case_text: Reference may also be made to the observations, to the same effect, by Gyles J in Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237 ; (2004) 140 FCR 101 at [68] . See also the review of the authorities by Allsop J in DSE (Holdings) Pty Limited v Intertan Inc [2003] FCA 384 ; and Lombe v Pollak [2004] FCA 264 at [30] [33] dealing with the common law test. 46 The tender of Exhibit JL1 cannot be said to have been to deploy the substance of legal advice for forensic or commercial purposes so as to reveal an implied inconsistency with the maintenance of confidentiality; Bennett at [68]. 47 I accept Mr Johnson's submission that it is extraordinary that both solicitors and counsel for Mr Boensch failed to make any or any adequate enquiry as to the extent of the materials contained in Exhibit JL1. Some criticism may flow from that. But it does not preclude a finding of inadvertence. 48 I do not accept Mr Johnson's submission that the documents in Exhibit JL1 were delivered without qualification as to their status. The qualification was stated in [50] of the statement to which the Exhibit was attached. Although no evidence was put before his Honour to explain the mistake, the circumstances make it plain that error and inadvertence were revealed. 49 I will make orders 1, 3 and 4 sought in the notice of appeal filed on 13 February 2007. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson. Associate: Dated: 16 April 2007 Counsel for the Appellant: N Perram SC with MJ Heath Solicitor for the Appellant: Wright Pavuk Lawyers Counsel for the Respondent: JT Johnson Solicitor for the Respondent: McLean & Associates Date of Hearing: 6 February 2007 Date of Judgment: 16 April 2007 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2007/532.html


case_outcome: referred to

case_title: DES (Holdings) Pty Limited v Intertan Inc [2003] FCA 384

case_text: Reference may also be made to the observations, to the same effect, by Gyles J in Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237 ; (2004) 140 FCR 101 at [68] . See also the review of the authorities by Allsop J in DSE (Holdings) Pty Limited v Intertan Inc [2003] FCA 384 ; and Lombe v Pollak [2004] FCA 264 at [30] [33] dealing with the common law test.


case_text: Of course, "a mere plea" of inadvertence may not by itself necessarily enable a party to avoid a waiver of privilege; Hooker Corporation Ltd v Darling Harbour Authority (1987) 9 NSWLR 538 at 542-543. Thus, the Court must be satisfied on the material before it that the act was in truth inadvertent. 40 In the present case, inadvertence is established by the fact that even when cross-examined on the documents, Mr Leong did not realise that the documents in Exhibit JL1 included the Extra Documents. 41 It was only when Mr Heath realised what had happened that he drew his Honour's attention to the apparent inadvertence. This is clear, in my view from the passages of the transcript that I have reproduced above. 42 It is true that in the last passage of the transcript that I have reproduced at [27], Mr Heath said that no issue of inadvertence arose. However, this was because, as Mr Heath correctly observed, the amended application before his Honour dealt only with the question of whether privilege could be maintained over Exhibit SDP6. 43 With due respect to his Honour, whose judgment was given ex tempore , an examination of the transcript shows that Mr Heath did not eschew inadvertence in relation to the maintenance of the claim over the Extra Documents. 44 Of course, I do not criticise his Honour for delivering ex tempore reasons. It is merely that a full reading of the transcript puts in context the last passage of Counsel's remarks on the issue of inadvertence. 45 In any event, I would add that it is difficult to see how the tender of Exhibit JL1 was inconsistent with the maintenance of confidentiality. It was tendered on an application to claim privilege and it was tendered with the express proviso in [50] of Mr Leong's statement that he did not intend to disclose confidential communications to which privilege may attach.


case_title: Lombe v Pollack [2004] FCA 264


case_outcome: followed

case_text: The appellant, Mr Boensch, contends that his Honour was in error in concluding that the tender was deliberate and that any claim of inadvertence had been eschewed. Mr Boensch submits that, upon the proper application of the principle stated by the High Court in Mann v Carnell [1999] HCA 66 ; (1999) 201 CLR 1 at 13, there was no implied or accidental waiver of privilege in the six documents. 4 The essential reason why this issue arises is the failure of the solicitor who produced the documents to the first respondent, Mr Pascoe, and to the Court, to make proper enquiry as to the extent of the materials comprised within the documents that were produced and tendered. 5 In the hope of maintaining clarity in my analysis of the question, I will endeavour to distinguish between the documents produced or referred to at various stages of the proceeding. 34 The test of implied waiver of privilege was stated by the High Court in Mann v Carnell at [29]. Their Honours pointed to an intentional act of disclosure which was inconsistent with the maintenance of confidentiality in the communication. 35 Their Honours went on to say that "[w]hat brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of confidentiality". They said the test is "not some overriding principle of fairness operating at large". 37 It is unnecessary for present purposes to determine whether or to what extent the provisions of s 122 of the Evidence Act dealing with the circumstances in which privilege may be lost correspond with the common law principles; see Mann v Carnell at [23]; see also Van Zonneveld v Seaton [2004] NSWSC 960 at [11] (per Campbell J).


case_title: Van Zonneveld v Seaton [2004] NSWSC 960

case_text: It is unnecessary for present purposes to determine whether or to what extent the provisions of s 122 of the Evidence Act dealing with the circumstances in which privilege may be lost correspond with the common law principles; see Mann v Carnell at [23]; see also Van Zonneveld v Seaton [2004] NSWSC 960 at [11] (per Campbell J).


case_outcome: cited

case_text: An example of an earlier statutory formula giving effect to such a distinction was considered by the Full Federal Court in Lambe v Director-General of Social Services (1981) 57 FLR 262. The question was whether a single mother in receipt of a supporting parent benefit was '... living with ... a man as his wife on a bona fide domestic basis although not legally married to him'. In deciding whether such a relationship existed the Court held that it was necessary to take into account a variety of factors, albeit no factors were spelt out in the statute. The Court held that all facets of the interpersonal relationship of the two persons had to be taken into account. Importantly (at 271): '... the question of the financial support which [the man] provides is an important although not necessarily crucial consideration, but is only one of a number of relevant matters which the Tribunal should take into account in characterizing, as required by the definition, the nature of the relationship ...'. 38 The same statutory formula was considered by Fitzgerald J in Lynam v Director-General of Social Security (1983) 52 ALR 128. He applied Lambe and said, inter alia (at 131): 'Each element of a relationship draws its colour and its significance from the other elements, some of which may point in one direction and some in the other. What must be looked at is the composite picture. Any attempt to isolate individual factors and to attribute to them relative degrees of materiality or importance involves a denial of common experience and will almost inevitably be productive of error. The endless scope for differences in human attitudes and activities means that there will be an almost infinite variety of combinations of circumstances which may fall for consideration. In any particular case, it will be a question of fact and degree, a jury question, whether a relationship between two unrelated persons of the opposite sex meets the statutory test.' 39 The criterion of marital relationship was considered O'Loughlin J in Staunton-Smith v Secretary, Department of Social Security (1991) 32 FCR 164. The question in that case was whether a woman claiming a sole parent's pension was 'a married person ... living separately and apart from her spouse'. Having separated from her husband she had returned home as a matter of convenience and because of his assistance in caring for their disabled child. O'Loughlin J referred to Lambe and Lynam . He endorsed the observations of Fitzgerald J quoted earlier. He said (at 173): '... it is not sufficient to merely note that a couple are sharing accommodation, nor is it sufficient to note that one is financially dependent on the other; it is necessary to delve deeper to find the reasons for those arrangements. Those reasons will be better indicators in determining the correct nature of their relationship.'


case_text: The same statutory formula was considered by Fitzgerald J in Lynam v Director-General of Social Security (1983) 52 ALR 128. He applied Lambe and said, inter alia (at 131): 'Each element of a relationship draws its colour and its significance from the other elements, some of which may point in one direction and some in the other. What must be looked at is the composite picture. Any attempt to isolate individual factors and to attribute to them relative degrees of materiality or importance involves a denial of common experience and will almost inevitably be productive of error. The endless scope for differences in human attitudes and activities means that there will be an almost infinite variety of combinations of circumstances which may fall for consideration. In any particular case, it will be a question of fact and degree, a jury question, whether a relationship between two unrelated persons of the opposite sex meets the statutory test.' 39 The criterion of marital relationship was considered O'Loughlin J in Staunton-Smith v Secretary, Department of Social Security (1991) 32 FCR 164. The question in that case was whether a woman claiming a sole parent's pension was 'a married person ... living separately and apart from her spouse'. Having separated from her husband she had returned home as a matter of convenience and because of his assistance in caring for their disabled child. O'Loughlin J referred to Lambe and Lynam . He endorsed the observations of Fitzgerald J quoted earlier. He said (at 173): '... it is not sufficient to merely note that a couple are sharing accommodation, nor is it sufficient to note that one is financially dependent on the other; it is necessary to delve deeper to find the reasons for those arrangements. Those reasons will be better indicators in determining the correct nature of their relationship.'


case_text: The criterion of marital relationship was considered O'Loughlin J in Staunton-Smith v Secretary, Department of Social Security (1991) 32 FCR 164. The question in that case was whether a woman claiming a sole parent's pension was 'a married person ... living separately and apart from her spouse'. Having separated from her husband she had returned home as a matter of convenience and because of his assistance in caring for their disabled child. O'Loughlin J referred to Lambe and Lynam . He endorsed the observations of Fitzgerald J quoted earlier. He said (at 173): '... it is not sufficient to merely note that a couple are sharing accommodation, nor is it sufficient to note that one is financially dependent on the other; it is necessary to delve deeper to find the reasons for those arrangements. Those reasons will be better indicators in determining the correct nature of their relationship.'


case_title: Cadman v Secretary, Department of Social Security (1993) 31 ALD 486

case_text: The Social Security and Veterans Affairs Amendment Legislation Act (No 3) 1989 (Cth) amended the Social Services Act 1947 by introducing the concept of a person 'living with the other person in a marriage-like relationship' (new s 43A(6)). The assessment of such a relationship required consideration of the same factors that apply today (new s 3A). In Cadman v Secretary, Department of Society Security (1993) 31 ALD 486, Neaves J noted that the Tribunal under appeal had applied the new criteria even though it was dealing with a case to which the old test applied. That was the test of 'living with a man as his wife on a bona fide domestic basis although not legally married to him'. However, his Honour held, each of the listed matters considered under the new s 3A of the former Act was as relevant to that task as it was to the test of a marriage-like relationship (at 490). This merely illustrates the similarities of the kind of decision-making which is required under each of the statutory formulae and, to that extent, the continuing utility of the older authorities. 42 The Social Security (No Budget Measures) Legislation Amendment Act 1995 (Cth) deleted the requirement that a marriage-like relationship required the parties to it to be 'living' together and substituted the term 'has a relationship with a person'. The Explanatory Memorandum to the Bill stated that the changes were designed to ensure that sole parent pensions would not be paid to couples only temporarily living apart. But in a useful commentary on the provisions Sutherland P, Annotations to the Social Security Act 1991 (5 th ed, Federation Press, 1998) states, correctly in my view, (at 12-13): 'In fact the way the amendments are framed means that they have a wider effect: firstly, they will apply to all payments, not just sole parent pension; and secondly, they will have a relevant effect on the initial issue as to whether a "marriage-like relationship" exists.' 43 When the 'marriage-like relationship' provisions were first inserted in the Social Services Act 1947 similar provisions were introduced into the Veterans Entitlements Act 1986 (Cth), they being ss 5E(2) and 11A . The latter section sets out criteria for determining the existence of a marriage-like relationship for determining whether a person is a member of a 'couple' under s 5E(2). The criteria are the same as those in the Social Security Act see generally Creyke R and Sutherland P, Veterans' Entitlements Law (Federation Press, 2000) at 168-172.


case_text: The formula of the words 'living together in a marriage-like relationship' used in s 11A , as included in the Veterans Entitlements Act 1986 by 1989 amendments, was considered by Tamberlin J in Garner v Repatriation Commission (1998) 53 ALD 297. His Honour observed, relevantly to the current provisions of s 4(3) of the Act, that s 11A required regard to be had to all of the circumstances of the relationship, albeit it set out a number of matters which must be taken into account. 45 There have of course been a number of Tribunal decisions on the marriage-like relationship provisions and these are referred to in the text books cited above. It would, however, be multiplying discussions of various factual situations to canvass those decisions. 46 Having regard to the current provisions of s 4(3) and the approaches discussed in the earlier authorities mentioned, a decision-maker concerned with whether an unmarried person is in a marriage-like relationship with another person of the opposite sex: 1. Must have regard to their interpersonal relationship as a whole not limited by the factors listed in s 4(3). 2. Must have regard to each of: (a) the financial aspects of the relationship; (b) the nature of the household; (c) the social aspects of the relationship; (d) any sexual relationship between the people; (e) the nature of the people's commitment to each other. 3. In having regard to the preceding five matters, must have regard to all factors relevant to each and, in particular, must have regard to the factors listed under each heading in s 4(3). 4. Must specifically consider the total picture of the relationship created by all of these factors bearing in mind that consideration must be given to those which weigh against a marriage-like relationship and those which weigh in favour of it. 5. Must undertake the preceding consideration bearing in mind that a marriage-like relationship is not disclosed solely by any one of the following matters: (a) financial cooperation; (b) cohabitation; (c) a sexual relationship; (d) cooperative household arrangements; (e) mutual commitment. 61 The Tribunal's general conclusion was that (at [45]): '... the weight of evidence supports the finding that at the relevant time Ms Pelka was in a marriage-like relationship....' This conclusion did not proceed, as one might have expected, from a weighing of the various factors against each other. It is plain that there were matters pointing in different directions. A decision-maker in applying the matters set out in s 4(3) should acknowledge that they are non-exhaustive and at least indicate that consideration has been given to whether there might be any other factors relevant to the difficult judgment of whether a 'marriage-like' relationship exists. Each of the individual matters listed in s 4(3) is accompanied by a non-exhaustive list of factors. Again, the decision-maker in each case should consider whether there are any other factors relevant to the particular matter listed see Garner (supra). The Tribunal quoted a passage from a decision of the Tribunal in Re: Secretary, Department of Family and Community Services and WAP [2000] AATA 7. It is not clear however from the reasons how it applied the non-exhaustive approach set out in the passage which it quoted.


case_text: The Tribunal's general conclusion was that (at [45]): '... the weight of evidence supports the finding that at the relevant time Ms Pelka was in a marriage-like relationship....' This conclusion did not proceed, as one might have expected, from a weighing of the various factors against each other. It is plain that there were matters pointing in different directions. A decision-maker in applying the matters set out in s 4(3) should acknowledge that they are non-exhaustive and at least indicate that consideration has been given to whether there might be any other factors relevant to the difficult judgment of whether a 'marriage-like' relationship exists. Each of the individual matters listed in s 4(3) is accompanied by a non-exhaustive list of factors. Again, the decision-maker in each case should consider whether there are any other factors relevant to the particular matter listed see Garner (supra). The Tribunal quoted a passage from a decision of the Tribunal in Re: Secretary, Department of Family and Community Services and WAP [2000] AATA 7. It is not clear however from the reasons how it applied the non-exhaustive approach set out in the passage which it quoted.


case_text: am bound to follow matters of principle enunciated by the Full Court. In that regard, it may be, as Buchanan J highlights in the following passage from his judgment in McDonald v Parnell Laboratories (Aust) (No 2) [2007] FCA 2086 ; (2007) 164 FCR 591 at 597, [22] , that there is a difference in opinion at intermediate appellate level as to whether, for the purpose of satisfying a condition precedent to the awarding of indemnity costs and as an alternative to "imprudent", the rejection of an offer of compromise should be able to be described as "unreasonable" or "plainly unreasonable": In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 ( Dukemaster) Sundberg and Emmett JJ said, in a case like the present where O 23 r 11 did not apply because an applicant had been wholly unsuccessful, that an applicant for a more generous award of costs than party-party costs 'must show that the rejection of the offer was imprudent or plainly unreasonable' (see at [7]). There has been doubt expressed about the soundness of the statement in Dukemaster that rejection of an offer, if unreasonable, must be 'plainly unreasonable' in the light of the earlier judgment of a Full Court in Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at [217] [218], to which Wilcox J also referred in Coshott (see Seven Network Limited v News Limited [2007] FCA 1489 at [59] [62]). In the earlier of the Full Court authorities, Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at 432-433, [218] , the point was made that the conduct of an offeree need not be "plainly unreasonable" in order to warrant the ordering of indemnity costs because "To adopt an especially high standard of unreasonableness would operate as a fetter on the discretion to award indemnity costs and diminish the effectiveness of the Calderbank offer as an incentive to settlement." I respectfully agree and, for that reason, would choose to follow the earlier Full Court authority were that to be critical to the resolution of the costs application. It is not though because in both Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 and Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 the alternative of imprudent rejection was acknowledged. Like Buchanan J in McDonald v Parnell Laboratories (Aust) (No 2) and, as his Honour noted (at [22]), like Heerey J in AFP Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 3) [2007] FCA 2016 at [24] [25], it is sufficient to assess whether the rejection of any of the offers was, "imprudent". That basis of assessment accords with the exemplar given by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited , which I have already noted, whose judgment, as Heerey J acknowledged in AFP Properties (ibid), is the locus classicus on the subject.


case_outcome: considered

case_text: respect of each of the offers upon which Flottweg relied, Olivaylle submitted that, even if it were a necessary conclusion flowing from my dismissal of the application that it was worse off than the position offered by those letters, there was no presumption flowing from this that costs taxed on an indemnity basis must be awarded. The importance afforded by Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480 ; (2001) 109 FCR 77 at 98, [88] to "sufficient particularity" in relation to an explanation for an offer and "inevitability of failure" was stressed. So, too, was stressed the need to remind myself that it was for Flottweg as offeror to show that the conduct of Olivaylle as offeree in rejecting any "Calderbank" offer was unreasonable, the application by Weinberg J in Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224 ; (2002) 190 ALR 121 at [35] of the Full Court's statement to this effect in Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at [217] [218] being cited in support.


case_text: Australian and International Pilots Association v QANTAS Airways Ltd (No 3) [2007] FCA 879 ; (2007) 162 FCR 392 at 396 Tracey J remarked: statutory provisions dealing with the power to award costs are procedural in nature and, in the absence of contrary legislative intention, will operate retrospectively at least to the extent of applying to cases commenced before the amendment: see eg Galvin v Forests Commission (Vic) [1939] VLR 284 at 297-8; Jackman v Dandenong Sewerage Authority (No 2) (1967) 20 LGRA 413 at 415. Here, a contrary legislative intention is evident in relation to any operation O 23 r 11(6) might otherwise have with respect to past events. Like Kenny J in Review 2 Pty Ltd v Redberry Enterprise Pty Ltd (No 2) [2008] FCA 1805 , I consider that such a conclusion is dictated by s 12(2)(b) of the Legislative Instruments Act . I also consider that s 12(2)(a) of the Legislative Instruments Act provides additional support for that view in that, prior to the making of the amendment to the rules, there existed a right to the exercise of a discretion with respect to the awarding of costs unfettered by any such prima facie presumption.


case_text: respect of each of the offers upon which Flottweg relied, Olivaylle submitted that, even if it were a necessary conclusion flowing from my dismissal of the application that it was worse off than the position offered by those letters, there was no presumption flowing from this that costs taxed on an indemnity basis must be awarded. The importance afforded by Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480 ; (2001) 109 FCR 77 at 98, [88] to "sufficient particularity" in relation to an explanation for an offer and "inevitability of failure" was stressed. So, too, was stressed the need to remind myself that it was for Flottweg as offeror to show that the conduct of Olivaylle as offeree in rejecting any "Calderbank" offer was unreasonable, the application by Weinberg J in Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224 ; (2002) 190 ALR 121 at [35] of the Full Court's statement to this effect in Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at [217] [218] being cited in support. Flottweg's submissions did not gainsay the matters of principle for which the cases relied upon by Olivaylle stood, only the application of those principles in the circumstances of this particular case. In particular, Flottweg accepted that the mere fact that the result at trial left Olivaylle worse off than any pre-trial offer carried with it no presumptive entitlement to an award of indemnity costs. Rather, it was submitted that the question was whether the rejection of the offers (or at least one of them) was unreasonable or imprudent, the discussion and conclusions reached by Sackville J in Seven Network Ltd v News Ltd [2007] FCA 1489 ; (2007) 244 ALR 374 at [59] to [63] with respect to Black v Lipovac , supra and other authorities being adopted. Flottweg further submitted that, while it may not have been unreasonable or imprudent for Olivaylle to have instituted or, as the case may be, continued the litigation in the absence of one or more of the offers it made, at least one of those offers constituted a fair commercial compromise such that it was unreasonable or imprudent to institute or continue the litigation in the face of that offer. That sentiment, it was submitted, was evident in the approach taken by Emmett J in Ruaro v Ferrari [2008] FCA 307 at [17] . I am bound to follow matters of principle enunciated by the Full Court. In that regard, it may be, as Buchanan J highlights in the following passage from his judgment in McDonald v Parnell Laboratories (Aust) (No 2) [2007] FCA 2086 ; (2007) 164 FCR 591 at 597, [22] , that there is a difference in opinion at intermediate appellate level as to whether, for the purpose of satisfying a condition precedent to the awarding of indemnity costs and as an alternative to "imprudent", the rejection of an offer of compromise should be able to be described as "unreasonable" or "plainly unreasonable": In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 ( Dukemaster) Sundberg and Emmett JJ said, in a case like the present where O 23 r 11 did not apply because an applicant had been wholly unsuccessful, that an applicant for a more generous award of costs than party-party costs 'must show that the rejection of the offer was imprudent or plainly unreasonable' (see at [7]). There has been doubt expressed about the soundness of the statement in Dukemaster that rejection of an offer, if unreasonable, must be 'plainly unreasonable' in the light of the earlier judgment of a Full Court in Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at [217] [218], to which Wilcox J also referred in Coshott (see Seven Network Limited v News Limited [2007] FCA 1489 at [59] [62]). In the earlier of the Full Court authorities, Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at 432-433, [218] , the point was made that the conduct of an offeree need not be "plainly unreasonable" in order to warrant the ordering of indemnity costs because "To adopt an especially high standard of unreasonableness would operate as a fetter on the discretion to award indemnity costs and diminish the effectiveness of the Calderbank offer as an incentive to settlement." I respectfully agree and, for that reason, would choose to follow the earlier Full Court authority were that to be critical to the resolution of the costs application. It is not though because in both Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 and Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 the alternative of imprudent rejection was acknowledged. Like Buchanan J in McDonald v Parnell Laboratories (Aust) (No 2) and, as his Honour noted (at [22]), like Heerey J in AFP Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 3) [2007] FCA 2016 at [24] [25], it is sufficient to assess whether the rejection of any of the offers was, "imprudent". That basis of assessment accords with the exemplar given by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited , which I have already noted, whose judgment, as Heerey J acknowledged in AFP Properties (ibid), is the locus classicus on the subject.


case_title: Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 244

case_text: power to award costs is conferred on the Court by s 43 of the Federal Court of Australia Act 1976 (Cth) (Federal Court of Australia Act). The creation of this Court as a superior court of record and one of both law and equity by ss 5(1) and 5(2) of that Act may mean that it is not strictly correct to regard s 43 just as a source of the Court's power to award costs. That is because the courts of chancery, in contrast to those of the common law, had from medieval times regarded themselves as possessed of an inherent power to award costs: Dal Pont GE, The Law of Costs (2 nd ed, Butterworths, 2009) at [6.2]. The jurisdiction of the common law courts to award costs is statutory, having its origins in the Statute of Gloucester 1278 (Eng): Dal Pont, ibid. When the separate origins of the power to award costs and that this Court is one of law and equity are recalled, it can be seen that s 43 of the Federal Court of Australia Act is in part a source of power but is in part also declaratory. Such considerations led the Full Court in Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd [1993] FCA 471 ; (1993) 45 FCR 224 at 229 to state that s 43 "complements the jurisdiction obtained by the Court as a court of equity".


case_title: Calderbank v Calderbank [1976] Fam 93

case_text: should now be given of the various offers made by Flottweg and of Olivaylle's responses to those offers, including its counteroffers. It is convenient in so doing also to set out Olivaylle's submission as to why I should not regard its rejection of a particular offer as at least imprudent. Flottweg's solicitors to Olivaylle's solicitors - 18 August 2006 Your client has demanded that it be reimbursed the full amount of the purchase price "in accordance with the contract". That demand is rejected. Without addressing any of the reasons why the equipment might not have achieved the desired yield, your client is patently not entitled to a full refund under the contract. In particular, and without limitation, the terms of the contract expressly include that "Flottweg's liability howsoever arising should be limited to 5% of the contract price including damages for delay" (see page 15 of the order confirmation dated 8 February 2005). Our client appreciates that litigating a matter to judgment carries risks, expense and delays. Our client would prefer to reach a commercial solution with your client, including in order to preserve the business relationship that was established between our respective clients which (which have been instructed) has been otherwise good. Our client is prepared to settle the dispute with your client on the following terms: Our client pay to your client 10% of the asserted contract price, namely $113,112.40. The end date of the warranty period be extended from 28 February 2007 to 30 Jun 2007. This offer remains open for acceptance until 5pm on 1 September 2006 after which time it will lapse. In making this offer, our client does not make any admission or concession. It is simply made in order to attempt to resolve the dispute on a commercial basis. Olivaylle's submission : It was submitted that the letter was sent before the institution of proceedings, contained no supporting rationale, did not acknowledge a right of withdrawal and in any event was open for only a short period. The point concerning the sending of the offer before proceedings was not one chronology but rather related to the absence of a supporting rationale and was put as a way of highlighting that Olivaylle was not at that stage seized with knowledge of the case that came to be put against it. Having regard to these circumstances, it was submitted that it was not unreasonable for Olivaylle to have rejected this offer. Olivaylle's solicitors to Flottweg's solicitors - 30 August 2006 [O]ur client was entitled to withdraw from the contract after the expiry of a reasonable period of grace. On 21 February 2006 our client wrote to your client putting them on notice that unless the Olive Oil Line was modified or rectified to enable it to comply with the contract, our client would withdraw from the contract on 30 June 2006. Our client reiterated on 19 June 2006 that unless your client could solve the five problems as listed in that letter, it would cancel the contract. Again our client confirmed that it had provided your client with a period of grace to the end of 30 June 2006 to correct the non-conforming items. As you are aware, on 25 July 2006 Wallmans Lawyers, on behalf of our client, sent a letter to your client and amongst other things, put your client "...on notice that the period of grace has expired and our client has withdrawn from the contract." Our client is therefore entitled to have the purchase price refunded. We confirm that our client has instructed us to make one final attempt at settling this matter before proceedings are commenced in the Federal Court of Australia (Adelaide Registry). The without prejudice offer is as follows: Within seven days of receipt of this letter, your client will pay into Wallmans' trust account the sum of $224,339.96 being the value of the letter of credit as converted by your client from Wachovia Bank LC #SM 212584W on 1 August 2006 after having been notified that our client had withdrawn from the contract. On or before 30 January 2007 your client to supply and exchange their present decanter model #Z53-4/454 for their newest decanter model #Z73-4/454 in sealed N 2 version, including SIMP drive, on the run decanter settings and adjustments, change capabilities, all electronic items pertaining to this model, including the under decanter sieve and exchange of the bowl of the Flottweg separator AT1600DL in nitrogen flushed version for your client's newest improved bowl. Your client will then proceed to water test these items. No latter than 30 January 2007 your client will have delivered and installed a new substitute 100 rpm gearbox for the inclined paste conveyors into the malaxeurs, to replace the much slower gearbox mistakenly sent, by your client, for the 2006 harvest. Your client will extend the present processing line contract warranties to 30 days after the completion of the 2008 harvest. Once the items in points 2 and 3 above have been supplied and installed and tested to our client' satisfaction, our client will then pay your client the sum of $112,169.98 (being 50% of the amount returned to your client as set out in point 1 above). During the 2007 harvest, scheduled to commence mid-April 2007, your client's processing line will be tested for compliance with the following contract guaranteed parameters: (1) Minimum throughput of 5 tonnes per hour starting at the olive washer/deleafer; (2) Minimum processing line oil recovery of 85% of the maximum oil content in the olives as determined by an approved IOOC laboratory; (3) Processing line oxygen level starting at the malaxeurs of less than 1% oxygen. After your client has complied with points to 6 above, our client will pay your client the sum of $67,301.99 (being 30% of the amount returned by your client as set out in point 1 above). After your client has corrected any deficiencies found during the 2007 olive harvest either by repair or replacement, and the process line has met all guarantees contained in the contract of 8 February 2005, our client will pay to your client the sum of $44,867.99 (being 20% of the sum returned by your client as set out in point 1 above) after deducting from that sum all of our client's reasonable legal costs. We would be pleased if you would obtain your client's instructions in respect of the above offer. Should your client accept the above offer, Wallmans Lawyers will attend to drafting the requisite Deed of Discharge and Release. Flottweg's solicitors to Olivaylle's solicitors 5 September 2006 Our client has considered your client's settlement offer. In our client's view that offer represents a much more reasonable position than has hitherto been adopted by your client. However, our client cannot accept that offer in its current form as it: leaves aspects of performance subject to your client's discretion; and does not address what should happen in the event that the parameters in 6.1 to 6.3 of your client's offer are not met and accordingly leaves the matter potentially unresolved. Our client proposes that the matter be settled on the following terms: Our client pay to your client 5% of the asserted contract price, namely $56,556.20 within 7 days of a binding agreement having been executed. Our client provide your client with the following items of replacement equipment free of charge: (a) 1 x Decanter model Z6E-4/454 SIMP DRIVE, including electrical installation, necessary frequency converters, solids outlet, feed inlet and base frame. (Note that the model Z73/4/454 is not available in olive oil version); (b) Exchange Bowl of Flottweg Separator AC1500; and (c) 1 x 100rpm gearbox for screw conveyor, all within 5 months ex works Germany (approximately 6 ½ months DDP Kaniva) after a binding agreement having been executed. Subject to 4 below, the end date of the warranty period in respect of the design and quality of the materials in the equipment supplied (including replacement parts to be supplied) be extended from 28 February 2007 to 30 June 2007. Your client to provide a comprehensive release to our client from or in respect of any claims or obligations (present or future) in relation to the equipment supplied, including, but not limited to, oil yield, sustained oxygen level and process tonnage throughput. This offer is an offer in principle only and is not (by acceptance or otherwise) intended to give rise to binding legal relations. As an offer in principle it remains open for acceptance until 5pm on 11 September 2006 after which time it will lapse. In making this offer, our client does not make any admission or concession. It is simply made in order to attempt to resolve the dispute on a commercial basis. If this offer is not accepted or lapses then our client's reserves its rights to tender this letter to the Court following judgment in relation to the award of costs. Olivaylle's submission: The submissions made in respect of Flottweg's solicitor's letter of 30 August 2006 were repeated. In addition, it was submitted that, when regard was had to the form of release proposed, the offer of replacement equipment had about it the quality of giving with one hand and taking with the other. Olivaylle might still have been left with a line that met none of the contractual performance criteria. It was further submitted that the offer was one in principle only, ie it was not capable of immediate acceptance. In all of these circumstances it was submitted that it was not unreasonable for Olivaylle to have rejected it. Olivaylle's solicitors to Flottweg's solicitors 7 September 2006 Our client rejects your client's offer contained within the facsimile of 5 September 2006. Our client reiterates the offer as set out in our facsimile of 30 August 2006. Our client instructs us to keep the offer open until the close of business on Friday 8 September 2006. Should the sum of $224,339.96 not be deposited into Wallmans Trust Account, being: National Australia Bank BSB: 085 086 Account No: 50-799-4198 we will file proceedings in the Federal Court of Australia and serve the same direct on your client. Unless we hear from you before the close of business on Friday 8 September 2006, we will no longer communicate with you but only with your client until advised otherwise. Flottweg's solicitors to Olivaylle's solicitors - 30 January 2007 We refer to the letter from you to our client of 16 November 2006 and your client's Application and Statement of Claim. We note that in your letter you stated that: "We put you on notice that whilst the Olive Oil Line remains in our client's possession that our client merely treats themselves (sic) as caretakers of the Olive Oil Line and that all losses which they are now incurring or have incurred since entering into the contract with you have been and will continue to be, in your account." We also note that in your client's Application it seeks an order that "Flottweg collect the Olive Oil Line". Can our client take it from those statements that your client does not intend to use the Olive Oil Line in future? If so, then our client would be prepared, without admission and without prejudice to your client's claim, to collect the Olive Oil Line and pay to your client the net proceeds of any future re-sale. If, on the other hand, your client intends to use the Olive Oil Line in future then please advise the value that your client presently ascribes to the equipment. This information is necessary as if the value that your client ascribes to the equipment is less that that which our client would expect it to reach on the second hand market then our client may be prepared, again without admission and without prejudice to your client's claim, to remove the equipment and pay to your client the net proceeds (after deducting our client's costs) of any re-sale. For the avoidance of any doubt, our client's proposal would be without prejudice to your client's rights to seek to claim any balance from our client in the current proceedings. We note that arrangements would need to be agreed in relation to the inspection and testing of the equipment by both parties for the purpose of evidence in the proceedings prior to its removal. We see no reason why satisfactory arrangements could not be agreed. If your client does not intend to continue using the equipment then a decision as to the above matters must be made soon. If your client declines or does not respond to our client's offer then our client will rely on this letter and the in-principle offer contained in it in relation to any issue of damages and mitigation to which it may be relevant. Olivaylle's submission : In respect of this letter, too, it was submitted that the offer was one "in principle" only and not expressed in clear and unambiguous terms. On these bases it was submitted that the offer was not one which ought to be regarded as of the type and with the consequence described by Cairns LJ, Scarman LJ and Sir George Wilmer agreeing, in the well known case, Calderbank v Calderbank [1976] Fam 93 at 105-106. Offer of Compromise Flottweg to Olivaylle 14 August 2007 The following offer of compromise is made pursuant to Order 23 rule 2(1) of the Federal Court Rules . Without prejudice and without admissions the respondent offers to compromise these proceedings on the basis that the respondent pays the applicant the sum of $322,000.00 (exclusive of costs) in full and final satisfaction of all claims made by the applicant in these proceedings. This offer is open for acceptance by the applicant for a period of 28 days from the date of this offer. Following a query on the subject of costs made by Olivaylle's solicitors upon the receipt of this offer, Flottweg's solicitors replied on 30 August 2007 that, "This offer is exclusive of costs. That is, if accepted, our client will be required to pay your client's costs in an amount as taxed or as agreed." Olivaylle's submission : This was said to be an offer which but purported to comply with the Rules. It was submitted that it was not accompanied by any explanation and that, in those circumstances it was not unreasonable to reject it. It was further submitted that, upon its expiry, it was spent, having no ambulatory effect. Thus, later developments such as the service of the filing of Flottweg's affidavit material in response to the original pre-trial directions and the opportunity thus presented for knowing the case Flottweg intended to present factually were irrelevant. More generally, I was, on Olivaylle's behalf, quite properly reminded of an observation which I had made when deciding the costs consequence of the application by Flottweg for leave to adduce evidence from Mr Lorenz, that the grant of leave might also have consequences in relation to the determination of the costs of the trial. The reminder was made as part of a submission that the case ultimately exposed to Olivaylle at trial by Flottweg was different in its evidentiary sweep to that which existed in chief at its commencement. It was further submitted on Olivaylle's behalf that there were multiple issues in the trial in which the evidence overlapped in terms of relevance. By way of example, it was submitted that, even if it were concluded that Ms Ash's evidence carried with it for Olivaylle a particular cautionary note in terms of pressing a case for damages resulting from a lost or postponed opportunity to derive profits in the American market, the evidence necessary to show that the contractual performance criteria had been breached, which was one precondition to the proving of such a loss, overlapped with proofs necessary to show that the contractually conferred right to withdraw had arisen. It was also noted that Ms Ash's evidence was not available to Olivaylle even when the time for acceptance of the last of Flottweg's offers was open. Yet further, it was submitted that the contractual right of withdrawal was novel in terms of local precedent, such that it was not unreasonable in any event for Olivaylle to press a case for a refund in full of the price paid. This was linked with the submission as to overlapping evidence by way of developing an argument that, even if Olivaylle had failed in its claim for damages in respect of the lost or postponed American market opportunity, but succeeded in proving a right to withdraw, it may well have received the whole or most of the costs of the proceeding. It was consequentially submitted that it was neither unreasonable nor imprudent for Olivaylle to have pressed ahead with the whole of its case notwithstanding the offers successively made. In this regard, it was submitted that it was necessary to guard against the application of the false wisdom of hindsight to forensic value judgements which were not unreasonable at the time they were made. I am bound to follow matters of principle enunciated by the Full Court. In that regard, it may be, as Buchanan J highlights in the following passage from his judgment in McDonald v Parnell Laboratories (Aust) (No 2) [2007] FCA 2086 ; (2007) 164 FCR 591 at 597, [22] , that there is a difference in opinion at intermediate appellate level as to whether, for the purpose of satisfying a condition precedent to the awarding of indemnity costs and as an alternative to "imprudent", the rejection of an offer of compromise should be able to be described as "unreasonable" or "plainly unreasonable": In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 ( Dukemaster) Sundberg and Emmett JJ said, in a case like the present where O 23 r 11 did not apply because an applicant had been wholly unsuccessful, that an applicant for a more generous award of costs than party-party costs 'must show that the rejection of the offer was imprudent or plainly unreasonable' (see at [7]). There has been doubt expressed about the soundness of the statement in Dukemaster that rejection of an offer, if unreasonable, must be 'plainly unreasonable' in the light of the earlier judgment of a Full Court in Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at [217] [218], to which Wilcox J also referred in Coshott (see Seven Network Limited v News Limited [2007] FCA 1489 at [59] [62]). In the earlier of the Full Court authorities, Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at 432-433, [218] , the point was made that the conduct of an offeree need not be "plainly unreasonable" in order to warrant the ordering of indemnity costs because "To adopt an especially high standard of unreasonableness would operate as a fetter on the discretion to award indemnity costs and diminish the effectiveness of the Calderbank offer as an incentive to settlement." I respectfully agree and, for that reason, would choose to follow the earlier Full Court authority were that to be critical to the resolution of the costs application. It is not though because in both Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 and Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 the alternative of imprudent rejection was acknowledged. Like Buchanan J in McDonald v Parnell Laboratories (Aust) (No 2) and, as his Honour noted (at [22]), like Heerey J in AFP Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 3) [2007] FCA 2016 at [24] [25], it is sufficient to assess whether the rejection of any of the offers was, "imprudent". That basis of assessment accords with the exemplar given by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited , which I have already noted, whose judgment, as Heerey J acknowledged in AFP Properties (ibid), is the locus classicus on the subject.


case_text: this as it may in terms of provenance, there is no doubt that the awarding of costs is a matter for the exercise of a discretion, that the discretion is a broad one or that the power extends to the ordering that costs be taxed on an indemnity basis, rather than on the usual party and party basis: Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 536 ; (1993) 46 FCR 225. The judgment of Sheppard J in the latter is frequently cited for its comprehensive discussion of principle in relation to the awarding of costs on an indemnity basis. One of the circumstances which his Honour instances (at 233) which may justify the awarding of costs on an indemnity basis is an " imprudent refusal of an offer to compromise" (emphasis added). Order 23 of the Federal Court Rules (Cth) (the Rules) delineates aspects of the Court's practice and procedure with respect to offers of compromise and payment into court. It also offers guidance as to the ways in which, unless otherwise ordered in the circumstances of a particular case, the obtaining of a judgment by an applicant more or, as the case may be, less favourable than an offer of compromise will resonate in relation to liability to pay costs and the basis upon which taxation of costs will be ordered. Olivaylle commenced the present proceeding by the filing of its application in the Court's South Australian registry on 16 November 2006. At that time O 23 of the Rules provided, materially: Order 23 Offer of compromise and payment into court Interpretation In this Order, unless the contrary intention appears: applicant includes cross-claimant . claim in the proceeding includes a claim in relation to costs to which Order 62 applies. proceeding does not include a proceeding on an interlocutory application that is not capable of: (a) substantially disposing of the proceeding or of the whole or any part of any claim for relief in the proceeding; or (b) rendering unnecessary any trial or further trial in the proceeding or of the whole or any part of any claim for relief in the proceeding. respondent includes cross-respondent . Application (1) In any proceeding, a party may make to another party an offer to compromise any claim in the proceeding on the terms set out in the notice of offer. Form of offer (1) An offer of compromise is made to a party by serving a notice of the offer on the party. (2) A notice of offer must: (a) be prepared in accordance with Order 41; and (b) bear a statement to the effect that the offer is made under this Order; and (c) be signed by the party making the offer or by the solicitor appearing for that party. (3) Until an offer has been accepted, notice of the offer must not be filed. Further requirements of offer (1) If: (a) a sum of money is offered; and (b) that sum is inclusive of the costs of the proceeding; the notice of offer may specify the amount that is in respect of costs. (2) If: (a) a sum of money is offered; and (b) that sum is inclusive of interest; the notice of offer must specify the amount that is in respect of interest and how it is calculated. (3) An offer to pay a sum of money is, unless a notice of offer otherwise provides, taken to be an offer to pay that sum within 28 days after acceptance of the offer. ... Time for making or accepting offer (1) An offer may be made at any time before the time prescribed by subrule (7) in respect of the claim to which it relates. (2) A party may make more than one offer. (3) An offer may be expressed to be limited as to the time that it is open to be accepted, but the time expressed must not be less than 14 days beginning on the day after it is made. ... Offer to be without prejudice An offer made in accordance with this Order is taken to have been made without prejudice, unless the notice of offer otherwise provides. I am bound to follow matters of principle enunciated by the Full Court. In that regard, it may be, as Buchanan J highlights in the following passage from his judgment in McDonald v Parnell Laboratories (Aust) (No 2) [2007] FCA 2086 ; (2007) 164 FCR 591 at 597, [22] , that there is a difference in opinion at intermediate appellate level as to whether, for the purpose of satisfying a condition precedent to the awarding of indemnity costs and as an alternative to "imprudent", the rejection of an offer of compromise should be able to be described as "unreasonable" or "plainly unreasonable": In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 ( Dukemaster) Sundberg and Emmett JJ said, in a case like the present where O 23 r 11 did not apply because an applicant had been wholly unsuccessful, that an applicant for a more generous award of costs than party-party costs 'must show that the rejection of the offer was imprudent or plainly unreasonable' (see at [7]). There has been doubt expressed about the soundness of the statement in Dukemaster that rejection of an offer, if unreasonable, must be 'plainly unreasonable' in the light of the earlier judgment of a Full Court in Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at [217] [218], to which Wilcox J also referred in Coshott (see Seven Network Limited v News Limited [2007] FCA 1489 at [59] [62]). In the earlier of the Full Court authorities, Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at 432-433, [218] , the point was made that the conduct of an offeree need not be "plainly unreasonable" in order to warrant the ordering of indemnity costs because "To adopt an especially high standard of unreasonableness would operate as a fetter on the discretion to award indemnity costs and diminish the effectiveness of the Calderbank offer as an incentive to settlement." I respectfully agree and, for that reason, would choose to follow the earlier Full Court authority were that to be critical to the resolution of the costs application. It is not though because in both Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 and Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 the alternative of imprudent rejection was acknowledged. Like Buchanan J in McDonald v Parnell Laboratories (Aust) (No 2) and, as his Honour noted (at [22]), like Heerey J in AFP Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 3) [2007] FCA 2016 at [24] [25], it is sufficient to assess whether the rejection of any of the offers was, "imprudent". That basis of assessment accords with the exemplar given by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited , which I have already noted, whose judgment, as Heerey J acknowledged in AFP Properties (ibid), is the locus classicus on the subject.


case_title: Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1


case_title: McDonald v Parnell Laboratories (Aust) (No 2) [2007] FCA 2086 ; (2007) 164 FCR 591


case_outcome: applied

case_text: even without an expression of legislative intention such as that found in s 12(2) of the Legislative Instruments Act , the newly inserted presumption would not be classified as a mere matter of practice and procedure such that the amending rule would not be construed so as to give the presumption retrospective effect: Minister for Home and Territories v Smith [1924] HCA 41 ; (1924) 35 CLR 120 at 127-129 per Isaacs ACJ and Starke J. I therefore approach the question as to whether to award indemnity costs without presuming that the rules confer upon Flottweg the advantage of an indication as to how, prima facie , a discretion ought to be exercised.


case_title: NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480 ; (2001) 109 FCR 77


case_title: Notaras v Hugh [2003] NSWSC 919

case_text: not to be disclosed to Court (1) No statement of the fact that an offer has been made is to be contained in any pleading or affidavit. (2) If an offer has not been accepted, no communication with respect to the offer is to be made to the Court at the trial or hearing until after all questions of liability and the relief to be granted have been determined. (3) This rule does not apply where a notice of offer provides that the offer is not made without prejudice. Costs ... (5) If: (a) an offer is made by a respondent and not accepted by the applicant; and (b) the applicant obtains judgment on the claim to which the offer relates not more favourable than the terms of the offer; then, unless the Court otherwise orders: (c) the applicant is entitled to an order that the respondent pay the applicant's costs in respect of the claim incurred up to 11 am on the day after the day when the offer was made, taxed on a party and party basis; and (d) the respondent is entitled to an order that the applicant pay the respondent's costs in respect of the claim incurred after that time, taxed on an indemnity basis. As can be seen, the Rules did not then expressly deal with a situation where a respondent had made an offer of compromise which was not accepted by an applicant and that applicant's claim was subsequently dismissed. An analogous lacuna in the then rules of the New South Wales Supreme Court moved a judge of that court to observe that the costs rule "discriminates irrationally against wholly successful defendants": Notaras v Hugh [2003] NSWSC 919 at [5] per Sperling J. Various judges made recommendations that rules of practice be amended to remove this discrimination: Dal Pont, supra, at [13.16], fn 79. Order 23 r 11 was amended so as to address this lacuna by Federal Court Amendment Rules 2008 (No 1) (SLI 159 of 2008) which inserted a new sub-rule, sub-rule 11(6) into O 23 r 11. That new sub-rule provides: (6) If: (a) an offer is made by a respondent and not accepted by the applicant; and (b) the respondent obtains an order or judgment on the claim to which the offer relates as favourable to the respondent, or more favourable to the respondent, than the terms of the offer; then, unless the Court otherwise orders: (c) the respondent is entitled to an order that the applicant pay the respondent's costs in respect of the claim incurred up to 11 am on the day after the day the offer was made, taxed on a party and party basis; and (d) the respondent is entitled to an order that the applicant pay the respondent's costs in respect of the claim incurred after that time, taxed on an indemnity basis. The new sub-rule commenced on 2 August 2008.


case_text: then docket judge had made directions on 27 July 2007 which required Olivaylle to file its material on or before 7 September 2007. Flottweg had made earlier that year one unsuccessful application for security for costs: Olivaylle Pty Ltd (ACN 080 670 640) v Flottweg GMBH & Co KGAA (ABN 95 101 547 424) [2007] FCA 56 (It was shortly to make another: Olivaylle Pty Ltd (ACN 080 670 640) v Flottweg GMBH & Co KGAA (ABN 95 101 547 424) (No 2) [2007] FCA 1892 , heard 14 September 2007). Olivaylle had the benefit of a costs order in its favour from the earlier application.


case_title: Olivaylle Pty Ltd (ACN 080 670 640) v Flottweg GMBH & Co KGAA (ABN 95 101 547 424) (No 2) [2007] FCA 1892


case_text: is a sequel to the judgment which I delivered on 20 May 2009 in respect of the substantive issues in the proceedings: Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA (No 4) [2009] FCA 522 (the main judgment). It should be read in conjunction with it. For reasons which I then published, I dismissed Olivaylle Pty Ltd's application (Olivaylle). I intimated then that I would hear the parties with respect to costs. There is no dispute between the parties that costs should follow the event. The question is whether, as Flottweg AG (formerly Flottweg GMBH & Co KGAA) (Flottweg) sought following the dismissal, Olivaylle should be ordered to pay its taxed costs on an indemnity basis? If so, a related question is from which date payment of costs on that basis should be awarded? In essence, Flottweg's submission was that Olivaylle had unreasonably or imprudently rejected at least one, if not more, of a series of settlement offers which it had made, over a period between August 2006 and August 2007. In those circumstances, Flottweg submitted that costs should be awarded to it on an indemnity basis, either on and from the institution of proceedings or such later date as the Court might deem just. For its part, Olivaylle offered a critique of each of the offers to the end of submitting that there had been nothing unreasonable about their rejection such that the basis upon which costs should be taxed should be left as the usual party and party basis rather than being ordered on an indemnity basis.


case_text: approached its application for costs on the basis that the presumption for which O 23 r 11(6) provides was not applicable to any of the offers which it had made, given that each was made and had lapsed prior to 2 August 2008. That approach is supported by authority: Review 2 Pty Ltd v Redberry Enterprise Pty Ltd (No 2) [2008] FCA 1805 at [20] per Kenny J, referring to s 59(4) of the Federal Court of Australia Act , and s 12(2)(b) of the Legislative Instruments Act 2003 (Cth) (Legislative Instruments Act ). Olivaylle's position was no different. In Australian and International Pilots Association v QANTAS Airways Ltd (No 3) [2007] FCA 879 ; (2007) 162 FCR 392 at 396 Tracey J remarked: statutory provisions dealing with the power to award costs are procedural in nature and, in the absence of contrary legislative intention, will operate retrospectively at least to the extent of applying to cases commenced before the amendment: see eg Galvin v Forests Commission (Vic) [1939] VLR 284 at 297-8; Jackman v Dandenong Sewerage Authority (No 2) (1967) 20 LGRA 413 at 415. Here, a contrary legislative intention is evident in relation to any operation O 23 r 11(6) might otherwise have with respect to past events. Like Kenny J in Review 2 Pty Ltd v Redberry Enterprise Pty Ltd (No 2) [2008] FCA 1805 , I consider that such a conclusion is dictated by s 12(2)(b) of the Legislative Instruments Act . I also consider that s 12(2)(a) of the Legislative Instruments Act provides additional support for that view in that, prior to the making of the amendment to the rules, there existed a right to the exercise of a discretion with respect to the awarding of costs unfettered by any such prima facie presumption.


case_title: Ruaro v Ferrari [2008] FCA 307

case_text: submissions did not gainsay the matters of principle for which the cases relied upon by Olivaylle stood, only the application of those principles in the circumstances of this particular case. In particular, Flottweg accepted that the mere fact that the result at trial left Olivaylle worse off than any pre-trial offer carried with it no presumptive entitlement to an award of indemnity costs. Rather, it was submitted that the question was whether the rejection of the offers (or at least one of them) was unreasonable or imprudent, the discussion and conclusions reached by Sackville J in Seven Network Ltd v News Ltd [2007] FCA 1489 ; (2007) 244 ALR 374 at [59] to [63] with respect to Black v Lipovac , supra and other authorities being adopted. Flottweg further submitted that, while it may not have been unreasonable or imprudent for Olivaylle to have instituted or, as the case may be, continued the litigation in the absence of one or more of the offers it made, at least one of those offers constituted a fair commercial compromise such that it was unreasonable or imprudent to institute or continue the litigation in the face of that offer. That sentiment, it was submitted, was evident in the approach taken by Emmett J in Ruaro v Ferrari [2008] FCA 307 at [17] .


case_text: submissions did not gainsay the matters of principle for which the cases relied upon by Olivaylle stood, only the application of those principles in the circumstances of this particular case. In particular, Flottweg accepted that the mere fact that the result at trial left Olivaylle worse off than any pre-trial offer carried with it no presumptive entitlement to an award of indemnity costs. Rather, it was submitted that the question was whether the rejection of the offers (or at least one of them) was unreasonable or imprudent, the discussion and conclusions reached by Sackville J in Seven Network Ltd v News Ltd [2007] FCA 1489 ; (2007) 244 ALR 374 at [59] to [63] with respect to Black v Lipovac , supra and other authorities being adopted. Flottweg further submitted that, while it may not have been unreasonable or imprudent for Olivaylle to have instituted or, as the case may be, continued the litigation in the absence of one or more of the offers it made, at least one of those offers constituted a fair commercial compromise such that it was unreasonable or imprudent to institute or continue the litigation in the face of that offer. That sentiment, it was submitted, was evident in the approach taken by Emmett J in Ruaro v Ferrari [2008] FCA 307 at [17] . I am bound to follow matters of principle enunciated by the Full Court. In that regard, it may be, as Buchanan J highlights in the following passage from his judgment in McDonald v Parnell Laboratories (Aust) (No 2) [2007] FCA 2086 ; (2007) 164 FCR 591 at 597, [22] , that there is a difference in opinion at intermediate appellate level as to whether, for the purpose of satisfying a condition precedent to the awarding of indemnity costs and as an alternative to "imprudent", the rejection of an offer of compromise should be able to be described as "unreasonable" or "plainly unreasonable": In Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 ( Dukemaster) Sundberg and Emmett JJ said, in a case like the present where O 23 r 11 did not apply because an applicant had been wholly unsuccessful, that an applicant for a more generous award of costs than party-party costs 'must show that the rejection of the offer was imprudent or plainly unreasonable' (see at [7]). There has been doubt expressed about the soundness of the statement in Dukemaster that rejection of an offer, if unreasonable, must be 'plainly unreasonable' in the light of the earlier judgment of a Full Court in Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at [217] [218], to which Wilcox J also referred in Coshott (see Seven Network Limited v News Limited [2007] FCA 1489 at [59] [62]). In the earlier of the Full Court authorities, Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 at 432-433, [218] , the point was made that the conduct of an offeree need not be "plainly unreasonable" in order to warrant the ordering of indemnity costs because "To adopt an especially high standard of unreasonableness would operate as a fetter on the discretion to award indemnity costs and diminish the effectiveness of the Calderbank offer as an incentive to settlement." I respectfully agree and, for that reason, would choose to follow the earlier Full Court authority were that to be critical to the resolution of the costs application. It is not though because in both Black v Lipovac [1998] FCA 699 ; (1998) 217 ALR 386 and Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 the alternative of imprudent rejection was acknowledged. Like Buchanan J in McDonald v Parnell Laboratories (Aust) (No 2) and, as his Honour noted (at [22]), like Heerey J in AFP Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 3) [2007] FCA 2016 at [24] [25], it is sufficient to assess whether the rejection of any of the offers was, "imprudent". That basis of assessment accords with the exemplar given by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited , which I have already noted, whose judgment, as Heerey J acknowledged in AFP Properties (ibid), is the locus classicus on the subject. The time by which Olivaylle had to file its evidence in chief according to the then current interlocutory timetable lapsed during the time when the offer was open for acceptance. The critique offered by Flottweg by reference to various conclusions reached at trial does not, in my opinion, impermissibly call in aid a false wisdom of hindsight. I accept that I must consider whether the rejection of the offer was unreasonable by considering, inter alia, the strengths and weaknesses of Olivaylle's case prospectively at the time when the offer was made: Seven Network Ltd v News Ltd [2007] FCA 1489 ; (2007) 244 ALR 374 at [65] and the authorities there cited by Sackville J. Rather, what the critique does is to highlight evidentiary difficulties that were present in Olivaylle's case during the time originally fixed for the filing of its evidence in chief. As events transpired, those difficulties remained thereafter but what is presently relevant about the subjects identified in the critique is that, on the bases highlighted and viewed prospectively , Olivaylle either knew or ought reasonably to have known when the offer was made that it just could not hope to receive anything remotely approaching a damages award of some $27 million, as propounded on the strength of Mr Jorgensen's first report. Its evidentiary difficulties persisted, as was candidly acknowledged on the adjournment application, but in essential elements were present in August 2007. It is true that the evidentiary foundation of the cases for each party was embellished during the trial but that does not detract from the significance of the evidentiary difficulties present in August 2007. In my concluding remarks in the main judgment I attributed the pressing of the claim to Mr De Moya's disappointed pride. Those were remarks made after reflecting on the evidence that came to be led at a lengthy trial and with the benefit of observing the witnesses who came to give evidence, including Mr De Moya. There were though elements of such a conclusion in prospect in 2007 when the offer was made and during the time for its acceptance. The premises upon which Mr Jorgensen was instructed to prepare his report are eloquent in this regard. When matters of pride are excised, what remained in prospect in August 2007 was a case in contract and under the TPA which was problematic both in terms of liability, likelihood of vindication of a right of rescission or "withdrawal", securing of any order under s 87 and damages. There was a damages cap in the Contract. On any view, the sum offered was well in excess of that cap. That cap had no role to play in the event of a vindication of the asserted right of "withdrawal", but that such a right had been engaged was conjectural. The contractual cap could not limit the amount of any damages which would fall for assessment under s 82 of the TPA and s 87 did confer a power to vary the Contract so as to delete it. These powers were though enlivened only in the event that a liability claim under the TPA succeeded. Mr De Moya had already made his preference for relying on the contractual word plain and Olivaylle already knew that Flottweg had the benefit of the Greek Certificate, to say nothing of the design input of Mr Nieuwkerk in relation to achievement of contractually required atmospheric oxygen levels and the separate advisory role that he undertook for Olivaylle in relation to the supply of nitrogen gas for those parts of the line to be blanketed. Even prospectively, proof of liability in respect of the TPA claim was fraught with the risk.


case_title: Grovenor v Permanent Trustee Company of NSW Ltd (1966) 40 ALJR 329

case_text: In Grovenor v Permanent Trustee Company of NSW Limited (1966) 40 ALJR 329, also cited by McHugh J, the High Court stated (at 330) that "[t]he well-established rules as to the joinder of necessary parties ... ought always to be strictly observed". 69 By the amended originating process, Idameneo seeks, relevantly: • a declaration that Symbion Health is not bound by the TID in so far as it contains cll 13.8 and 13.9; and • an injunction restraining Symbion Health from paying, and the Directors from causing or procuring Symbion Health to pay, the break fee referred to in cll 13.8 and 13.9 of the TID. A declaration that Symbion Health is not bound by the provision for payment of the Symbion Health Break Fee and an injunction directed against payment of it directly affect Symbion Health's contractual obligations of Symbion Health to Healthscope and Healthscope's contractual rights against Symbion Health. 70 It is not practicable to formulate the relief sought in respect of the Symbion Health Break Fee so that it will affect only the rights and interests of the parties to the proceeding and not those of Healthscope. Idameneo necessarily seeks relief that will affect the rights and interests of Healthscope too.


case_text: There is a well-known line of authority to the general effect that it is the province of directors, not the courts, to identify where the interests of a company lie, and that the courts do not exercise a supervisory function over the business judgments of directors: see, for example, Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL [1968] HCA 37 ; (1968) 121 CLR 483 at 493; Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 (PC) at 832. Unlike a company's power to issue shares with which the cases just cited were concerned, the power to agree to the inclusion of a break fee provision in a complex contract of the TID kind, being sui generis , is even less apt to being circumscribed by any more detailed rules than the general duty expressed in s 181(1).


case_title: Howard Smith Ltd v Ampol Petroleum Ltd [1974] 1 NSWLR 68


case_text: Symbion Health submits that Idameneo's failure to join Healthscope as a party is a fatal defect in the proceeding. Symbion Health cites News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 ( News v ARL ) at 524 525 and Victoria v Sutton [1998] HCA 56 ; (1998) 195 CLR 291 at [77] per McHugh J. Symbion Health submits that Healthscope's rights against Symbion will be directly affected if Idameneo obtains the relief it seeks, because Healthscope will lose the benefit of the Symbion Health Break Fee provision. Similarly, Healthscope's rights will, according to Symbion Health, also be directly affected by the relief relating to the proposed Capital Reduction, since the effect of the relief sought in that respect is that approval of the Capital Reduction by all ordinary shareholders of Symbion Health would be required, and Idameneo has made it clear that it will oppose the capital reduction. Thus, the Diagnostics Transaction will be doomed to fail.


case_title: Re AMP Ltd (2003) 48 ACSR 540

case_text: Finally, Symbion Health refers to the decision of Emmett J in Re AMP Ltd (2003) 48 ACSR 540 ( AMP ) in which his Honour appears to have had no difficulty in accepting that an equal reduction of capital was involved, even though cl 3.3 of the scheme before him was an "ineligible overseas shareholders" provision. 50 Idameneo points out that under cl 13.8 of the TID (summarised at [20] [22] above), the amount of the Symbion Health Break Fee and the Healthscope Break Fee (each $19.575 million) includes a reasonable amount of compensation in respect of costs and expenses incurred by Healthscope and Symbion Health respectively in respect of the Original Scheme. Idameneo submits that to the extent that the Symbion Health Break Fee includes compensation in respect of costs and expenses of that kind, the conduct of the Directors in causing Symbion Health to agree to pay that fee is a breach of their duties as directors either under s 181(1) of the Act or under the general law: (a) to act bona fide in the best interests of Symbion Health, and, or in the alternative, (b) for a proper purpose. 51 Idameneo submits that Symbion Health's response to a notice given to it by Idameneo to produce documents in respect of the negotiation of the contents of clauses 4.9, 13.8 and 13.9 of the TID does not disclose that the Directors gave any consideration to the issue whether the break fee to be agreed to as payable by Symbion Health should include Healthscope's costs associated with the failed Original Scheme. 86 Similarly, in AMP 48 ACSR 540, an application for orders under s 411 of the Act in respect of a scheme of arrangement, Emmett J had no difficulty in recognising the distinction between a "Capital Adjustment Resolution" which gave rise to a "Cancellation Entitlement" in the Scheme Shareholders on the one hand, and the application of that Cancellation Entitlement by the Scheme company as consideration for the issue to the Scheme Shareholders of an appropriate number of shares in a different company. While there was no argument on the question, the reduction was recognised by his Honour as an equal reduction distinct from the logically subsequent application of the Cancellation Entitlement of each Scheme Shareholder (see [6] [8]). In that case a distinction was drawn in the Scheme conditions, appropriately in my view, between the Capital Adjustment Resolution which effected the reduction of share capital on the one hand, and "Scheme mechanics" that included both the application of the Cancellation Entitlement and the treatment of ineligible overseas shareholders on the other hand. 87 A second submission made by Symbion Health, outlined above at [43], is that, independently of the formal distinctness of the two resolutions, the proposed reduction is an equal reduction. The submission is that para (c) of s 256B(2) ("the terms of the reduction are the same for each holder of ordinary shares") is to be construed in the light of the purpose of the provision. That purpose is stated in s 256A as being "to ensure fairness between a company's shareholders". Symbion Health refers to the Explanatory Memorandum to the Company Law Review Bill 1997 (Cth) which introduced s 256C. The Explanatory Memorandum explained (at 10.17): Selective reductions require a special resolution, or unanimous shareholder agreement at a general meeting, because they have the capacity to advantage some shareholders over others . Where a selective reduction is approved by a special resolution, a vote may not be cast in favour of the resolution by a person who is to receive consideration as part of the reduction, or whose liability in respect of amounts unpaid on shares is to be reduced. ... This is intended to ensure that the resolution's approval reflects the wishes of the company's disinterested shareholders and corresponds to the approach taken in section 257D of the Bill in relation to shareholder approval for a selective share buy-back. (Emphasis added.) 88 I also accept this alternative submission made by Symbion Health. I do not think that para (c) of s 256B(2) is concerned with characteristics peculiar to a particular shareholder (in this case the operation of the laws of the place of residence of a particular overseas shareholder) that have nothing to do with equality of treatment of shareholders by the resolution or by its operation on their rights under the constitution of the company. There is no suggestion that the Ineligible Overseas Shareholders provision has "the capacity to advantage some shareholders over others" in the relevant sense of "aptness to advantage some shareholders over others". 89 The law, whether Australian or foreign, may have a wide and diverse range of impacts on shareholders in an Australian company who reside overseas. Revenue laws come to mind. The effect of those laws may be that the ultimate net effect of a distribution will be different as between Australian resident shareholders and a particular overseas resident shareholder. A reduction of capital can be an equal reduction notwithstanding the operation of such laws on the special position of the overseas shareholders. Indeed, tax considerations may be seen to produce differential ultimate net effects of a capital reduction even as between particular Australian resident shareholders, but it could not be suggested that the reduction is made a selective one on that account. 90 The presently contemplated overseas laws preventing in specie distributions are also laws of general application that cause a procedural difficulty for overseas resident shareholders in realising their entitlements. I do not think that a procedure of the kind expressed in the Ineligible Overseas Shareholders Resolution is the concern of para (c) of s 256B(2): such a procedure is designed to facilitate equality of treatment of shareholders rather than to prevent it.


case_title: Re ETRADE Australia Limited (1999) 30 ACSR 516

case_text: Symbion Health also relies on the judgment of Santow J in Re ETRADE Australia Ltd (1999) 30 ACSR 516 ( ETRADE ). It refers to the statement by his Honour (at 517) to the effect that in that case a distinction was to be drawn between the reduction of capital by the allocation of cash pro rata according to a certain formula on the one hand, and the application of the shareholders' cash entitlement (by reason of a scheme of arrangement before his Honour) in the purchase of shares previously acquired by the scheme company. 84 In ETRADE 30 ACSR 516, Santow J distinguished between a resolution for the reduction of capital which provided for a distribution of cash to the shareholders, and a logically subsequent application of their cash entitlements to the acquisition of shares in another company. Under the scheme of arrangement that was before the court, the shareholders in a company were required to acquire shares in another company. His Honour said that such cases concerned the question of "the precise point at which the reduction of capital ceased its work and an associated scheme of arrangement took over" (at 516). He stated (at 517): The present proposal before me might be thought to involve a reduction of capital by way of transfer of shares owned by the company effecting the reduction. (There is also the usual provision for shareholders with foreign addresses having their pro rata allocation of shares allotted or transferred to a nominee for sale and the proceeds accounted for to the shareholder with the foreign address.) However, that characterisation would not be an accurate statement of what in fact is brought about by the reduction of capital. The reduction of capital in legal terms allocates cash pro rata according to the formula in the documentation. Only after that, and solely by force of the scheme, that cash is required to be applied in purchasing ICM shares previously acquired by the scheme company, ETRADE Australia Ltd. The two steps are telescoped, so that the shareholder never physically receives the cash, but they remain conceptually distinct. In those circumstances, there is clearly enough what s 256B(2) defines as an "equal reduction". That is to say, the reduction relates only to ordinary shares including those created by virtue of the exercise of pre-existing options, it applies in proportion to the number of ordinary shares held and the "the terms of the reduction are the same for each holder of ordinary shares". Being thus an equal reduction, it may now be effected merely by an ordinary resolution. 85 Consistently with this passage, I regard the Capital Reduction as ending with the allocation of the pro rata number of Consideration Shares provided for in the Capital Reduction Resolution to each Symbion Health shareholder as at the Record Date. The Capital Reduction Resolution gives rise to an entitlement in each such shareholder to a certain number of the Consideration Shares, even if "the shareholder never physically receives" those Consideration Shares, to adopt the words of Santow J. The entitlement to a certain number of the Consideration Shares and the ultimate receipt of cash representing the proceeds of the sale of them "remain conceptually distinct" as his Honour said of the entitlement to cash and receipt of shares in ETRADE 30 ACSR 516.


case_text: Symbion Health submits that Idameneo's failure to join Healthscope as a party is a fatal defect in the proceeding. Symbion Health cites News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 ( News v ARL ) at 524 525 and Victoria v Sutton [1998] HCA 56 ; (1998) 195 CLR 291 at [77] per McHugh J. Symbion Health submits that Healthscope's rights against Symbion will be directly affected if Idameneo obtains the relief it seeks, because Healthscope will lose the benefit of the Symbion Health Break Fee provision. Similarly, Healthscope's rights will, according to Symbion Health, also be directly affected by the relief relating to the proposed Capital Reduction, since the effect of the relief sought in that respect is that approval of the Capital Reduction by all ordinary shareholders of Symbion Health would be required, and Idameneo has made it clear that it will oppose the capital reduction. Thus, the Diagnostics Transaction will be doomed to fail. 67 In Victoria v Sutton [1998] HCA 56 ; 195 CLR 291 McHugh J gave as a reason for setting aside orders of the Industrial Relations Court of Australia, a want of necessary parties. His Honour stated (at [77]), citing, inter alia , News v ARL 64 FCR 410: The rules of natural justice require that, before a court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. Because that is so, it is the invariable practice of the courts to require such a person to be joined as a party if there is an arguable possibility that he or she may be affected by the making of the order.


case_title: Lifetime Investments Pty Ltd v Commercial (Worldwide) Financial Services Pty Ltd [2006] FCA 495

case_text: In comprehensive reasons for judgment for the orders made by Greenwood J on 28 April and published on 3 May 2006, [2006] FCA 495 , extending to some 55 pages and 152 paragraphs, his Honour outlined the affidavit evidence that was before him and which led him to the making of the asset preservation orders, including the orders in question. 7 At par 75 of those reasons his Honour said: '75 For present interlocutory purposes, I am prepared to accept that there is compelling evidence that Mr Wallader nominated a National Australia Bank account in the name of the First Respondent as the account to which the investment monies were to be transferred and that the monies were so transferred. I also accept that the monies were transferred for the purpose of the agreement of 30 March 2001 and were to be applied for investment purposes on the terms and conditions of that agreement. Moreover, I accept that the Applicant has not received any part of the US$2 million and no explanation has been given either orally or in correspondence or by affidavit in these proceedings as to the location of the funds, the nature of the investment, the entity holding the funds, whether the funds have been invested at all or any explanation of any dealing in relation to the funds.' 8 Later, his Honour said: '97 Document 0012 of "EMA9" is a document which bears the title "COMMERCIAL WORLDWIDE FINANCIAL SERVICES PTY LTD National Australia Bank USD A/C". 98 The document describes debit and credit entries to the account for the period "1/3/2001 to 30/6/2001". The first entry on 1 March 2001 is the receipt of US$1 million from Mr Roger de Saint Quentin... The account shows a credit entry on 4 April of US$2,000,100.00 described as "One Our Clients". The account shows two debit entries on the following day, 5 April 2001. The first is a withdrawal of US$250,000.00. The second is an amount of US$1,760,000.00. The description field for the second account contains the letters CPFS. The document does not bear an account number. CPFS may be an acronym for Commercial and Primary Financial Services Pty Ltd ("CPFSP/L"). Document "A19" is a bank statement for that company for an account at the Bank of Queensland Ltd Account BSB 124-001 USD Foreign Currency Account 170415, for the period 1 June 2001 to 1 July 2001. 99 At 1 June 2001, the opening balance was US$1,125,000.00. On 6 June 2001, a total of US$250,000.00 was transferred to two accounts at the Bank of Queensland Ltd, 93-170415 and 90-170415. 100 On 19 June 2001, US$40,000.00 was transferred to "Asia-Pacific Corp". On 19 June 2001, US$110,000.00 was transferred to Account 94-170415. On 1 July 2001, the closing balance of the account was US$725,000.00. Interest on the account of US$3,774.86 was credited to Account 90-170415. 101 Bank statements for CPFSP/L for Bank of Queensland Account BSB 124-001, USD Foreign Currency Account 170415 for the important period of the transfer on 5 April 2001 (that is, statements for the period 1 April 2001 to 1 May 2001) from the USD account of the First Respondent at the National Australia Bank into the Bank of Queensland USD account of the First Respondent are not available and were not produced to the solicitors for the Applicant on execution of the Anton Pillar order. Nor were the documents relating to the Bank of Queensland Accounts 90-170415, 93-170415 and 94-170415 produced to the solicitors on execution of the Anton Pillar order. However, the statements that were produced for CPFSP/L show that monies were transferred from the CPFSP/L account to each of Accounts 90, 93 and 94 170415. Further Inferences 102 I am prepared to draw the inference for interlocutory purposes that the amount of US$2,000,100.00 (notwithstanding the addition of US$100.00) shown as a credit in the USD account of the First Respondent on 4 April 2001 is the amount of the Applicant's USD funds the subject of Mr Severin's instructions on or about 30 March 2001 to the Applicant's bank to transfer funds to the account of the First Respondent. The date of the credit in the First Respondent's account is close to the instruction date by Mr Severin to the Applicant's bank. If acted upon reasonably promptly, the international electronic transfer to the First Respondent's account is likely to have occurred on or about 4 April. I am also prepared to infer for interlocutory purposes that the substantial transfer on 5 April to "CPFS" was a transfer to the USD account at the Bank of Queensland of CPFSP/L. Further, I infer for interlocutory purposes that withdrawal of US$250,000.00 occurred with the consent and approval of Mr Wallader.' 9 His Honour said at par 105: '105 For interlocutory purposes, I am prepared to infer that Mr Wallader has received the Applicant's funds and has applied those funds to his own use or to his use and that of his wife whether in his own name or that of his wife or through one or more companies of which he and his wife are shareholders and directors. I infer from the facts of the conduct alleged against Mr Wallader that he has dealt with the Applicant's funds so as to obfuscate the ultimate transfer or use of the funds.' 10 That finding is important for present purposes, because it expresses his Honour's inference on the material before him, and for the interlocutory purposes with which he was concerned, that Mr Wallader has applied those funds to his own use or to his use and that of his wife, whether in his own name or that of his wife or through one or more companies of which he and his wife are shareholders and directors. 11 The affidavit of Mr Wallader speaks only of the shareholdings there specified. The reference in his Honour's reasons for judgment, particularly at par 98 and following, to the company, Commercial and Primary Financial Services Pty Ltd, is important. As par 101 set out above shows, there were, at about the appropriate time of the transfer from the applicant to the Bank of Queensland account, references to a number of bank accounts in addition to those which are referred to in Mr Wallader's affidavit. 12 Greenwood J noted at par 101: 'Bank statements for CPFSP/L for Bank of Queensland Account BSB 124-001 USD Foreign Currency Account 170415 for the important period of the transfer on 5 April 200 (that is, statements for the period 1 April 2001 to 1 May 2001) from the USD account of the First Respondent at the National Australia Bank into the Bank of Queensland USD account are not available and were not produced to the solicitors for the Applicant on the execution of the Anton Pillar order. Nor were documents relating to the Bank of Queensland accounts 90-170415, 93-170415 and 94-170415.' Two of those are the accounts referred to in Mr Wallader's affidavit of assets. 13 His Honour referred to the details of the first respondent, Commercial and Primary Financial Services Pty Ltd, D and J Wallader Pty Ltd, Colinton Station Pty Ltd and Colinton Station Export Pty Ltd in his Honour's reasons in pars 107 - 109. Whether relevant information concerning the disposition of the funds advanced might be revealed in the banking records of some or all of the companies is unknown. At par 126 his Honour said: '126 The Applicant is not in a position to adduce evidence of an application of the funds by the First or Second Respondent to a particular purpose or asset. The Applicant says it simply does not know how the money has been used or applied by Mr Wallader except to say that $US250,000.00 was withdrawn by Mr Wallader on 5 April 2001 from the account of the First Respondent to which the Applicant's funds were transferred and $US1,760.000.00 was transferred to another account controlled by a company controlled by Mr Wallader and his wife.' 14 Finally, his Honour referred, at consideration number 14 in par 148, to the making of the asset preservation orders: '14 In this case, the evidence for interlocutory purposes, establishes a strong prima facie case that monies were transferred by the Applicant to the First Respondent controlled by Mr and Mrs Wallader to be applied for a particular purpose in reliance upon Mr Wallader. A substantial proportion of the funds were transferred to another company controlled by Mr and Mrs Wallader. Mr Wallader chooses not to admit the receipt of the funds and has elected not to swear any affidavit disclosing the treatment of the funds. In the period since the receipt of the funds, the Applicant has expended significant sums in improving assets under his control or under the control of proprietary entities of which he is a director. Although there is no evidence that the actual funds transferred on or about 30 March to the First Respondent have been applied in a particular way (apart from the transfer of substantial funds to the account of CPFSP/L and the withdrawal of $US250,000.00) or to a particular asset, the inference is open that Mr Wallader has applied the moneys to his own advantage or to the advantage of himself and his wife whether directy or by the vehicle of companies controlled by him.' 21 The order made by Greenwood J in the present case is not one compliance with which will infringe Mr Wallader's privilege against self-incrimination. It is an order which might involve Mr Wallader in providing material which might incriminate him in the commission of an offence, but, in my judgment, he is entitled, in answering that order, to claim the privilege against self-incrimination, as he has done. 34 Essentially, what the applicant in the principal proceedings is seeking is that by orders in aid of asset preservation, probative evidence in the civil claim will be compulsorily obtained. No doubt, Mr Wallader, at the trial, can be asked questions concerning what happened to the $2 million. It would be open to him, in respect of some of those questions to claim privilege, but, as Greenwood J noted, failure to account for what happened to the money would permit inferences to be drawn. I make it plain that no adverse inference can be drawn from the claiming of privilege on the grounds of self-incrimination; however, a failure to disclose what in fact occurred in relation to the money may be a very different matter. 35 I am not persuaded that this subsection does not apply to a witness refusing to make an affidavit of the kind required by Greenwood J. In my view, the maker of an affidavit is a 'witness' within the meaning of s 128(5). As Gibbs CJ, Mason and Dawson JJ explained in Control Consultants Pty Ltd v Commissioner for Corporate Affairs [1985] HCA 6 ; (1985) 156 CLR 385 at 393, in respect of the common law privilege against self-incrimination: 'The privilege, apart from any statutory exclusion, would protect a person against a requirement that he produce or identify incriminating documents, or reveal their whereabouts or explain their contents in an incriminating fashion.' 42 For the above reasons, all I propose to do is to declare that the disclosure order, par 7, made by Greenwood J on 28 April did not abrogate or modify the privilege against self-incrimination, and Mr Wallader is still able to claim that privilege in an affidavit. 43 The costs of and incidental to the Notice of Motion of the second respondent in the principal proceedings should be his costs in those proceedings. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender J. Associate: Dated: 5 June 2006 Counsel for the Applicant: Mr Andrew Lyons (In the Notice of Motion) Solicitor for the Applicant: Watts and Company Counsel for the Respondent: Mr James Catlin (In the Notice of Motion) Solicitor for the Respondent: Harwood Andrews Lawyers Date of Hearing: 22 May 2006 Date of Judgment: 26 May 2006 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2006/696.html