FEDERAL COURT OF AUSTRALIA AGL Energy Limited v Hardy (No 3) [2017] FCA 952 File number: VID 176 of 2017 Judge: O'CALLAGHAN J Date of judgment: 23 August 2017 Catchwords: COSTS – where respondent found guilty of contempt for failing to comply with search order made pursuant to r 7.43 of the Federal Court Rules 2011 (Cth) – fine of $25,000 previously imposed – whether contemnor should pay applicants' costs on an indemnity basis Legislation: Federal Court of Australia Act 1976 (Cth), s 43 Federal Court Rules 2011 (Cth), rr 7.43, 7.47 Cases cited: AGL Energy Limited v Hardy [2017] FCA 420 AGL Energy Limited v Hardy (No 2) [2017] FCA 863 Ali v Collection Point Pty Ltd [2011] FCAFC 87 Australian Competition and Consumer Commission v World Netsafe Pty Ltd (2003) 133 FCR 279 Bovis Lend Lease Pty Ltd v Construction Forestry Mining and Energy Union (No 2) [2009] FCA 650 Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [2003] FCAFC 13; 196 ALR 350 Degmam Pty Ltd (in Liq) v Wright (No 2) [1983] 2 NSWLR 354 Evenco Pty Ltd v Amalgamated Society of Carpenters, Joiners, Bricklayers and Plasterers of Australasia Union of Employees, Queensland [1999] QSC 77 Evenco Pty Ltd v Australian Building Construction Employees & Builders Labourers Federation (Qld Branch) [2000] QCA 108; [2001] 2 Qd R 118 Hinch v Attorney-General (Vic) (1987) 164 CLR 15 Kazal v Thunder Studios Inc (California) [2017] FCAFC 111 McIntyre v Perkes (1988) 15 NSWLR 417 Ronowska v Kus (No 2) [2012] NSWSC 817; 221 A Crim R 261 Dal Pont, Law of Costs (3rd ed, LexisNexis Butterworths 2013) Date of hearing: Determined on the papers Date of last submission: 15 August 2017 Registry: Victoria Division: Fair Work National Practice Area: Employment and Industrial Relations Category: Catchwords Number of paragraphs: 21 Counsel for the Prospective Applicants: Mr CJ Murdoch QC Solicitor for the Prospective Applicants: Minter Ellison Counsel for the First Prospective Respondent: Mr EP White Solicitor for the First Prospective Respondent: Slater and Gordon Lawyers ORDERS VID 176 of 2017 BETWEEN: AGL ENERGY LIMITED (and others named in the Schedule) First Prospective Applicant AND: GREGORY THOMAS HARDY (and another named in the Schedule) First Prospective Respondent JUDGE: O'CALLAGHAN J DATE OF ORDER: 23 August 2017 THE COURT ORDERS THAT: 1. Gregory Thomas Hardy pay the prospective applicants' costs of the proceeding on an indemnity basis. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT O'CALLAGHAN J: 1 On 26 April 2017, the Court found that Mr Hardy was guilty of contempt of court, in that on 2 March 2017, after being served with a search order made by the Court pursuant to r 7.43 of the Federal Court Rules 2011 (Cth) on 28 February 2017 (the Search Order), he failed to comply with paragraph 11 of that order by refusing to permit members of the "Search Party" to enter the "Premises" (both, as defined in the Search Order) so that they could carry out the search and other activities referred to in the Search Order: see AGL Energy Limited v Hardy [2017] FCA 420. The Court imposed a penalty of $25,000 upon Mr Hardy in respect of that contempt: see AGL Energy Limited v Hardy (No 2) [2017] FCA 863. 2 These reasons should be read together with AGL Energy Limited v Hardy [2017] FCA 420 and AGL Energy Limited v Hardy (No 2) [2017] FCA 863. 3 Following oral submissions on penalty and costs and determination of the question of penalty, the parties were given the opportunity to make a further brief written submission, which they have now done, in relation to the question of costs. It is now necessary to determine that issue. Applicable legal principles 4 The prospective applicants (collectively, AGL) seek their costs of the proceeding on an indemnity basis, under s 43 of the Federal Court of Australia Act 1976 (Cth) and r 7.47 of the Federal Court Rules 2011 (Cth). Mr Hardy opposes the making of an order on an indemnity basis. Although his counsel did not in his written submission expressly say so, I take him to submit that he accepts that the ordinary rule, that costs follow the event, applies (see Hinch v Attorney-General (Vic) (1987) 164 CLR 15 at 89-90), but that an order should be made on a party-party, not an indemnity, basis. 5 In Kazal v Thunder Studios Inc (California) [2017] FCAFC 111 at [192]-[193], the Full Court said: A common consequence of success by a person bringing contempt proceedings is an indemnity costs order. Katzmann J in Kazal v Thunder Studios Inc (California) [2017] FCA 238 at [90] helpfully referred to Connect TV Pty Ltd v All Rounder Investments Pty Ltd (No 4) [2013] FCA 393 at [43] per Tracey J, and Infa-Secure Pty Ltd v Crocker (No 2) [2016] FCA 202; 338 ALR 586 at 600 [44] per Reeves J. Her Honour observed that in Victoria and in Queensland it seems to be the "common or usual practice" to award indemnity costs in contempt cases, referring to Deputy Commissioner of Taxation v Gashi (No 3) [2011] VSC 448; 85 ATR 262 at 270-1 [20] per Dixon J and the abovementioned case of Infa-Secure. Katzmann J also pointed out that in National Australia Bank Ltd v Juric (No 2) [2001] VSC 398 at [70] Gillard J explained: [I]t has been recognised for many, many years in contempt cases, that a litigant who must come to court in order to enforce an order which has been breached by contempt, or to have a person dealt with [for] contempt, should not be out of pocket. 6 After referring (at [194]) to Moore J's observation in Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [2003] FCAFC 13; 196 ALR 350 at [6], "that there is no general principle or rule of law in contempt cases that a successful applicant or successful prosecutor is routinely awarded costs on an indemnity basis", the Full Court continued (at [195]): There is no doubt that this Court has a discretion to award indemnity costs to a party bringing contempt proceedings. In many contempt cases there will be powerful discretionary considerations favouring the award of indemnity costs. If there is a variable practice in that regard, this is a case falling within the category for which an indemnity costs order would be entirely appropriate. (Emphasis added.) (See also Australian Competition and Consumer Commission v World Netsafe Pty Ltd (2003) 133 FCR 279 at [40]-[43] per Spender J; and Ronowska v Kus (No 2) [2012] NSWSC 817; 221 A Crim R 261 at [89] per Pembroke J.) 7 I do not read any of the relevant cases as suggesting that there is an inflexible or normal rule that indemnity costs should be awarded in contempt cases. To that extent, I accept the submission of Mr Hardy's counsel to that effect. The decision whether to award costs and, if so, on what basis, in contempt cases, like other cases, is always discretionary. But the fact that many of the cases say that it may nonetheless be a "common" or "usual" practice to do so is not necessarily inconsistent with the fact that, in all cases, the starting point is an unfettered discretion. For a useful collection of many of the more recent cases, see G E Dal Pont, Law of Costs (3rd ed, LexisNexis Butterworths 2013) [16.68], especially at footnotes 346-349. 8 As the Full Court said in Ali v Collection Point Pty Ltd [2011] FCAFC 87 at [80]: "As the authorities reveal, indemnity costs are not infrequently awarded where an applicant successfully prosecutes a charge of contempt. In that context, it may be relevant that, as Tracey J stated in Bovis Lend Lease Pty Ltd v Construction Forestry Mining and Energy Union (No 2) [2009] FCA 650 at [45], 'the applicant has not been seeking any remedy on its own behalf but rather has been upholding the various public interests which are served by prosecutions for contempt of court'": see too Evenco Pty Ltd v Amalgamated Society of Carpenters, Joiners, Bricklayers and Plasterers of Australasia Union of Employees, Queensland [1999] QSC 77 at [5]-[6] per Chesterman J. The costs order was upheld on appeal in Evenco Pty Ltd v Australian Building Construction Employees & Builders Labourers Federation (Qld Branch) [2000] QCA 108; [2001] 2 Qd R 118. 9 Further, although Rogers AJA in McIntyre v Perkes (1988) 15 NSWLR 417, did not express a final view about the question, and reserved it to be fully argued on another occasion, there is much to be said for his Honour's view that because "[a]s well as enforcing his own rights, the party bringing proceedings for contempt is, at the same time, vindicating the order of the court and ensuring that its infringement does not go without scrutiny and, if appropriate punishment" and that "[t]here is a public, as well as a private, interest in proceedings for contempt" (at 436B), in such circumstances "what possible justification is there for leaving a person out of pocket when he is, at least in part, achieving a public purpose?" (at 436C). 10 There are a number discretionary factors weighing strongly in favour of awarding indemnity costs to AGL in this case. 11 First, the conduct of Mr Hardy in refusing to comply with the Search Order was deliberately defiant and contumacious: see AGL Energy Limited v Hardy (No 2) [2017] FCA 863 at [31]. 12 Secondly, Mr Hardy knew that he was committing contempt when he refused the independent lawyer access to his home: see AGL Energy Limited v Hardy (No 2) [2017] FCA 863 at [31]. 13 Thirdly, it was only after a contested hearing on the contempt charge that Mr Hardy agreed to the "protocol" proffered by AGL and it was only by Mr Hardy's compliance with that protocol that AGL was able to achieve that which it would have achieved had Mr Hardy not defied the Search Order. 14 Fourthly, AGL must be regarded, at least in part, as acting in the public interest and no reason has been identified why, in all the circumstances of this case, in the exercise of the Court's discretion, AGL should be out of pocket for commencing the contempt proceeding and seeing it through. As Holland J said in Degmam Pty Ltd (in Liq) v Wright (No 2) [1983] 2 NSWLR 354 at 358F "…in cases where an application is made to the court for committal for contempt such orders being made in an endeavour to ensure that the party that has been enforced to take that extra step, in order to obtain his rights, after they have been adjudicated by the court, may be relieved entirely of the expense of doing so...". Submissions and evidence 15 Mr Hardy submits that a costs order on an indemnity basis should not be made because the Court has imposed a substantial penalty. 16 Mr Hardy also submits that a costs order on an indemnity basis should not be made because he himself has incurred substantial costs in complying with the "protocol", which was contained in the consent orders made on 30 May 2017 and annexed to the Court's reasons in AGL Energy Limited v Hardy (No 2) [2017] FCA 863. He relies on an affidavit of his solicitor, Mr Naughton, sworn 10 August 2017, which relevantly deposes that Mr Hardy has paid approximately $42,850 in legal and other costs in complying with the 30 May 2017 orders. That evidence is as follows: Orders 6(a) and 6 (b) of the Orders of the Court dated 30 May 2017 required: (a) NuLegal to conduct searches over Mr Hardy's Privilege Claim Electronic Places to identify documents that fall within the NuLegal Search Parameters to prepare the NuLegal Search Report; (b) NuLegal to provide the NuLegal Search Report to the solicitors for Mr Hardy… The Court ordered that the costs associated with Orders 6(a) to (b) were to be borne by Mr Hardy. Mr Hardy's costs in complying with the orders are approximately $23,150, comprising approximately $19,250 in fees charged by NuLegal and approximately $3,900 in professional fees incurred by Slater + Gordon. Order 6 (c) … required the solicitors for Mr Hardy to conduct searches of the documents identified in the NuLegal Search Report to identify any Listed Things. Mr Hardy's costs in complying with this order are approximately $16,700, being the professional fees incurred by Slater + Gordon. Order 7 (a) … required Mr Hardy to prepare an affidavit containing so many of the Listed Things to which objection to production is taken on the basis of his claim for civil penalty privilege and/or client legal privilege and deliver those documents to the Court. Order 7 (b) … required Mr Hardy to file and serve on [AGL] a separate affidavit setting out the basis of any objection with respect to those documents. Mr Hardy's costs in complying with those orders are approximately $3,000, being the professional fees incurred by Slater + Gordon. CONSIDERATION 17 It may readily be accepted that the penalty imposed on Mr Hardy is a substantial one, but in this case it is not relevant for the purposes of determining the basis upon which costs should be awarded. There is here no connection between the two. 18 As for the submission that Mr Hardy has spent a large sum of money complying with the protocol to which he consented on 30 May 2017, that is also irrelevant to the question of the basis upon which an award for costs should be made. 19 First, some part of that expenditure would have been necessarily incurred by Mr Hardy had he complied with the Search Order and then made claims for privilege in respect of seized documents. Secondly, and most importantly, Mr Hardy has only himself to blame. Had he complied with, and not defied, the Search Order, he would not have incurred those expenses, or most of them in any event. In my view, the fact that he had to incur them is no reason that AGL should not, in the exercise of the Court's discretion, be paid their costs of the proceeding on an indemnity basis. There is no reason why AGL should be out of pocket because Mr Hardy, for his own purposes, months after the independent lawyer unsuccessfully attempted to execute the Search Order, agreed to orders designed to address the contempt: see AGL Energy Limited v Hardy (No 2) [2017] FCA 863 at [36]-[38]. 20 In written submissions filed on behalf of Mr Hardy, his counsel further submits that "by reason of the consent orders made on 30 May 2017 [AGL has] been relieved of significant expense had there been no breach of the search order made by O'Callaghan J". I assume that what counsel means is that AGL has now effectively obtained the benefit of compliance with the substance of the Search Order, without having to pay the Independent Computer Expert referred to in the Search Order: see AGL Energy Limited v Hardy [2017] FCA 420 at [35]-[40]. In my view, that is neither here nor there. Mr Hardy consented to paying the (new) Independent Computer Expert in the orders made on 30 May 2017, as part of his effort to address the contempt. It is not a factor that should disentitle AGL to payment of its costs on an indemnity basis. DISPOSITION 21 In my view, the discretionary factors identified above which weigh strongly in favour of awarding indemnity costs in this case, and the lack of any significant countervailing discretionary factors, mean that it is appropriate that Mr Hardy pay AGL's costs of the proceeding on an indemnity basis. Accordingly, an order will be made to that effect. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Callaghan. Associate: Dated: 23 August 2017 SCHEDULE OF PARTIES VID 176 of 2017 Prospective Applicants Second Prospective Applicant AGL LOY YANG PTY LTD Third Prospective Applicant AGL LOY YANG MARKETING PTY LTD Prospective Respondents Second Prospective Respondent CONSTRUCTION, FORESTRY, MINING and ENERGY UNION