Exit Distraction Free Reading Mode
- Selected for Reporting
[2021] QSC 51
In this significant judgment, Bowskill J delivered the first judicial consideration of whether or not costs should be ordered under s 1317AH(3) of the Corporations Act 2001 (Cth). Her Honour helpfully set out seven key principles which should be considered in determining whether or not costs should be ordered in such cases.
Bowskill J
18 March 2021
The plaintiff brought proceedings under s 1317AE of the Corporations Act 2001 (Cth), one of the whistleblower provisions recently introduced into the Corporations Act 2001 (Cth). On 26 February 2021, Bowskill J granted strike-out applications brought by the first defendant (ERM) and a number of the “natural person defendants” and struck out the plaintiff’s further amended statement of claim. [1]. ERM and the natural person defendants then sought costs in relation to their strike-out application. [4].
However, s 1317AH(3) of the Corporations Act 2001 (Cth) provides that in proceedings such as the plaintiff’s, costs are only payable where they were brought (a) “vexatiously or without reasonable cause”, or (b) “the court is satisfied that the claimant’s unreasonable act or omission caused the other party to incur the costs”. [3]. ERM and the natural person defendants contended that the plaintiff’s actions in defending the strike-out applications and not filing a further amended statement of claim addressing the defects brought to his attention by the defendants prior to those applications were unreasonable. [8].
In considering whether costs should be ordered, Bowskill J first observed that the Explanatory Memorandum to the Bill which inserted s 1317AH showed that the purpose underlying s 1317AH is to limit the circumstances in which the Court may order costs against a whistleblower to remove the deterrent effect of costs orders against whistleblowers. [5]–[6]. Her Honour then noted that there has not yet been any judicial consideration of s 1317AH(3), and set out the following principles, drawn largely from analogous provisions in other legislation: [7]:
a) Section 1317AH constrains the power otherwise conferred on the Court to make an order for costs;
b) A claimant in a proceeding in relation to a matter arising under s 1317AE must not be ordered to pay costs other than in accordance with s 1317AH(3);
c) For the exception under s 1317AH(3)(b) to arise, two criteria must be met, after which the Court will have a discretion as to whether or order that the claimant pay costs:
(i) the Court must be satisfied that the claimant has engaged in “an unreasonable act or omission”; and
(ii) the Court must be satisfied that the unreasonable act or omission caused the other party to incur costs;
d) The determination of whether or not the claimant has engaged in an unreasonable act or omission will depend on the particular circumstances of the case;
e) In determining whether a party acted unreasonably, it should be noted that there is a distinction between a party which pursues arguments which are ultimately abandoned or rejected, and one which prosecutes a case that is incompetent or insupportable;
f) Simply because a claimant does not conduct the litigation in the most efficient manner does not mean that their conduct is unreasonable; and
g) Given the purpose of the provision is to ensure whistleblowers are not deterred from bringing a matter to court by fear of an adverse costs order, the Court “should not too readily find conduct of a claimant to be unreasonable”. [7].
Looking at the plaintiff's conduct overall, Bowskill J was not satisfied that the plaintiff’s conduct “crossed the threshold into unreasonableness”, as this was the first strike-out application in the proceedings, and the plaintiff was entitled to advance the arguments his legal representatives saw fit to advance in defence of the pleading. [10]. While one aspect of the plaintiff’s defence of the strike-out applications “skates close to unreasonable”, her Honour was “reluctant to adopt an approach of dividing up particular issues, in determining whether, overall, the plaintiff engaged in an unreasonable act or omission”. [10]. Post-application conduct which did not result in the defendants incurring any extra costs, while itself unreasonable, did not cause the defendants to incur any costs. [11].
In the event, Bowskill J ordered that each party bear its own costs. [13].
M Paterson