Federal Court of Australia Sunland Group Limited v Gold Coast City Council (No 2) [2022] FCA 69 File number(s): QUD 230 of 2020 Judgment of: GREENWOOD J Date of judgment: 4 February 2022 Catchwords: CORPORATIONS – consideration of the disposition of the costs in relation to an interlocutory application the subject of Sunland Group Limited v Gold Coast City Council [2021] FCA 1473 Cases cited: Aldi Foods Pty Ltd v Transport Workers' Union of Australia (2020) 385 ALR 486 Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 90 ALJR 270 Northern Territory v Sangare (2019) 265 CLR 164 Oshlack v Richmond River Council (1998) 193 CLR 72 Re Nutricare Holdings Limited (No 2) [2021] FCA 33 Sunland Group Limited v Gold Coast City Council [2021] FCA 1473 The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 28 Date of hearing: 4 February 2022 Counsel for the Applicants: Mr S J Webster Solicitor for the Applicants: Holding Redlich Counsel for the Respondent: Mr G Gibson QC and Mr A Psaltis Solicitor for the Respondent: Hopgood Ganim ORDERS QUD 230 of 2020 BETWEEN: SUNLAND GROUP LIMITED First Applicant SUNLAND DEVELOPMENTS NO 22 PTY LTD Second Applicant AND: GOLD COAST CITY COUNCIL Respondent order made by: GREENWOOD J DATE OF ORDER: 4 FEBRUARY 2022 THE COURT ORDERS THAT: 1. The applicants pay 70% of the costs of the respondent of and incidental to the interlocutory application the subject of the decision in Sunland Group Limited v Gold Coast City Council [2021] FCA 1473. 2. Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT GREENWOOD J: 1 These reasons are concerned with the disposition, on the papers, of the costs of and incidental to the interlocutory application made by the respondent in the principal proceeding, Gold Coast City Council (the "Council"), reserved by Order 4 of the orders made on 23 November 2021. These reasons ought to be read together with the reasons in Sunland Group Limited v Gold Coast City Council [2021] FCA 1473 (the "principal reasons"). 2 By para 1 of the interlocutory application, the Council sought an order that the applicants, Sunland Group Limited ("SGL") and Sunland Developments No 22 Pty Ltd ("SD 22", collectively "Sunland"), produce for inspection un-redacted copies of Documents 86, 97, 119, 120, 122, 125, 135, 136, 138, 141 and 142 of Sunland's list of documents (as set out at pp 17-21, AMA-06 to the affidavit of Mr Alcock filed 14 April 2021). Put simply, those documents consisted, in the main, of copies of a document described as a due diligence report provided to Sunland's directors on 26 September 2014 in relation to a proposed acquisition by Sunland of land at 259 Rio Vista Boulevard, Mermaid Waters (otherwise described as the "Mermaid Beach land"), which occurred in October 2014. 3 Fundamentally, the contest in relation to each of the para 1 documents reduced to a question of whether legal professional privilege in relation to redacted sections of the documents had been waived. 4 Sunland was said to have waived, by implication, the legal professional privilege otherwise subsisting in the redacted sections of the due diligence report having regard to Sunland's statement of claim, the matters it had chosen to put in controversy in asserting its cause of action, and the evidence of the directors as to their reliance on the whole of the due diligence report in reaching a state of mind as to contended reliance on representations said to have been made by the Council in Sunland entering into the acquisition transaction for the Mermaid Beach land. 5 In the principal reasons, the Court observed that an examination of whether legal professional privilege had been waived, as contended, was a fact-intensive question and it would be necessary to examine the scope of the statement of claim and the other matters upon which the Council relied in asserting waiver. Sunland contended that when the principles governing that question were applied to the relevant facts, no waiver of the privilege had occurred. 6 Thus, in order to resolve the interlocutory application it was necessary to examine closely the various factual matters pleaded in the statement of claim, the principles governing waiver of legal professional privilege and the evidence of the directors having regard to the affidavits they filed. 7 By para 2 of the application, the Council sought an order that Sunland produce for inspection 16 documents (pp 22-23, AMA-06, Mr Alcock's affidavit filed 14 April 2021) which were the subject of a claim for legal professional privilege in their entirety. As to these documents, the Council contended that Sunland had not produced them on the ground of legal professional privilege. In oral submissions, the Council took the position that it had chosen not to address the para 2 documents separately from the arguments advanced in relation to the para 1 documents on the basis that Sunland's submissions did not seek to make any point of distinction in the application of the relevant principles (as discussed in the principal reasons), as between the para 1 and para 2 documents. The Council's contention was that if the Court was with the Council on its primary submission concerning the para 1 documents, that position would equally apply to the para 2 documents. 8 Sunland contested that proposition and contended that in addition to failing to establish waiver concerning the para 1 documents, the Council had failed to make good a ground of waiver as to any of the para 2 documents. 9 In the result, the Council succeeded in its interlocutory application in relation to the para 1 documents but was unsuccessful in relation to the para 2 documents. 10 The Council contends that although it accepts that it did not succeed in obtaining an order for production of the para 2 documents, it is nevertheless appropriate that the costs order reflect an apportionment of the costs incurred in prosecuting the interlocutory application. The Council contends that Sunland ought to be ordered to pay 80% of the Council's costs of the interlocutory application. That approach is said to follow for a number of reasons. 11 The Council contends that the factual background to the application with respect to both the para 1 and para 2 documents was materially identical. The factual background relating to the cause of action was extensively described in the principal reasons by reference to the statement of claim at [7] to [52]. Apart from the matters of pleading which needed to be examined, the evidence of the directors was examined at [53] to [58] of the principal reasons. The factual background relied upon by Sunland in seeking to make good its cause of action was also extensively described in the written submissions. Aspects of the essential submissions of the parties were then summarised in [60] to [62] of the principal reasons. The matters of principle in relation to waiver of legal professional privilege were also extensively described in the principal reasons at [63] to [90]. In order to determine the application it was thus necessary to extensively deal with the elements of the cause of action as pleaded, the governing principles and the evidence of the directors, as mentioned earlier. 12 The Council says that it is clear from these matters that the analysis of the factual background and the discussion of the governing principles dominated the written submissions of the parties and were required to be addressed in order to demonstrate the Council's entitlement to the order with respect to the para 1 documents. The Council says that only "marginally additional time" was devoted to the separate consideration of the application with respect to the para 2 documents. 13 The Council also contends that Sunland's written submissions drew no distinction, in point of principle, between the para 1 and para 2 documents and directed attention to the para 2 documents in only a passing way in the sense that the case for waiver, in the written submissions, in respect of any of the para 2 documents was simply put on the basis that it "[did] not overcome the hurdles set out above". The Council contends that it was only in the course of oral submissions that an entirely separate point was taken with respect to the para 2 documents to the effect that no basis for a contention that privilege had been waived in relation to each and every one of the para 2 documents had been articulated. 14 The Council contends that the Court's consideration of the order sought in relation to the para 2 documents was "equally brief" with the "entire discussion" occupying only seven paragraphs of the principal reasons. The Court addressed the question in relation to the para 2 documents within the limits of what was put to the Court. 15 The Council says that the separate consideration by the parties and the Court of the issues raised in relation to the para 2 documents was "incremental", rather than "substantial". 16 The Council says that it should have the benefit of an award of costs as the Council was justified in seeking the Court's aid in order to compel production of the un-redacted documents in which it contended Sunland had waived legal professional privilege, but which Sunland had refused to produce. The Council says that Sunland's refusal to produce the documents had the "practical consequence" of forcing the Council to bring the application and because the Council succeeded in obtaining the order it sought in respect of those documents, it contends that it ought to have the benefit of an order of costs. 17 The Council also submits that the costs ought to be reduced only modestly to reflect the fact that only incrementally additional costs were incurred by the parties in relation to the order sought concerning para 2 documents. The Council says that attributing a percentage apportionment of 80% reflects the fact that the Council was not entirely successful on the interlocutory application; that Sunland was partially successful; and that the "overwhelming bulk of the costs" incurred in prosecuting the interlocutory application were "necessarily incurred" to obtain the order with respect to the para 1 documents, regardless of the outcome of the application with respect to the para 2 documents. 18 Sunland takes a different view. 19 Sunland says that the Council enjoyed mixed success in its interlocutory application and that in the circumstances of the case it is appropriate to order that the costs of the interlocutory application be each party's costs in the cause; or that the costs of the application be reserved for later determination (at the conclusion of the proceeding) or that there be no order as to costs. 20 Sunland says that in circumstances where a party has enjoyed mixed success on an interlocutory application, it is often not appropriate to award costs without regard to the ultimate outcome of the primary proceeding. Sunland suggests that the discretion should be exercised so as to make an order for costs in the cause with the result that the Council would recover the costs if it was successful in the cause. At least one example of that approach is set out in Sunland's written submissions. 21 Sunland also contends that while it is correct to say that during the hearing more time was engaged on the due diligence reports comprising the para 1 documents, Sunland nevertheless led evidence relating to the para 1 and para 2 documents; Sunland's written and oral submissions addressed both the para 1 and para 2 documents; and the para 2 documents contained more documents than para 1. 22 The Council has referred the Court to a range of well-known statements of fundamental principle informing the exercise of the discretion as to costs: Aldi Foods Pty Ltd v Transport Workers' Union of Australia (2020) 385 ALR 486 at [88], Besanko, Bromberg and O'Bryan JJ; Re Nutricare Holdings Limited (No 2) [2021] FCA 33 at [35], Reeves J; Oshlack v Richmond River Council (1998) 193 CLR 72, McHugh J at [67] and [68]; Northern Territory v Sangare (2019) 265 CLR 164 at [25], the Court; Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 90 ALJR 270, the Court; and The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174, Emmett, Kenny and Middleton JJ (and the authorities referred to in the cited passages). 23 In all of these authorities, the question of the disposition of the costs was addressed in circumstances where final orders had been made in the relevant proceeding (and the resolution of appeals from the final orders of the particular trial judges). 24 In the present proceedings, the question concerns the disposition of the costs incurred in an interlocutory application. However, there is nothing in the character of the application that suggests any good reason why the determination of whether an order for costs is to be made (and if so, what order and on what basis), ought to be put off until final orders are made in the principal proceeding. The interlocutory application was an entirely discreet application in which the Council called in aid the Court in order to secure access to the un-redacted para 1 documents (and the para 2 documents) on the footing that Sunland had waived the legal professional privilege in those documents. The application was resisted by Sunland and the question of whether legal professional privilege had been waived was an entirely separate question which fell for final determination by the application. As to the para 1 documents, the Council succeeded in its contentions. 25 In order to succeed in its contentions, it was necessary for the Council to explain the foundation for Sunland's cause of action reflected in the statement of claim and to address the principles governing waiver. It was also necessary to address the evidence of the directors. It is also true that much of this material was relevant to the para 2 documents which attracted very little debate as things transpired. 26 In substance, the Council was successful and it is correct to say that the dominant analysis inherent in the application overall was directed to the para 1 documents. As the successful party, in substance, the Council ought to have an order for costs which protects it, that is to say, compensates it, for the costs it incurred in securing access to the para 1 documents. The Council had to take Sunland to Court to secure access to the para 1 documents and it was this debate that dominated the proceedings. 27 It is true that the Council was unsuccessful in relation to the para 2 documents and the content of the order ought to reflect that aspect of the matter. However, any apportionment must take into account the substance of the controversy which brought the parties to Court. 28 In all the circumstances, taking into account the matters of principle derived from the authorities at [22] of these reasons, the appropriate order is that the applicants in the principal proceeding pay 70% of the costs of the respondent Council of and incidental to the interlocutory application. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Greenwood. Associate: Dated: 4 February 2022