondents contend that they are entitled to indemnity costs from the dates of Calderbank letters dated 1 October 2009 in the Supreme Court proceedings and 3 December 2009 in the Federal Court proceedings respectively. Those were offers to compromise each of the proceedings upon the basis that the applicant would abandon them and bear her own costs, thereby avoiding any potential liability to the respondents for costs already incurred by them. 5 Each of these foundations appears to me to provide a sufficient basis for the award of indemnity costs from the dates specified. As to the first basis upon which indemnity costs have been sought, it is well-established that indemnity costs are not awarded as a punishment against an unsuccessful litigant. However, they will be awarded in appropriate cases to protect a respondent from the financial burden of proceedings which were unjustified and should not have been commenced. Each of the proceedings commenced by the applicant falls, in my view, into this category. In the present case, the lack of merit in each of the proceedings is so marked, and the claim for protection by the respondents against unwarranted financial burden is so well-founded, that there is a sufficient justification for the award of indemnity costs with respect to the whole of each of the proceedings, subject to an issue to which I will return concerning the basis on which the Supreme Court proceedings were transferred to this Court. It is not necessary for me to repeat here the findings which were made in the earlier judgment. The proceedings were, in each case, based on falsehood and were without any legal substance. The respondents are entitled to claim that they should be relieved, so far as an order for costs would achieve this, from the financial burden of defending them. 6 The offer of compromise made on 20 March 2009 erects a presumptive right to indemnity costs under the Federal Court Rules as they stood at the time the proceedings were commenced and the time that the offer of compromise was made, and as they stand now (see r 25.14 of the Federal Court Rules 2011). There would be no reason to deny the respondents the benefit of this presumption in the present case. 7 The Calderbank letters would also provide a sufficient foundation for an award of indemnity costs, were it necessary to rely upon them. In appropriate circumstances an offer to compromise proceedings by relieving another party of potential exposure to a substantial costs order might serve as a sufficient justification for an order for indemnity costs if the offer was refused. In my view it would do so in the present case. The defects and difficulties in the applicant's case were pointed out in each of the Calderbank letters. Pursuit of the proceedings and rejection of the offers in order to place before the Court what I found to be a false version of the relevant events was, in my view, clearly unreasonable and unjustified. 8 As the respondents are entitled to their costs on an indemnity basis on the first foundation they rely upon, no further specific attention need be given to the alternative bases on which indemnity costs were sought, although each would, if necessary, have provided an independent foundation for such an order from the relevant dates identified above. 9 Although the respondents are, accordingly, entitled to an order for indemnity costs, and would be entitled to tax their costs on that basis, they have proposed a different method of assessment which, if accepted, would result in a lower costs order against the applicant. The respondents seek a lump sum order for the payment of their costs to avoid the need to embark upon a lengthy and costly process of taxation of those costs in order to establish the amount which would be awarded on an indemnity basis. The respondents' submissions in support of this order indicate a willingness to forego a significant amount of the costs the respondents actually incurred. In a sense, this approach erodes the protection which would otherwise be afforded by an award of costs on an indemnity basis. On the other hand, an award of costs on a lump sum basis would avoid the burden and additional cost of the taxation process. The applicant has repeatedly claimed to be impecunious. If the claim is true the respondents may not recover more than a fraction of costs awarded in their favour, if any at all. 10 The respondents have provided evidence that the costs of preparing a suitable bill of costs for the purposes of taxation, using the services of a professional costs consultant, would be between $570,000 and $715,000. Further professional fees of up to $60,000 would also be incurred. As the applicant has, in both proceedings, represented that she has no significant assets, I am satisfied that it would be unjust to require the respondents to incur substantial additional costs to prepare a bill of costs for taxation when there is serious doubt about the capacity of the applicant to pay any significant amount of the costs already incurred. In these circumstances, and given that adopting the approach suggested by the respondents could only operate in the applicant's favour and not to her prejudice, I am prepared to proceed on the basis that a lump sum award of costs should be made. 11 The respondents in the defamation proceedings commenced in the Supreme Court were represented by different solicitors to the solicitors retained by the respondents in the proceedings commenced in this Court. Apart from the fact that the proceedings were commenced in two different courts, the respondents in the two proceedings were not, to any extent, identical. The causes of action against them were different. All the respondents in both proceedings were, however, jointly represented by the same counsel after the proceedings were transferred to the Federal Court. At one point in the proceedings, after they had been listed for hearing together, the applicant applied that I should restrict the respondents' representation to one firm of solicitors. I declined to do so. In my view the respondents were entitled, in the circumstances and where the defamation proceedings were transferred to this Court only shortly before trial, to retain the representation which had earlier been arranged. I do not propose now to make any discount for the fact that the respondents in the Supreme Court proceedings were represented by different solicitors than the solicitors representing the respondents in the Federal Court proceedings. 12 At the time that the defamation proceedings were transferred from the Supreme Court to this Court, the applicant was ordered to pay the respondents' costs being costs in the defamation proceedings which had been wasted - i.e. costs incurred due to the unnecessary duplication of steps which were already required to be taken in the proceedings earlier commenced in this Court. Principally, those matters concerned discovery, the issuing of subpoenas and proofing of witnesses, although other matters were also claimed. The assessment made in the Supreme Court by McClellan CJ at CL, when assessing those particular costs on a lump sum basis, was to award $250,000 of a claimed $549,000 for those particular items. Against this, it was recorded that professional costs had been incurred, to that point, in excess of $1.1m. 13 I am not prepared to disturb the assessment which was then made and which is, in any event, the subject of an unresolved appeal in the New South Wales Supreme Court. However, it is clear from the judgment of McClellan CJ at CL that on the evidence before his Honour, there were in excess of $550,000 in costs already incurred which were not the subject of the order for costs which he made. That order addressed only wasted costs in the categories I have mentioned. Hence, I shall regard costs of $550,000 as carried over to the proceedings in this Court, and not resolved or addressed by any order of the Supreme Court. As will become apparent shortly, this figure appears to me to represent solicitors' costs and did not include counsel's fees incurred to that time in the Supreme Court proceedings. 14 The only other costs orders made at interlocutory stages (apart from orders made by the Full Court of the Federal Court, with which I shall not deal) appear to be an order of $15,000 against the applicant made by McClellan CJ at CL in respect of a stay application made on 8 April 2010, and an order which I made against the applicant on 24 November 2010 concerning an unsuccessful application for recusal. I do not propose to interfere with the order for costs of $15,000. The order for costs of the recusal application was not quantified. It is not now desirable to require that it be taxed. It will therefore be included in the lump sum order I will make for the whole of the proceedings conducted in this Court. The earlier order will, accordingly, be revoked. 15 The evidence about costs incurred by the respondents (which included detailed invoices available for inspection by the Court if required) which was given on oath by solicitors acting for the respondents in each of the proceedings, indicated that the following actual costs have been incurred in the conduct of the proceedings in this Court (using round figures): Freehills' professional fees in NSD 1165 of 2008 $3.34m Clayton Utz's professional fees in NSD 1526 of 2010 $2.35m Counsel's fees $2.38m 16 As to actual costs in the defamation proceedings before their transfer to this Court, it seems clear that the figure of $1.1m referred to by McClellan CJ at CL did not include counsel's fees, which exceeded $140,000. That amount appears to me to be separate from the figure of $550,000 referred to earlier which was not addressed by the earlier costs order made by McClellan CJ at CL. When those solicitors' costs and counsel's fees in the Supreme Court proceedings are taken into account, the overall outstanding costs in the two proceedings exceed but are roughly: Solicitors' professional fees $6.24m Counsel's fees $2.52m 17 In addition to counsel's fees, there are a variety of other disbursements in the two proceedings which total roughly $290,000. On the approach I have taken, of leaving undisturbed any orders for costs made by the Supreme Court, the overall total of outstanding actual costs incurred by the respondents nevertheless exceeds $9m. It should be noted that my approach is a little more conservative than that adopted by the respondents, who while making allowance for the orders made by the Supreme Court, otherwise sought costs in the Supreme Court proceedings on an indemnity basis. 18 The figures given so far do not include GST. The respondents do not seek to recover any amount paid as GST. 19 In the context of the actual costs I have mentioned, the respondents have sought a lump sum order for costs which, taking into account their claimed entitlement to receive costs on an indemnity basis, nevertheless involves substantial reductions. The reductions would be achieved in part by foregoing the recovery of some disbursements altogether and in part by accepting a reduction of 50% in solicitors' costs. The respondents seek to recover counsel's fees and some other disbursements in full. The amount claimed is $5,883,034.83 out of total costs (as calculated by the respondents' solicitors) of $9,619,435.17. The general approach seems to me to be appropriately conservative and involves a very significant discount from an assessment of costs on an indemnity basis. 20 As I have indicated, I will not revisit the costs which were assessed by McClellan CJ at CL (which were not assessed on an indemnity basis). On my own very broad calculations, counsel's fees and 50% of solicitors' costs (i.e. those in this Court and those not earlier assessed in the Supreme Court) are about $5.64m without adding any further disbursements. Some allowance must also be made for further disbursements. 21 Of the disbursements claimed (and not all are) the most significant are transcript fees, which in this Court total $186,944.49, and "court filing fees, conduct money and service fees", which in this Court total $25,106.54. The respondents' also claimed disbursements of this kind in the Supreme Court proceedings. It should be noted that not only was the applicant excused from the payment of hearing fees in this Court (which amounted to over $210,000) due to the fact that she had a Commonwealth Health Care card issued by Centrelink, but special arrangements were also made, at no cost to her, for the provision of a hard copy of the transcript of the whole of the trial itself to her solicitors, and an electronic copy to each of her three counsel. That represented a very significant monetary advantage to her in the conduct of the trial. I am satisfied that the respondents are entitled to a sum broadly reflecting the disbursements claimed by them, but for this purpose I will confine the respondents to disbursements connected with proceedings in this Court and round the sum off to a figure of $210,000. 22 Commencing from the premise that the respondents would be entitled to costs on an indemnity basis if costs were taxed, I am satisfied, in all the circumstances, that it is appropriate to award the respondents costs in a lump sum of $5,850,000. 23 The orders I shall make are: 1. Costs ordered by the Supreme Court of New South Wales are not affected by these orders. 2. Costs ordered by the Full Court of this Court are not affected by these orders. 3. Previous costs orders made at first instance in either of the proceedings in this Court are revoked. 4. The applicant is to pay the respondents' costs in both proceedings, assessed overall at $5,850,000. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan. Associate: Dated: 20 April 2012