FEDERAL COURT OF AUSTRALIA Rose v Essential Energy (No 2) [2020] FCA 347 File number: NSD 1958 of 2018 Judge: MARKOVIC J Date of judgment: 17 March 2020 Catchwords: COSTS – application for preliminary discovery pursuant to r 7.23 of the Federal Court Rules 2011 (Cth) – where prospective applicants were successful in the application which was contested by prospective respondent – prospective respondent ordered to pay prospective applicants' costs of the application – prospective applicants ordered to pay prospective respondent's reasonable costs of providing discovery Legislation: Federal Court of Australia Act 1976 (Cth) ss 20A, 43 Federal Court Rules 2011 (Cth) rr 7.23, 7.29(b) Cases cited: Alstom Power Limited v Eraring Energy [2004] FCA 706 DSE (Holdings) Pty Limited v InterTAN Inc (2004) FCA 1251 ObjectiVision Pty Limited v Visionsearch Pty Limited (No 3) [2015] FCA 304 Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (No 2) [2019] FCA 657 Proctor v Kalivis (No 3) [2010] FCA 1194 Steffen v ANZ Banking Group [2009] NSWSC 883 Date of hearing: Determined on the papers Date of last submissions: 21 February 2020 (Prospective Applicants) 2 March 2020 (Prospective Respondent) 4 March 2020 (Prospective Applicants) Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 33 Counsel for the Prospective Applicants: Mr S Habib SC Solicitor for the Prospective Applicants: Mr B Petrovski of William Roberts Lawyers Counsel for the Prospective Respondent: Mr H Pintos-Lopez Solicitor for the Prospective Respondent: Mr C Wood of Sparke Helmore Lawyers ORDERS NSD 1958 of 2018 BETWEEN: LAWRENCE JAMES ROSE Prospective First Applicant SUSAN ELIZABETH ROSE Prospective Second Applicant AND: ESSENTIAL ENERGY ABN 37 428 185 226 Prospective Respondent JUDGE: MARKOVIC J DATE OF ORDER: 17 march 2020 THE COURT ORDERS THAT: 1. Pursuant to r 7.29(b) of the Federal Court Rules 2011 (Cth) the prospective applicants are to pay the prospective respondent's reasonable costs and expenses of providing discovery and production in accordance with Orders 1, 2 and 3 of the Orders made on 14 February 2020. 2. The prospective respondent is to pay the prospective applicants' costs of the application for preliminary discovery. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MARKOVIC J: 1 On 14 February 2020 I made orders, among others, pursuant to r 7.23 of the Federal Court Rules 2011 (Cth) (Rules) that the prospective respondent, Essential Energy (Essential), give discovery to the prospective applicants, Mr and Mrs Rose, of the documents and categories of documents identified in Annexure A to those orders. At the request of the parties I did not determine the issue of costs of the preliminary discovery application (Application) or of the provision of the discovery the subject of the orders that I made but made orders permitting the parties to file submissions in relation to both the costs of the Application and of provision of the discovery: see Rose v Essential Energy [2020] FCA 124. 2 The parties have now filed submissions, neither party has sought an oral hearing and I am satisfied that the issue of costs can be determined on the papers: see s 20A of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act). 3 As I have already observed, there are two costs issues to be determined: the costs of the Application and the costs of the provision of the discovery that Essential has been ordered to provide to Mr and Mrs Rose. I will deal with each issue in turn. Costs of the application 4 Mr and Mrs Rose, on the one hand, seek an order that Essential pay their costs of the Application while Essential, on the other, contends that the appropriate order in relation to costs of the Application is that each party bears his, her or its own costs or, in the alternative, that Mr and Mrs Rose should only be entitled to costs incurred after 6 February 2019 and that costs prior to that date should be awarded to Essential. The relevance of 6 February 2019 is that it is the date on which the prospective claim based on the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL Claim), was first raised by Mr and Mrs Rose. Parties' submissions 5 Mr and Mrs Rose submit that they commenced this proceeding on 24 October 2018 following a series of unsuccessful attempts, commencing in March 2018, to obtain from Essential, by way of applications made pursuant to the Government Information (Public Access) Act 2009 (NSW) (GIPA Act) and related correspondence, quickly, inexpensively and efficiently what, in substance, has now been ordered by the Court to be provided. They contend that Essential, a statutory authority bound by the State's model litigant policy for civil litigation (M2016-03), has vigorously contested the Application on all available issues since its commencement, relied on three affidavits, contested jurisdiction, contested every element of the requirements of r 7.23 of the Rules, relied on technical and complex legal arguments of the type discouraged in Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (2017) 257 FCR 62 and advanced a positive case on discretion relying on a possible coronial inquiry. Mr and Mrs Rose say that as a result they have incurred substantial costs and delay and they have succeeded, and Essential has failed, on all issues requiring determination by the Court. Accordingly, they submit that Essential should pay their costs of the Application consistent with the weight of authority relevant to the circumstances of this proceeding. 6 Essential submits that in determining the appropriate order for costs of the Application the Court would have regard to the following matters: (1) the Application and Mr and Mrs Rose's evidence in chief were filed on 18 October 2018 and served on 24 October 2018; (2) the ACL Claim, which was central to the conclusions reached by the Court, was only raised by Mr and Mrs Rose on 6 February 2019, just days before the hearing which was originally listed on 12 February 2019; (3) the third affidavit sworn by Mr Petrovski, the solicitor for Mr and Mrs Rose, which sets out the evidence in chief in respect of the ACL Claim was made more than three months after Mr Petrovski's first affidavit filed in the proceeding; (4) no explanation was given for the late introduction of the ACL Claim and evidence in breach of the Court's timetable for the service of evidence; (5) the Court would infer that the ACL Claim was only introduced so very late because Mr and Mrs Rose were concerned about the case based on s 67 of the Insurance Contracts Act 1984 (Cth) (IC Act); (6) the contentions raised by Mr and Mrs Rose in relation to s 67 of the IC Act have not been determined by the Court and there is thus no finding that Mr and Mrs Rose had a reasonable belief in respect of such contentions, this being the sole alleged jurisdictional basis for the prospective negligence and nuisance claims prior to 6 February 2019; (7) most of the time at hearing was taken up by senior counsel for Mr and Mrs Rose who explained matters not properly addressed in writing. In particular neither the "Connection Contract" argument nor the "indirect funding" argument in relation to the ACL Claim was articulated in Mr and Mrs Rose's written submissions and, in turn, the basis for the ACL Claim was not made clear until hearing; (8) in any event Essential acted reasonably and was entitled to put Mr and Mrs Rose to proof, especially having regard to the jurisdictional issues involved and the written submissions on the ACL Claim; (9) the model litigant policy identified by Mr and Mrs Rose does not apply to Essential as it is not a government agency. However, Essential does generally seek to act consistently with such policies; (10) in any case, contrary to Mr and Mrs Rose's written submissions, model litigant policies do not require a government litigant to refrain from taking legitimate points that it is entitled to take or to surrender documents that are subject to lawful exceptions under the GIPA Act; (11) to insist that jurisdiction be properly invoked is not a "technical" argument. It is the basis of the Court's power to quell disputes; and (12) further proceedings may never be commenced by Mr and Mrs Rose. Legal principles 7 Section 43 of the Federal Court Act confers a wide discretion on the Court to award costs, which is not to be read down otherwise than by judicial principle conformable with its amplitude: see DSE (Holdings) Pty Limited v InterTAN Inc (2004) FCA 1251 at [14]. 8 The parties are somewhat at odds about the effect of the authorities that have considered the appropriate costs order to be made in an application for preliminary discovery although both parties agree that, where a prospective applicant is successful in its application for preliminary discovery, the position in relation to costs of the application is not straightforward. Rather, the costs outcomes differ depending on the circumstances in each particular case. 9 That that is so is reflected in the observations of Perry J in ObjectiVision Pty Limited v Visionsearch Pty Limited (No 3) [2015] FCA 304 (ObjectiVision) where at [13] her Honour said: It has been doubted that there is as yet a "conventional approach" as to the manner in which the discretion as to costs and expenses is to be exercised in preliminary discovery applications: Apache Northwest Pty Ltd v Newcrest Mining Ltd [2009] FCAFC 39; (2009) 182 FCR 124 (Apache) at 146-147 [90]-[91] (Flick J (in dissent but on issues not presently relevant)); J & A Vaughan Super Pty Ltd v Becton Property Group Limited [2013] FCA 340 (Vaughan Super) at [16] (Kenny J). Any order for costs must necessarily be dictated by the facts and circumstances of the proceeding: Apache at 146 [89]; Vaughan Super at [16]. The decided cases are therefore illustrative only of the manner in which the discretion has been exercised in the circumstances of the particular case and provide guidance in that sense. (Original emphasis.) 10 In ObjectiVision Perry J considered the appropriate orders for both the costs of the application for preliminary discovery and the provision of the discovery the subject of an order made pursuant to r 7.23 of the Rules. Relevantly, in relation to the application for preliminary discovery each of the prospective respondents sought contingent costs orders: the prospective first respondent sought an order, in the alternative, that costs be costs in the cause should a substantive action be commenced or, if not commenced within a reasonable time, that the prospective applicant pay its costs of the application; and the prospective second respondent sought its costs, in so far as they related to the claims of preliminary discovery for breach of contract, to be assessed at 30% of its total costs of the application and that its remaining costs be costs in the cause if proceedings are commenced or, if proceedings are not commenced within six weeks of inspection, that the prospective applicant pay its costs. 11 In light of the competing orders sought by the parties, Perry J considered a number of the authorities. Her Honour noted that doubts had been expressed about the contingent approach to costs orders adopted in cases such as Cappuccio v Australia and New Zealand Banking Group Limited [1999] FCA 1188. At [17]-[18] her Honour said: 17 … Thus, in C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 (C7), where C7 succeeded in large measure in its application for preliminary discovery, Gyles J at [50] held that: It needs to be borne in mind that this is an extraordinary jurisdiction. It provides for compulsory access to the private affairs of members of the community in order that somebody else can determine if they have a case against that party and the threshold set by O 15A r 6(a) [the precursor to FCR, r 7.23] is not very high. There is much to be said for the view that a respondent in these circumstances is entitled to put the applicant to proof except in a clear case. Some judges have been disposed to make orders which, to a greater or lesser extent, leave costs to be determined after the result of preliminary discovery and inspection is known, and even to depend upon, to some extent, the fate of the litigation which ensues. I am not persuaded of the merit of that approach. An application pursuant to O 15A is a discrete application and may never lead anywhere. There is no reason why a party which is out of pocket because of costs should await some indefinite future event. 18 Gyles J concluded at [51] that, having regard to these considerations and to the fact that the relief which the applicant will obtain is effectively that offered before the hearing, the proper order was that the applicant pay 50% of the costs of the respondents. His Honour also noted that in the event that proceedings were instituted and the applicant were to succeed, it may be arguable that the applicant should be compensated for the burden of this costs order (and perhaps its own costs) although that would be a matter for the trial judge. (Original emphasis.) 12 At [21] her Honour observed that: Similar doubts as to the desirability of making contingent costs orders were expressed by McDougall J in Steffen v ANZ Banking Group [2009] NSWSC 883 (Steffen) at [31] with respect to the principles applicable to an application for preliminary discovery under the Uniform Civil Procedure Rules 2005 (NSW). McDougall J considered that generally it is better to deal with costs on an application for preliminary discovery by making an order with immediate rather than contingent operation (at [33]). However, his Honour took a different view as to where the burden of costs should lie on a contested application for preliminary discovery, considering at [32] that: "where an application for preliminary discovery is contested in an adversarial fashion, then the ordinary consequences of that decision should follow unless some good reason is shown why they should not." (following Simpson J in Airways Corp of New Zealand v The Present Partners of Pricewaterhouse Coopers Legal [2002] NSWSC 521 (Airways Corp of NZ)). (Original emphasis.) 13 At [22] Perry J referred to the decision in Proctor v Kalivis (No 3) [2010] FCA 1194 (Proctor) which her Honour noted adopted a similar approach to that in Steffen v ANZ Banking Group [2009] NSWSC 883 (Steffen). In particular, among other things, in Proctor at [17] Besanko J observed that if a respondent takes an adversarial approach to an application for preliminary discovery then it may be appropriate that it pay the costs caused by that adversarial approach. Her Honour considered that there was considerable force in the approach adopted in Proctor and Steffen in contested cases, such as the one before her, but that the exceptional nature of the jurisdiction remained a matter to be taken into account in determining costs and a factor that may lead to a closer scrutiny, than might otherwise be the case, of the extent to which a successful prospective applicant should receive its costs. 14 In Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (No 2) [2019] FCA 657 (Pfizer Costs), after summarising the principles emerging from the authorities in relation to an award of costs in applications for preliminary discovery, Burley J said at [26]-[27]: 26 It is true to say, as has been observed in some of the authorities to date, that there has been no uniform approach to the award of costs in relation to preliminary discovery applications. However, an emerging thread is that where a prospective respondent takes an adversarial approach to the application, it may be required to bear some or all of the costs in the event that the prospective applicant is successful. The rationale behind that approach may be explained by the extraordinary nature of the preliminary discovery jurisdiction, which is intended to facilitate the making of sensible decisions concerning the commencement of proceedings, before proceedings have been formulated. Accordingly, whilst an adversarial approach is not prohibited, it is to be discouraged. Preliminary discovery is not a process by which potential parties are to open up new fronts for litigation warfare, but a procedure by which the efficient conduct of litigation is promoted; Appeal Judgment [2], [4] (Allsop CJ), [119] (Perram J). 27 Where a prospective respondent elects to enter the fray and vigorously contest the application, it becomes exposed to the risk that it should bear a costs consequence similar to the position it would be in were it a party to proceedings proper. Where the contest on an application is limited to the prospective applicant being put to proof of the elements of r 7.23, then even a successful prospective applicant may be liable to pay the costs. Conversely, where each point is hard fought, the prospective respondent is exposed to the risk that it will be visited with some or all of the costs in the event they are unsuccessful. In such circumstances, it may be inappropriate to defer a costs order to the outcome of any prospective litigation. Consideration 15 In the context of the Application, the approach of the parties to it is a relevant matter to consider in determining the appropriate order for costs of the Application. Essential says that it "acted reasonably" and that it "was entitled to put [Mr and Mrs Rose] to proof". No criticism can be levelled at Essential about the way it approached the Application, nor is there any warrant to consider whether it acted contrary to the model litigant policies that apply to New South Wales government agencies or authorities, to the extent that it is bound by those policies. Essential was entitled to put Mr and Mrs Rose to proof of the elements of r 7.23 of the Rules. However, any suggestion by Essential that it did no more than that cannot be sustained. 16 Essential entered the fray and vigorously contested the Application: see Pfizer Costs at [27]. It took an adversarial approach to each element of the Application. While it accepted that Mr and Mrs Rose had a reasonable belief that they may have a right to obtain relief based on causes of action in negligence and/or in nuisance, it contested their ability to bring those claims in this Court for want of jurisdiction. It contested their ability to maintain that they had a reasonable belief as required by r 7.23(1)(a) of the Rules in relation to the ACL Claim. It contested whether, after making reasonable inquiries, Mr and Mrs Rose had sufficient information to decide whether to start a proceeding to obtain the relief. It argued that, even if the requirements of r 7.23 of the Rules were satisfied, the Court would decline to exercise its discretion to make an order for preliminary discovery because of a possible coronial inquiry into the Tathra bushfire and because of the potential cost of providing the discovery. 17 Essential says that the Court should take into account that the ACL Claim was raised late and, it should be inferred, because Mr and Mrs Rose were concerned about the case based on s 67 of the IC Act on which they had relied to establish jurisdiction. That is, Mr and Mrs Rose were concerned that they would be unable to demonstrate that they had a reasonable belief that they may have a right to obtain relief in this Court based on causes of action in negligence and nuisance. A number of things can be said about that submission. 18 First, it is true it seems, at least based on the material filed, that the ACL Claim was only raised some six days prior to the initial date allocated for hearing of the Application. That date was vacated and orders were made for Essential to file further evidence. 19 Secondly, Essential did not alter its attitude to the Application as a result of the introduction of the ACL Claim. It continued to contest it including additionally, as noted at [16] above, by contesting Mr and Mrs Rose's reasonable belief that they may have a claim for relief based on the ACL Claim. It is difficult to see, and Essential does not explain, how raising the ACL Claim at inception of the proceeding or any earlier than 6 February 2019 would have changed its attitude to the Application. 20 Thirdly, the Application was ultimately listed for hearing some four months later giving Essential ample time within which to consider the ACL Claim and to seek any particulars or clarity in relation to it, to the extent that it did not understand the basis for it. 21 In the circumstances of this case I do not accept that the appropriate order is that each party should bear its own costs of the Application. In my opinion, in circumstances where Essential contested the Application as it did, the appropriate order is that it should pay Mr and Mrs Rose's costs of the Application. Had Essential taken a less adversarial approach the same outcome might not have followed. But, in circumstances where it chose to contest the Application in the manner that it did, it opened itself up to the risk of a costs order. That risk has now been realised. Further, for the reasons explained at [18]-[20] above I would not limit those costs to costs incurred after 6 February 2019. Costs of PROVISION OF THE preliminary discovery 22 Mr and Mrs Rose submit that the appropriate order for the costs of providing the preliminary discovery are orders to the effect that: if they commence a proceeding within six months of completion of discovery and provision of documents for inspection in accordance with the Court's orders, the costs of discovery be costs in the cause in that proceeding or, alternatively, be at the discretion of the Court in that proceeding; or if they do not commence a proceeding within six months of completion of discovery and provision of documents for inspection in accordance with the Court's orders, Mr and Mrs Rose are to pay Essential's reasonable costs of providing the discovery. 23 Essential submits that the an order should be made pursuant to r 7.29(b) of the Rules that Mr and Mrs Rose pay its costs of providing preliminary discovery. Parties' submissions 24 Mr and Mrs Rose submit that Essential could have avoided the costs of providing the discovery now ordered by substantive production in response to the GIPA Act applications in 2018 or in response to their further request on 11 October 2018 and that, as a model litigant, it should have done so. They contend that production under the GIPA Act regime could and should have been provided in accordance with the procedure and fees payable thereunder and to the extent, if at all, the discovery now ordered goes further, it will be discovery that would be required in the contemplated substantive proceeding and will reduce the scope and cost of discovery in that proceeding. 25 Mr and Mrs Rose submit that where Essential, a statutory authority bound by the State's model litigant policy for civil litigation, has vigorously contested not only this proceeding but also Mr and Mrs Rose's rights under the GIPA Act regime, the costs of providing preliminary discovery should accordingly be treated as costs in the cause in the contemplated substantive proceeding. However, they accept that if a substantive proceeding is not commenced within six months of completion of discovery and provision of discovered documents for inspection in accordance with the Court's orders, they should pay the costs of production. 26 Essential submits that Mr and Mrs Rose's six month time frame in their proposed order is excessive given the information they already have and their evidence as to information required to make a decision about whether to commence a proceeding. 27 Essential contends that, contrary to Mr and Mrs Rose's assertion, it is not possible to say whether preliminary discovery will reduce the costs of discovery in the contemplated substantive proceeding noting, for example, that it is reasonable to suppose that other similar documents will be sought once a proceeding is commenced and the issues are more fully defined. It says that this will necessarily result in duplication of effort and time. 28 Essential submits that there is no good reason why it, and ultimately its customers, should be expected to carry these costs, potentially for years, in circumstances where Mr and Mrs Rose may ultimately be unsuccessful at trial, especially given that they are supported by a litigation funder. Essential says that if Mr and Mrs Rose ultimately bring a proceeding and are successful they can seek to recover compliance costs in the ordinary way and no contingent order is required. Consideration 29 Rule 7.29(b) of the Rules relevantly provides that a person against whom an order is made under Div 7.3 of Pt 7 of the Rules may apply to the Court for an order that the prospective applicant pay the person's cost and expenses. 30 In my opinion it is appropriate that an order be made that Mr and Mrs Rose meet Essential's costs of providing the discovery the subject of Orders 1, 2 and 3 of the orders made on 14 February 2020. 31 That Essential could have provided the documents now the subject of the orders for preliminary discovery in answer to the GIPA Act applications made on behalf of Mr and Mrs Rose, a matter about which I do not seek to pass any comment or make any finding, is not to the point. Even if it had provided documents in that way, costs issues were likely to have arisen. Nor, as I have already observed, is the submission that Essential is bound to act in accordance with New South Wales model litigant policies a matter that would persuade me to make the order sought by Mr and Mrs Rose. Further, that Essential chose actively to dispute the Application does not add to, affect or cause the cost of providing the discovery. 32 I accept Essential's submission that there is no good reason why it and ultimately its customers should have to bear these costs. As Perry J said in ObjectiVision at [39] to make Essential await the possible outcome of a proceeding, if any, commenced by Mr and Mrs Rose for the costs incurred in complying with the order for preliminary discovery, "given the extraordinary and intrusive nature of these orders and given that the costs of compliance may be significant", is not fair. In any event, it may be that if Mr and Mrs Rose ultimately bring a proceeding and are successful they can seek to recover compliance costs in that proceeding, subject to the discretion of the trial judge: see Alstom Power Limited v Eraring Energy [2004] FCA 706 at [17]; ObjectiVision at [39]. Conclusion 33 I will make orders accordingly. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic. Associate: Dated: 17 March 2020