Re: WESTSUB DISCOUNTS PTY. LTD.

And: IDAPS AUSTRALIA LIMITED

No. V G261 of 1986

FED No. 188

Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA



VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

Woodward J.(1)

CATCHWORDS

Practice and Procedure - payment into court - lesser amount awarded together with costs - no application to vary costs order - judgment entered the following day - whether Court then has power to change order as to costs - whether slip rule applies - whether supplementary order available - appropriate order as to costs after successful payment in.

Federal Court of Australia Act 1976 s 23

Federal Court Rules Ord 35 r 7, Ord 36 r 2, Ord 62 r 27

HEARING

MELBOURNE



#DATE 4:5:1990

Counsel for the Applicant: Mr D M Austin

Solicitor for the Applicant: McLindins

Counsel for the Respondent: Dr J McL Emmerson QC

and Mr Colin Golvan

Solicitors for the Respondent: Abbott Tout Russell

Kennedy

ORDER

1. Order 4 of the orders made herein on 9 April 1990 be vacated.



2. The respondent pay the applicant's costs of



claim and cross-claim incurred up to and including 27 March 1989.

3. The applicant pay the respondent's costs of



claim and cross-claim incurred on and after 28 March 1989.



4. Each party bear its own costs of this motion.



5. The sum of $150,000 paid into court by the



respondent be paid out to the solicitors for the respondent.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is an application, by way of notice of motion brought by the respondent, seeking a variation to an order made on 9 April 1990 concerning the costs of this action.

  1. Judgment was given on that day in a claim and cross-claim which both succeeded, and after set-off an order was made that the respondent pay the applicant $109,607.15. The Court has since been told that, shortly before the hearing commenced, the respondent paid into court an amount of $150,000.

  2. When judgment was delivered on 9 April the solicitor for the respondent was present in court. He has since sworn an affidavit about his failure at that time to draw to the Court's attention the fact that a payment had been made into court which exceeded the amount of the judgment. In that affidavit he said,

    "The Sydney office of my principals had

    the conduct of Idaps' case at all material

    times in this action however I was asked by my

    principals to attend and did attend before His

    Honour Mr. Justice Woodward on the 9th of

    April, 1990 to hear Judgment in this matter.

    At the time Judgment was handed down in

    Court I briefly read in paragraph 3 of the

    Minutes of His Honour's Order that the net

    amount to be paid to the Applicant by Idaps

    was $109,607.15, (being a sum less than the

    sum of $150,000.00 which had previously been

    paid into this Honourable Court by Idaps).

    Subject to reading the full terms of His

    Honour's Judgment however I did not know upon

    what basis His Honour had carried out his

    calculations regarding the sum of $109,607.15

    and whether there would be grounds for Idaps

    to rely upon its Payment Into Court in the

    making of submissions on the issue of costs.

    In the circumstances I considered that the

    appropriate course of action was for a

    separate application to be made in relation to

    the costs issue in order that due

    consideration could be given to the matter and

    instructions obtained. In addition, I

    considered that because the Notices of Payment

    Into Court would be present on the Court's

    records, the Registrar would notify the

    parties to be present at the time of his

    settling of the Order so that due

    consideration would be given to the costs

    issue arising from the Payment Into Court.

    Following receipt of the written Judgment

    I briefed Counsel to draw a Notice of Motion,

    and to settle supporting Affidavit material,

    in relation to a proposed application by Idaps

    seeking the setting aside or variation of His

    Honour's Order on the question of costs in

    light of the Payment Into Court and also to

    seek an Order that the moneys in the Litigants

    Fund be paid to Idaps."

  3. However, while these steps were being taken by the solicitor for the respondent, the solicitors for the applicant were active. On the day after judgment was delivered, they lodged a draft of the orders with the Registrar so that they could be entered. Under Order 36 Rule 2 of the Federal Court Rules, the Registrar may settle the draft without an appointment for the attendance of the parties. That was the course taken by the Registrar in the present case. Accordingly, judgment was formally entered on 10 April 1990. Order 4 of that judgment provided that;

    "The respondent pay the applicant two

    thirds of the applicant's costs of claim and

    cross-claim."

    This decision had been arrived at bearing in mind the issues on which the respective parties had succeeded but, of course, in ignorance of any payment into court. The respondent now seeks, in substitution for that order, or by way of supplementary order, orders that,

"a. the respondent pay the applicant two thirds of the applicant's costs until 20th March 1989 of claim and cross-claim. b. the applicant pay the respondent's costs from 20th March 1989 of claim and cross-claim."

  1. Counsel for the applicant has argued that, the original order having been entered, the Court has no power to vary or replace it as the respondent has sought. The respondent argues that the Court has power and relies upon order 35 rule 7 as the source of that power.

  2. That rule is in the following terms;

"7. (1) The Court may vary or set aside a judgment or order before it has been entered.



(2) The Court, where it is not exercising its appellate or related jurisdiction under Division 2 of Part III of the Act, may if it thinks fit vary or set aside a judgment or order after the order has been entered where -



(a) the order has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default and whether or not the absent party has notice of the motion for the order;



(b) the order was obtained by fraud;



(c) the order is interlocutory;



(d) the order is an injunction or for the appointment of a receiver;



(e) the order does not reflect the intention of the Court; or



(f) the party in whose favour the order was made consents.



(3) A clerical mistake in a judgment or order, or an error arising in a judgment or order from an accidental slip or omission, may at any time be corrected by the Court.



(4) Sub-rule (2) shall not affect the power of the Court to vary or terminate the operation of an order by a supplementary order."

  1. Counsel argued that this rule gives power to the Court to make the variations sought, either under the "slip rule" set out in sub-rule (3) or under sub-rule (4). With regard to sub-rule (3) it was submitted that the "accidental slip or omission" referred to does not have to be the slip or omission of the Court. It may be an error of one of the parties - in this case the failure of the respondent's solicitor to draw the Court's attention to the payment into court at the time judgment was delivered. However, counsel also argued that there was in this case a slip or omission by the Court, in the sense that the Registrar had failed to "appoint a time and place for attendance of the parties to settle the draft" pursuant to order 36 sub-rule 2(b) when the Registrar knew, or should have known, that moneys had been paid into court which could affect the exercise of the Court's discretion as to costs.

  2. So far as the submission about errors of a party is concerned, there is authority for the proposition that such an error can give rise to the application of the slip rule.

  3. Perhaps the most helpful authority, and one which pulls together a number of earlier decisions, is to be found in Coppins v Helmers (1969) 72 SR (NSW) 273. There the Court of Appeal, constituted by Herron C.J., Sugerman and Mason JJA, had to consider the refusal of a single judge to re-open a judgment in third party proceedings, in which he had ordered that the amount of damages awarded against the defendant in the primary action should be apportioned equally between the defendant and the third party. There had been no application in the third party proceedings to apportion the plaintiff's costs of the primary action, which had also been awarded against the defendant.

  4. In dismissing the appeal, the Court said, at 277,

"It is well settled that a court has power at any time to correct an error in an order arising from a slip or accidental omission, whether or not that power is conferred expressly on the court by the slip rule (Milson v Carter (1893) AC 638). The power is vested in a court in virtue of its inherent jurisdiction and it seems that this power is no less extensive than the power conferred by the slip rule in its traditional form. The authorities establishing what may be done to correct orders under the slip rule may, therefore, be regarded as indicating, at least in a general way, what a court may do in the exercise of its inherent jurisdiction."

  1. I pause here to observe that, in the case of the Federal Court, I think it is more appropriate to speak of the implied rather than the inherent jurisdiction of the Court; see Jackson v Sterling Industries (1986) 12 FCR 267 at 272 and 283-5; 69 ALR 92 at 96-97 and 108-9. Since the Court is the creature of statute, I believe that any such power as may be inherent in the Supreme Courts of the States must be found in the statute establishing the Court. Section 23 of The Federal Court of Australia Act 1976 provides "the Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, .... as the Court thinks appropriate." I think that, by implication, this section gives the Federal Court the same powers, among others, which Diplock L.J. referred to in Hunter v Chief Constable of the West Midlands Police (1928) AC 529 at 536, when he spoke of -

    "The inherent power which any Court of

    Justice must possess to prevent misuse of its

    procedure in a way which, although not

    inconsistent with the literal application of

    its procedural rules, would nevertheless be

    manifestly unfair to a party to litigation

    before it, or would otherwise bring the

    administration of justice into disrepute among

    right-thinking people."

  2. To return to the decision in Coppins v Helmers, the Court of Appeal continued, at 277-8,

    "There is a strong body of judicial

    decisions to support the proposition that

    under the slip rule a court may correct its

    order so as to include in it an order on an

    ancillary matter which by inadvertence was not

    dealt with at the hearing, notwithstanding

    that the purpose of the correction is

    otherwise than to give expression to the

    intention of the court at the time when it

    pronounced its decision.

    Thus, a court will amend its order by

    including in it an order for costs which

    through inadvertence was not made at the

    hearing (Fritz v Hobson (1880) 14 Ch D 542;

    Barker v Purvis (1888) 56 LT 131; Melbourne

    Harbour Trust Commissioners v Cuming, Smith and

    Co Pty Ltd (1906) VLR 192); so also it will

    include in an order for costs an item of costs

    which was overlooked when the order for costs

    was originally pronounced (Chessum and Sons v

    Gordon (1901) 1 KB 694; In re Earl of Inchcape

    (1942) 1 Ch 394). ....

    Other examples may be given of

    circumstances in which a court will amend an

    order so as to include a provision concerning

    a matter which, through inadvertence, was not

    dealt with at the hearing, the purpose of the

    amendment being otherwise than to clarify an

    ambiguity in the original order or to give

    effect to the intention of the court at the

    time when the original order was pronounced.

    But the limitations attaching to the power of

    a court to correct an order so as to include a

    provision concerning a matter which was not

    dealt with at the hearing are illustrated by

    Brew v Whitlock (No. 3) (1968) VR 504, in

    which the Full Court of the Supreme Court of

    Victoria refused to amend an order by

    including a provision allowing interest on a

    judgment in circumstance where no application

    had been made for an order for interest on the

    original hearing before the Full Court. It is

    significant that in that case Arnett v

    Holloway (1960) VR 22 was distinguished on the

    ground that in the latter case it was apparent

    what order for costs needed to be inserted in

    the order made.

    However, for the purposes of this appeal

    it is sufficient to say of all instances in

    which a court has corrected an order by

    including in the original a provision

    concerning a matter which was not dealt with

    at the hearing, that they are cases in which

    the correction has related, not to the

    substantial issue between the parties which

    has been resolved by the original order, but

    to an ancillary or consequential matter. The

    researches of counsel have not brought to

    light any judicial decision in which a court

    has exercised its power to correct an order,

    once completed, by varying its determination

    on the substantial question in issue in a

    respect which through inadvertence was not

    dealt with at the original hearing."

  3. It is clear from this decision that a distinction has to be drawn between adding to or amending the judgment itself and making corrections to ancillary orders, such as orders for costs. It is clear that, in the former case, a judgment cannot be re-opened once it has been entered; see also Bailey v Marinoff (1971) 125 CLR 529. But in the case of ancillary orders, such as orders for costs, an error or omission made by counsel or solicitors for a party can provide sufficient justification for the court to correct a mere slip or omission.

  4. In the present case I think it can also be said that there has been an omission on the part of the Court in that, having either actual or constructive knowledge of the payment into court, the Registrar has nevertheless allowed the judgment as originally pronounced to be entered without notifying the party which had paid into court more than the amount awarded against it on the face of the judgment.

  5. However, in my view, that is not the end of the matter. As the Full Court of the Supreme Court of Victoria pointed out in Brew v Whitlock (No. 3) (above, at 506) there are four elements which have to be satisfied before the slip rule can be applied. These are -

    1. a "slip or omission",

    2. that it be "accidental",

    3. that there be an "error" in the judgment arising

from the accidental slip or omission, and

4. that it be an error capable of being "corrected"



under the rule.



  1. In that case the appellant had sought to re-open a successful appeal in which judgment had been entered, in order to add a claim for interest which had not been made during the course of the appeal, although it had been sought in the original statement of claim.

  2. The Full Court could have disposed of the matter on the same basis that the Court of Appeal relied upon in Coppins (above), namely, that the order sought related not to an ancillary or consequential matter but to the very subject matter of the litigation, and that an application under the slip rule could not be entertained where the omission was that of the party's legal representatives who had failed to seek certain damages to which their client was entitled.

  3. However, the Full Court in Brew v Whitlock (No 3) dealt with the matter differently, while arriving at the same result. Without deciding whether there had been a slip or omission within the meaning of the rule, or whether if there was such a slip or omission it was accidental, the Court held that there had been no error in the judgment given since interest had not been sought, and finally that there was no error capable of being the subject of correction. The Full Court said, at 506-7,

    "In our view it is necessary that it

    should appear not only that the judgment was

    wrong, but also what could and should be done

    to it to make it right; not only what was

    omitted, but would need to be put in. It is

    impossible, in our view, to apply the rule to

    a case where, on the application to correct

    the judgment, it is necessary to exercise an

    independent discretion, not only as to whether

    interest should have been awarded but also as

    to the rate at which it should run and as to

    the time from which it should run."

  4. It is to be noted that the Court of Appeal in Coppins referred to this aspect of the Full Court's judgment with apparent approval.

  5. In the present case, if the slip rule is to be applied, it requires the Court to vacate the exercise of discretion on the subject of costs which had previously been determined upon, and to substitute a fresh exercise of discretion taking into account sub-rule 27(2) of Order 62, which is in these terms:

    "Where a party has brought money into

    Court, the Court may, in exercising its

    discretion as to costs, take into account that

    fact, and the amount of the money brought into

    Court."

  6. As I shall shortly explain, there is some conflict of authority as to the way in which the court's discretion should normally be exercised when money had been paid into court which proves to be more than sufficient to meet the amount of the judgment. However, one thing which is clear is that the court does have, in the circumstances of each case, an unfettered discretion which must, of course, be exercised judicially.

  7. In the present case it is not immediately clear what order should be made, either as to the costs before the date of payment in or as to the costs after that date. Both questions have required argument and careful consideration. Even the precise date at which any change of liability for costs should take place is a matter for deliberation.

  8. In these circumstances it is my opinion, consistent with the views expressed by the Court of Appeal in New South Wales and the Victorian Full Court, that this is not a case appropriate for the application of the slip rule. The order to be substituted for the order said to be in error is not obvious or easily to be found, requiring as it does both argument and deliberation.

  9. I turn now to consider the operation of sub-rule 7 (4) of Order 35 (above). It is not easy to see what scope should be given to sub-rule (4) having regard to the provisions of sub-rule (2). Sub-rule (2) appears to list the circumstances in which a court would be most likely to want to vary an order deliberately made, without any accidental slip or omission, after it had been entered. If sub-rule (4) is to be given a wide meaning, what is the value of sub-rule (2)?

  10. However wide or narrow the proper scope of sub-rule (4) may be, it is, in my view, wide enough to cover the circumstances of the present case where, I believe, the order made must be amended in order that justice may be done.

  11. The present case is not unlike that which was decided by Fisher J in T J M Products Pty Ltd v A and P Tyres Pty Ltd (1987) 17 FCR 390; 78 ALR 579. The substantial difference between that case and the present is that in T J M Products a notice of motion to set aside an order for costs had actually been issued before the other party to the action entered judgment. In that matter, Fisher J relied on authorities such as Hunter v Chief Constable of the West Midlands Police (above) and Castanho v Brown and Root (UK) Ltd (1981) AC 557, where the filing of a notice of discontinuance in order to avoid the possible adverse effects of a summons taken out by the other party, was held by the House of Lords to be an abuse of process.

  12. His Honour held that the facts before him constituted an abuse of process also; therefore the judgment or order had not been regularly entered and ought to be struck out. His Honour said, at 398 (FCR), 587 (ALR),

"....the court may exercise the express power to vary or set aside the judgment or order conferred upon it by Order 35, rule 7(1) of the Rules in circumstances where, ex hypothesi, the judgment or order has not been regularly entered."



  1. I prefer to rely upon sub-rule (4) of rule 7 since I think it would overstate the present case to call it an abuse of the process of the court. I believe that, in all the circumstances, it would be "manifestly unfair" to Idaps and would tend to "bring the administration of justice into disrepute among right-thinking people" (see Hunter v Chief Constable of the West Midlands Police, above) if the court were not able to reconsider its order for costs after having learnt of the payment into court.

  2. In reaching this conclusion I take into account the fact that the worst that could be said of the conduct of Idaps' solicitor was that he made an error of judgment in the few seconds available to him after the Court's orders had been read, and again, perhaps, in failing to draw the Registrar's immediate attention to the potential problem. But both of these were understandable omissions. I also have regard to the apparent weakness in the procedures of the Court which enabled the judgment in this case to be entered without notice to the party which had paid into court more than the amount of the judgment. Finally, I note the fact that judgment was entered very promptly after its formal pronouncement.

  3. I was informed by counsel for Westsub that consideration was given to the question of costs at the same time that an application for interest was contemplated by Westsub's legal advisers. Counsel submitted that it would now be unfair if the question of cost were re-opened in circumstances where the question of interest clearly could not be re-opened (see, for example, Brew v Whitlock (above)). There had been no application for interest in the original pleadings, or in the several amendments to them, or during the course of a lengthy trial in which there were ample opportunities to add to or vary the claim in any way in which the applicant saw fit.

  4. Not having had the benefit of argument, I cannot say what my attitude would have been to the raising of the question of interest for the first time after judgment had been delivered. However, it is clear from what I have been told that a deliberate decision was made that the applicant would not seek interest and thus provide an opportunity for the respondent to apply for a variation of the order as to costs. Having made that decision and entered judgment, I think that the applicant is bound by its own actions, and I should not take considerations of interest into account in exercising such discretion as I have to deal with the respondent's application for review of the order for costs.

  5. I turn therefore to consider what variation, if any, should be made to the order for costs which was previously pronounced.

  6. The modern approach in the United Kingdom to discretion as to costs after payment in, is dealt with in the fourth edition of Halsbury's Laws of England, Vol 37, pp 222-3, at paragraph 293, in the following terms,

"In exercising its discretion as to costs the court must, to such extent as may be appropriate in the circumstances, take into account any payment of money into court and the amount of such payment. Since this discretion must be exercised judicially, if the plaintiff recovers in the action no more than the sum paid into court, the order for costs will give the plaintiff the costs of the action down to the date of payment in and the defendant his costs after that date. The modern practice is to look at the position of the parties at the end of the day to determine whether the amount paid in is more or less than the total of the plaintiff's claim, and therefore not to make any special order with regard to the costs on the issue of liability after the date of payment. The underlying principle of the modern practice is that the court is applying the rule that costs follow the event, so that even though he may succeed on the issue of liability or on any other issue or question in the action, if the plaintiff recovers less than the amount paid in, he has lost "the event", and the defendant thereupon becomes entitled to the costs after the day of the payment in."

  1. See also Wagman v Vare Motors Ltd (1959) 1 WLR 853 and Hultquist v Universal Pattern and Precision Engineering Co Ltd (1960) 2 QB 467 at 481-2.

  2. In a footnote to the section in Halsbury, it is stated that

    "the earlier cases which required the court to

    award the plaintiff costs of the issue or

    issues in which he succeeded including the

    issue of liability .... or as to the

    apportionment or division of costs ... have

    ceased to be relevant."

  3. In my view, Halsbury correctly states the position in Australia today. I have been referred to several judgments given by judges of this Court while sitting in the Supreme Court of the Australian Capital Territory. Even allowing for the differing circumstances of each case and the unfettered discretion each judge had to arrive at a just result, they are not easy to reconcile.

  4. I can only say that, in so far as they do differ, I prefer the approach of Blackburn J in Morrison v Cook (1971) 4 ACTR 47 and the dicta of Fox J in Windbank v Bradly (1970) 4 ACTR 14 at 15, to the approach of Connor J in Tanner v Marquis Jackson, Cahill and Associates (1975) 6 ACTR 9 and Smithers J in Mangan v Mendum (1970) 4 ACTR 44. The difference between their Honours seems to lie in the change of approach referred to in Halsbury, above. Connor J makes this explicit in his judgment, although he does not refer to the earlier Supreme Court decisions. As I have indicated, I think the current approach is more in keeping with the purpose to be served by payment into court, though it may be appropriate to ameliorate the effects of that approach in any particular case. I am encouraged in the view I have taken by some words of Jenkinson J in T N Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd (1984) 1 FCR 371 at 385; 52 ALR 467 at 529. In that case, which involved a defective payment in, his Honour disavowed any intention of laying down any rule of practice or any presumption which might operate to fetter discretion, but said,

    "Order 23 and O 62, r 27, and the

    practice as to costs which is founded upon

    those and similar rules of court give rigorous

    effect to the policy that the parties to civil

    litigation should be induced to compromise".

  5. The court still has complete discretion to do what is just in all the circumstances; but the payment into court cannot be disregarded (see Ord 62 r 27). I believe that courts should do all they can to encourage the sensible compromise of actions. If money is paid into court, and the applicant recovers less than the amount paid in, then for all practical purposes the respondent has succeeded in the action. But the respondent's costs will still be subject to the same scrutiny as those of any successful litigant and if, for example, a significant part of the court's time has been taken up over issues that were not reasonably arguable, or by the calling of witnesses who were unnecessary to establish the respondent's case, then the unsucessful' applicant should not be burdened with those costs unnecessarily incurred.

  6. Having reviewed the present case I am not conscious of any such element in the presentation of the case for the respondent. It is true that there were some issues raised by the respondent upon which it failed. However, there was nothing in the respondent's defence of the applicant's claims which was unreasonable or unnecessarily costly. A considerable number of witnesses were called, but this was necessary in order to try to establish the respondent's defence and, indeed, the respondent was criticised for not having called one further witness. In its cross-claim the respondent raised several issues upon which it failed, but these were not time-consuming matters, nor were they unreasonable claims.

  7. I am conscious of a possible appearance of unfairness, in that the apparently successful applicant was only awarded two thirds of its total costs, while the now 'successful' respondent is awarded all its costs of the hearing.

  8. The difference between the two cases lies in the fact that the applicant made a number of very large claims and only succeeded in establishing a few of them. It also lost on the cross-claim. On the other hand, the respondent's payment into court amounted to a statement that it expected to win on some issues and lose on others and, on balance, to finish owing no more than $150,000. That is exactly what occurred.

  9. The applicant could have put itself in a parallel situation by writing a 'without prejudice' letter, to be used on the question of costs, saying it would settle for $x. If it had then recovered more than $x, it would, in my view, have been entitled to the costs of all issues, including those on which it lost, subject only to deductions for time-wasting or unwarranted expense.

  10. Indeed there is, I believe, a great deal to be said for all applicants following this course where there are a number of complex issues in a monetary claim and costs are likely to be substantial.

  11. In all the circumstances I think I should order that the respondent pay the applicant's costs of claim and cross-claim incurred up to and including 27 March 1989 and that the applicant should pay the respondent's costs of claim and cross-claim incurred on and after 28 March 1989.

  12. The respondent argued that the applicant should receive only two thirds of its costs incurred up to the payment in, following the lines of the order for costs previously made. However that order was based upon the time taken during the hearing on matters in which the applicant was unsuccessful and the respondent succeeded. Since the respondent is now to receive its costs of the hearing, I believe it would involve double-counting to order any reduction in the applicant's costs for the period up to the payment into court. I have no way of estimating how much of the applicant's preparatory costs went towards issues on which it ultimately failed. And, in any event, I think the applicant is entitled to some costs expended in investigating those claims and obtaining advice about them. I do not believe, in the new circumstances that have emerged, that I should make any arbitrary reduction in the applicant's costs up to the date of payment in. It will be noted that I have also allowed the applicant a full week, after the date of payment in, to consider its position and take advice on the question of settlement. I believe that this is a reasonable time to allow for the applicant to arrive at an informed decision on the choice offered to it by the payment into court.

  13. Although the respondent has succeeded in this motion, it could have been avoided if prompt steps had been taken after judgment to alert the Court to the fact that money had been paid in. In these circumstances I think that each party should bear its own costs of the motion.

  14. The respondent has also sought an order that the sum of $150,000 which it paid into court be now paid out to it. Counsel for the applicant was unable to suggest any good reason why this should not be done, and I shall so order.