Federal Court of Australia Jele Chemists Pty Ltd v Australian Community Pharmacy Authority (No 3) [2024] FCA 606 File number(s): QUD 293 of 2022 Judgment of: MEAGHER J Date of judgment: 10 June 2024 Catchwords: COSTS – Appropriate orders as to costs – Application of Hardiman principle – where appropriate alternative contradictors present – where notice of objection to competency and originating application dismissed Legislation: Federal Court of Australia Act 1976 (Cth) ss 29(1), 37M, 37N Federal Court Rules 2011 (Cth) rr 25.14, 36.08 Cases cited: BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557 Conradsen at [20], in Cmr of Taxation v Rowntree (No 2) [2021] FCA 268 Conradsen v Carpentaria Land Council Aboriginal Corp [2023] FCA 1373 Fagan v Crimes Compensation Tribunal (1982) 150 CLR 666 Freedom Pharmaceuticals Pty Ltd v Minister for Health (No 2) [2021] FCA 1250 Huon Aquaculture Group Ltd v Minister for the Environment (No 2) [2018] FCA 1938 Jele Chemists Pty Ltd v Australian Community Pharmacy Authority [2023] FCA 1652 R v Australian Broadcasting Tribunal Ex parte Hardiman (1980) 144 CLR 13 Lo v Australian Community Pharmacy Authority [2013] FCA 639 Metlife Insurance Ltd v Australian Financial Complaints Authority (No 3) [2022] FCA 849 Montgomery v Minister for Immigration (No 2) [2021] FCA 1444 Ogawa v Financial Information Commissioner [2014] FCA 229 PKT Technologies Pty Ltd (fka fairlight.au Pty Ltd) v Peter Vogel Instruments Pty Ltd (No 2) [2020] FCAFC 46 Wills v Chief Executive Officer of the Australian Skills Quality Authority (Costs) [2022] FCAFC 43 Division: General Division Registry: Queensland National Practice Area: Administrative and Constitutional Law and Human Rights Number of paragraphs: 38 Date of last submission/s: 9 February 2024 Date of hearing: 7 June 2023 Counsel for the Applicant: Mr C Gunson with Ms R Howe Solicitor for the Applicant: Robert James Lawyers Counsel for the First and Third Respondents: Ms K Slack Counsel for the Second Respondent: Mr T Flaherty Solicitor for the First and Third Respondents: Sparke Helmore Solicitor for the Second Respondent: Michael Flaherty Solicitors ORDERS QUD 293 of 2022 BETWEEN: JELE CHEMISTS PTY LTD Applicant AND: AUSTRALIAN COMMUNITY PHARMACY AUTHORITY First Respondent GLENVALE PHARMACY PTY LTD Second Respondent SECRETARY, DEPARTMENT OF HEALTH AND AGED CARE Third Respondent order made by: MEAGHER J DATE OF ORDER: 10 JUNE 2024 THE COURT ORDERS THAT: 1. The applicant pay the first respondent's costs to be assessed or agreed up to and including 29 March 2023. 2. The applicant pay the second respondent's costs to be assessed or agreed. 3. There be no costs order in respect of the third respondent. 4. Orders 1 and 2 do not operate to vary previous costs orders made by the Honourable Justice Collier on 30 November 2022. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MEAGHER J INTRODUCTION 1 In Jele Chemists Pty Ltd v Australian Community Pharmacy Authority [2023] FCA 1652 (judgment) on 21 December 2023, I made orders dismissing the Notice of Objection to Competency filed by the second respondent on 3 April 2023 and dismissing the further amended originating application filed on 29 March 2023. I also made orders as to the filing of submissions by the parties as to costs and proposed costs orders. Those submissions and proposed orders have now been filed. 2 These reasons dealing with the costs should be read with the judgement and adopt the abbreviations used in the judgement. That judgement sets out the full history of the matter, but for the purposes of these reasons, I note that the applicant made an application for an interlocutory injunction which was dismissed with costs on 30 November 2022 and the second respondent filed a notice of objection to competency as to the standing of the applicant on 3 April 2023. 3 The applicant's primary submission is that as a notice of appeal has been lodged against the whole of the judgement, the appropriate course to adopt is to postpone the resolution of the costs until the finalisation of the appeal. The notice of appeal also relates to orders made with regards to costs. According to the applicant's submission, for the parties to engage in a process of incurring additional costs, potentially unnecessarily, goes against ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth), which sets out the overarching purpose of civil practice and procedural provisions and the obligations of parties to act consistently with that purpose. 4 In the alternative, the applicant submitted that if the Court is minded to make orders with respect to costs, those orders should be: 1. That the applicant pay the first respondent's costs up to and including 15 September 2022 as agreed or taxed (see Huon Aquaculture Group Ltd v Minister for the Environment (No 2) [2018] FCA 1938) 2. That the applicant pay the second respondent's costs as agreed or taxed; 3. That there be no costs order in respect of the third respondent. 4. Orders 1 and 2 do not operate to vary previous costs orders made in this application on 30 November 2022. 5 In its submissions in reply, the applicant's position with respect to the second respondent changed such that it contended that given the time devoted to the standing argument raised by the objection to competency, the applicant should pay two thirds of the second respondent's costs and the second respondent should pay one third of the applicant's costs. The applicant submitted that, therefore, the ultimate order as it relates to the second respondent should be that the applicant pay one third of its costs. 6 As to the first respondent's costs, the applicant, in its submissions in reply, argued that the first respondent cannot appear "in accordance with the Hardiman principle" then resile from that stance in order to seek that its costs be paid. 7 The second respondent submitted that its lack of success with regards to the objection to competency should not result in there being an order of "percentage reduction in the costs of the proceedings." The second respondent's submissions in this regard were based on the following arguments: Had the applicant responded appropriately to the second respondent's queries raised as to the question of standing prior to hearing, there would have been no need for the objection to competency; That the second respondent's argument about standing being described as compelling in the judgement meant that there was a "public importance in respect of the temporal element of standing and under ADJR Act;" In any case, the determination of the issue neither lengthened the hearing nor lead to a measurable increase in costs; The applicant unreasonably rejected the substantial "Calderbank offer" made two weeks after the dismissal of the application for interlocutory relief and before any further steps were taken within this Court. That would mean that the second respondent would be entitled to indemnity costs from 10 January 2023 which would then be the sum from which any reduction in costs would be made in respect of the notice of objection to competency; and The applicant and second respondent are competitors, and the application was made in relation to their commercial activities. It would not be appropriate for a costs order to advantage the successful applicant. 8 The applicant in reply asserted that its standing should never have been challenged given existing authority. Further, the applicant submitted, the Calderbank offer could not form a basis for indemnity costs, and in any case its refusal to accept the offer was not unreasonable at the time. 9 The first respondent's submissions were that, although the judgement found that it had appeared in accordance with the Hardiman principle: R v Australian Broadcasting Tribunal Ex parte Hardiman (1980) 144 CLR 13 at 35-36, this principle is one which should apply with flexibility depending upon the circumstances: Ogawa v Financial Information Commissioner [2014] FCA 229 at [23]; Metlife Insurance Ltd v Australian Financial Complaints Authority (No 3) [2022] FCA 849 at [12]. 10 Further, the first respondent submitted it has been held that the "Authority is not a Tribunal" by Katzmann J in Lo v Australian Community Pharmacy Authority [2013] FCA 639 at [73]. In this matter, the first respondent submitted that its involvement in the case assisted the Court to have a full understanding of the law: Fagan v Crimes Compensation Tribunal (1982) 150 CLR 666 at 681 – 682, and that it assisted the Court with respect to matters of construction, as is evident from paragraphs [81], [84], [88], [89], [91] and [102] of the judgement. Similar to Lo, its submissions were directed to questions of law, notwithstanding the presence in this matter of a contradictor. The first respondent argued that its position is further justified as, until the filing of the further amended originating application, it was "the proper or active contradictor." 11 The first respondent submitted that this put it in a position similar to one in which a submitting notice has been filed by the "natural contradictor", Further it submitted that no objection was taken by the applicant to the role it played, which weakens any submissions the applicant now might make as to costs: Freedom Pharmaceuticals Pty Ltd v Minister for Health (No 2) [2021] FCA 1250 at [11]. 12 Accordingly, the first respondent submitted that the applicant should pay its costs. 13 The applicant, in reply, submitted that payment of the first respondent's costs ought to be confined to the period up until the second respondent was joined as a party, that is 16 September 2022, and hence became a proper contradictor. The applicant submitted that Fagan, relied upon by the first respondent, arose out of different facts, namely that that matter had not taken place inter-partes, the Attorney General had not intervened to represent the public interest, and therefore it was appropriate for the Tribunal to appear and argue the case: Fagan per Brennan J at 681. 14 As to the first respondent's submission that it is not a Tribunal, the applicant submitted that to be irrelevant. Were the applicant to have been successful, or to be successful on appeal, the matter would be remitted to the first respondent, and the public interest in preserving the perception of impartiality on its part means it ought not be seen to be opposed to the appellant. 15 The third respondent does not seek its costs in the proceeding, having filed a submitting notice. Relevant Principles 16 The Court's discretion to order costs arises under section 43(2) of the Act. In PKT Technologies Pty Ltd (fka fairlight.au Pty Ltd) v Peter Vogel Instruments Pty Ltd (No 2) [2020] FCAFC 46, the applicable principles were stated by the Full Court at [14]: The relevant principles are well-known and are not in dispute. Under s 43 of the Federal Court of Australia Act 1976 (Cth), costs are in the discretion of the Court. The discretion is broad but is to be exercised judicially. The fundamental purpose of the discretion is to compensate the successful party, not to punish the unsuccessful party. In general, a successful party will obtain an order for costs in its favour. However, a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. If the apportionment of costs is appropriate, the object is not mathematical precision but a result that best reflects the interests of justice in the overall circumstances of the case. See EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9]. 17 Section 37M of the Act provides for the overarching purpose of civil practice and procedure provisions as follows: (1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes: (a) according to law; and (b) as quickly, inexpensively, and efficiently as possible. (2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. (3) The civil practice and procedure provisions must be interpreted and applied, and any power conferred, or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose. (4) The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings: (a) the Rules of Court made under this Act; (b) any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court. 18 Section 37N provides that the parties are to act consistently with the overarching purpose as identified in s 37M of the Act. 19 With respect to the stay of proceedings pending appeal, r 36.08 of the Federal Court Rules 2011 (Cth) provides: 36.08 Stay of execution or proceedings under judgment appealed from (1) An appeal does not: (a) operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or (b) invalidate any proceedings already taken. (1) However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined. (2) An application may be made under subrule (2) even though the court from which the appeal is brought has previously refused an application of a similar kind. Note: Interested person is defined in the Dictionary. Calderbank Offer 20 As to the offer to compromise referred to in paragraph 7 above, r 25.14 of the Rules provides the following: 25.14 Costs where offer not accepted (1) If an offer is made by a respondent and not accepted by an applicant, and the applicant obtains a judgment that is less favourable than the terms of the offer: (a) the applicant is not entitled to any costs after 11.00 am on the second business day after the offer was served; and (b) the respondent is entitled to an order that the applicant pay the respondent's costs after that time on an indemnity basis. (2) If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant's proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent's costs: (a) before 11.00 am on the second business day after the offer was served—on a party and party basis; and (b) after the time mentioned in paragraph (a)—on an indemnity basis. (3) If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant's costs: (a) before 11.00 am on the second business day after the offer was served—on a party and party basis; and (b) after the time mentioned in paragraph (a)—on an indemnity basis. Note 1: Costs on an indemnity basis is defined in the Dictionary. Note 2: The Court may make an order inconsistent with these rules—see rule 1.35. 21 The Full Court, in Wills v Chief Executive Officer of the Australian Skills Quality Authority (Costs) [2022] FCAFC 43 stated at [23]: The applicable principles for determining whether an offer was "unreasonable" were conveniently explained by the Full Court in Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 as follows: 6. A well-established circumstance justifying an award of indemnity costs is an imprudent refusal of an offer to compromise (Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 per Sheppard J). In such cases, a key question is whether the offeree's refusal of the offer was "unreasonable" when viewed in light of the circumstances existing at the time the offer was rejected (Black v Lipovac & Ors (1998) 217 ALR 386 at 432 per Miles, Heerey and Madgwick JJ; CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] per Moore, Finn and Jessup JJ). 7. The circumstances to be taken into account in determining whether rejection of an offer was "unreasonable" cannot be stated exhaustively but may include, for example: (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree's prospects of success, assessed as at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree rejecting it. (Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Beling v Sixty International S.A. (No 2) [2015] FCA 355 at [25] per Mortimer J). 8. An unsuccessful party is not liable to pay indemnity costs merely because it received an offer to settle on terms more favourable than it achieved at trial and rejected that offer (CGU Insurance at [75]; Black at [217]-[218]). As we observed in the Appeal Reasons, albeit in the context of r 25.14(2) of the FCRs, assessment of the "unreasonableness" of an offeree's refusal of a settlement offer is a broad-ranging inquiry that is not restricted to consideration of the extent or quantum of the compromise offered. 22 In this case, although the second respondent made an offer to compromise, its primary submission is that it is not pressing for indemnity costs from the relevant date. As set out above, this is at least partly in recognition of the fact that the second respondent was not successful with regards to its objection to competency. In the alternative, the second respondent does seek its costs on an indemnity basis from the relevant date. consideration 23 I will deal with each of the parties' contentions in turn. Staying the determination of costs 24 The applicant submitted that the question of costs be deferred until the determination of the notice of appeal. As prescribed by r 36.08(1), an appeal does not automatically stay the proceedings. The first respondent noted that the applicant had not made an application for a stay pursuant to r 36.08(2) of the Rules (and s 29(1) of the Act), despite seeking in its submissions that the determination of costs be stayed. Rule 36.08 of the Rules provides that an appellant may apply to the Court to stay the execution of the proceeding until the appeal is determined. In this case, there was no judgment in relation to the costs for which execution could be stayed. Instead, the applicant would seemingly be applying for a stay of the hearing and determination of the question of costs: Conradsen v Carpentaria Land Council Aboriginal Corp [2023] FCA 1373 at [17] – [19]. 25 As referred to in Conradsen at [20], in Cmr of Taxation v Rowntree (No 2) [2021] FCA 268, there was an application to stay a hearing on penalty. At [13], Rares J stated that, despite the fact that s 29 of the Act had been incorrectly invoked, "this Court, as a superior court of record, has an inherent or implied power to grant a stay of proceedings before it". To the extent that the Court is being asked to exercise such a power, the only submissions which the applicant made in that regard is that it would be contrary to ss 37M and 37N of the Act if the question of costs is not deferred, given the parties may potentially incur additional unnecessary costs. 26 In this case, I am not satisfied that it is in the interests of justice to order a stay on the determination of the question of costs. As contended by the second respondent in its reply submissions, the just resolution of disputes calls for finality. There is no other reason which has been provided to support the stay of the determination of costs. The costs of first respondent and the Hardiman Principle 27 Implicit within the applicant's proposed costs orders set out at paragraph 4 is the submission that the first respondent's costs ought not be paid after 15 September 2022, being the time that the second respondent filed its Notice of Address for Service, relying on Huon Aquaculture Group Ltd v Minister for the Environment (No 2) [2018] FCA 1938. The first respondent contended that its active participation was desirable and went beyond 15 September 2022. The first respondent also argued that even though the Notice of Address for Service was filed on 16 September 2022, the second respondent did not formally articulate its position until after the filing of the further amended originating application on 29 March 2023. 28 In its reply submissions, the first respondent foreshadowed that, depending upon the position adopted by the applicant in its reply submissions, it may seek leave to file further reply submissions in respect of this matter. The first respondent was invited to advise whether it seeks such leave but confirmed that it does not. 29 While the first respondent appeared properly in accordance with the principles in Hardiman, it also made helpful submissions as to the law (not the facts) throughout the proceeding. However, I do not consider that the Court should depart from the principles in Hardiman. I do not consider it meaningful that the second respondent is not a Tribunal in accordance with the Hardiman principle. As argued by the applicant, the Hardiman principle is intended to ensure that the impartiality of the decision-making body is maintained in circumstances where the decision-making body might be required to reconsider the applicant's application. The principles applying to the first respondent are thus analogous. Further, unlike the cases referred to by the first respondent, namely Freedom Pharmaceutical and Fagan, in which the costs of the decision-making body were awarded, there was an appropriate and active contradictor in this matter. 30 On that basis, it is generally uncontentious that, at the very least, until 15 September 2022, there was a lack of active contradictor, and the first respondent is entitled to its costs during that period. 31 The question is then at which point thereafter did the active participation of the first respondent cease to be necessary. 32 In Huon at [54] – [59], Kerr J considered that the relevant time is the one in which the Minister was entitled to consider that its active participation might be necessary. Even though the contradictors in that case had filed defences on 1 June 2017, Kerr J was not satisfied that the Minister could have been confident that his involvement in the litigation was not necessary until the filing of submissions on 1 November 2017 as the applicant's pleadings were twice amended. In that regard, Kerr J stated at [57]: …It was not until some months later that the Minister could have known the basis upon which Petuna or Tassal (or both) were intending to defend the validity of the challenged decision. Having regard to the breadth of the Court's discretion on costs, I do not consider the Minister's position during those months as warranting disapprobation by refusal of costs. In my view, the Minister was entitled to prepare for the pending litigation on the basis that his involvement might be necessary. 33 Accordingly, in this case, the relevant time is not when the second respondent filed its notice of address for service but following the filing on 29 March 2023 of the further amended originating application, being the time at which the applicant's argument was crystallised and the first respondent could have anticipated what position the second respondent may take. 34 In my view, from that time, the proceeding had a proper contradictor, and the first respondent's role was limited to a Hardiman position. Accordingly, it is entitled to its costs on up to and including that time. The costs of the second respondent 35 The applicant advanced submissions as to why the failure to accept the offer to compromise should not be supportive of an order for indemnity costs. While I do not consider it necessary to determine that question as, on the second respondent's primary submissions, indemnity costs are not sought, I accept that the Calderbank offer was not properly made as it purported to bind the third respondent in circumstances where there was no indication that the third respondent authorised the offer terms. Further, the Calderbank principles do not apply in the same manner in judicial review proceedings: Montgomery v Minister for Immigration (No 2) [2021] FCA 1444 at [15]. 36 In BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557, Middleton J discussed the principles and authorities with respect costs and summarised them at [27] as follows: 1. A successful litigant is ordinarily entitled to its costs even if the losing party had good legal grounds for its position and conducted itself in the litigation reasonably and appropriately; 2.The successful litigant will be so entitled to its costs unless some good reason connected to the case is shown to the contrary; 3.Without limiting the general discretion available, a good reason to the contrary may arise: 3.1 Where the conduct of the successful litigant in connection with the case was unreasonable or inappropriate; 3.2 Where no such unreasonable or inappropriate conduct of the successful litigant is found, but nevertheless there were clearly distinct and severable issues or inquiries that were lost by the successful litigant; 4. If the conduct of a successful litigant was inappropriate or unreasonable in connection with the case, the successful litigant will usually be denied all or part of its costs; 5. Where the court is considering the question of costs in respect of a lost distinct or severable issue or inquiry, which can clearly be treated as distinct and severable, then to determine whether the successful party will lose some or all of its costs, it will be necessary to consider and weigh up case management principles, the significance of the issue or inquiry in proportion to the proceeding as a whole, and whether the issue or inquiry had any relative strength or merit; 6. The court has the discretion to apportion costs even if it cannot identify separate costs in respect of distinct or severable issues or inquiries on which the successful litigant failed, but the matters on which the party failed must be at least capable of separation from the matters on which the litigant was successful. 37 In this case, the second respondent conducted itself reasonably and appropriately. Although ultimately it failed in respect of its notice of objection to competency, there was significant overlap between the issues canvassed in that regard and in the application for judicial review. Accordingly, costs ought to follow the event, and the applicant should pay the second respondent's costs to be agreed or taxed. conclusion 38 For the above reasons, I am satisfied that from 25 March 2023, the matter had an active and appropriate contradictor. Accordingly, the applicant should pay the first respondent's costs up to and including that time. Further, as set out above, the applicant should pay the costs of the second respondent. The third respondent filed a submitting notice and does not seek its costs of proceeding. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Meagher. Associate: Dated: 10 June 2024