A recent Federal Court case highlights the importance of Commonwealth Government departments and agencies complying with the Legal Services Directions 2005 (Legal Services Directions) issued by the Commonwealth Attorney-General under section 55ZF of the Judiciary Act 1903 (Cth).

In Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited ACN 005 357 522 (No.2) [2010] FCA 567, the Federal Court ordered that the Australian Competition and Consumer Commission (ACCC) pay 80% of ANZ’s costs of and incidental to ANZ’s motion dated 13 July 2009 and the ACCC’s motion for leave to issue interrogatories made on 15 August 2009. One factor that the court took into account when making such a costs order was the extent to which the ACCC had failed to adhere to the model litigant obligations under Appendix B of the Legal Services Directions.

Background

On 16 March 2010, the court gave judgment in an application by ANZ in which it sought a direction that it was not obliged to provide verified answers to interrogatories in response to a notice administered by the ACCC. The notice was administered pursuant to an order granting leave under O 16 r 1 of the Federal Court Rules to file and serve a notice requiring answers to interrogatories directed to those matters described in the order.

The ACCC failed to issue its notice within the time limited by the order. As a result, at the hearing of ANZ’s application the ACCC sought a further order granting leave to deliver all the interrogatories the subject of the earlier order. On 16 March 2010, the court made orders granting the ACCC leave to issue and serve by 26 March 2010 a notice requiring ANZ to answer some but not all interrogatories.

The issue between the parties was who should be responsible for the costs of the interlocutory applications. The ACCC contended that each party should bear its own costs of and incidental to ANZ’s notice of motion filed on 13 July 2009 and of the further application for leave to deliver the interrogatories on the basis that each party achieved “mixed success” in their respective applications. Further, the ACCC contended that it had been substantially successful in obtaining further leave to deliver a range of interrogatories the subject of its application and in defending ANZ’s application for relief from answering the contested interrogatories as leave was granted to issue and serve 23 of the 98 contested questions contained within the set of interrogatories. In addition, the ACCC suggested that ANZ did not approach the task of answering the interrogatories “responsibly” consistent with the obligations described in Aspar Autobarn Co- Operative Society v Dovala Pty Ltd (1987) 16 FCR 284.

In response, ANZ contended that costs should follow the event barring special circumstances justifying some other order. It submitted that as it had been substantially successful and there were no special circumstances informing the exercise of the discretion, it should have its costs of and incidental to its motion dated 13 July 2009 and of the ACCC’s motion for leave to issue interrogatories made before the court on 15 August 2009. ANZ argued that it was successful in two respects. Firstly, it was successful in full in that it was not required to answer the interrogatories filed and served on 22 June 2009 and thus the ACCC was obliged to seek further leave to serve all of those interrogatories. Secondly, the ANZ said it was substantially successful in resisting the ACCC’s motion for leave to issue the 41 interrogatories comprising 98 questions in all.  

ANZ also argued that the ACCC was required to act as a model litigant and therefore it ought to have delivered the interrogatories within the time limit specified by the initial order, its failure to do so made a further application necessary and it ought to pay the costs of that application. In addition, ANZ contended that acting as a model litigant required the ACCC to discharge the chief obligations of the interrogator and frame the questions as clearly and concisely as possible and to ask only those questions that really required an answer in the particular case, that is to say, answers required having regard to the pleadings. In this regard, ANZ relied upon the observations of Refshauge J in Nelipa v Robertson [2009] ACTSC 16 at [97]:

“[I]t is not the function of the court to ensure compliance with the Directions or to become the disciplinary tribunal for alleged breaches. Nevertheless, it is clear that the obligation to act as a model litigant and the failure to act in that way can be a relevant factor in considering the appropriate order as to costs.”

Judgment

From the outset, Justice Greenwood noted that section 43(2) of the Federal Court of Australia Act 1976 (Cth) provides that “the award of costs is in the discretion of the Court or Judge”. He also noted the observations by Toohey J in Hughes v Western Australian Cricket Association & Ors [1986] FCA 382 that the discretion must be exercised judicially in light of various considerations. His Honour discussed the interrogatories, including the interconnection between them, and concluded that there were 74 questions rather than 98 questions asked and that ANZ’s objections were upheld in respect of 40 out of 74 questions. His Honour indicated that, on one view ([17]):

“each party has been successful to a significant degree in demonstrating that either a substantial number of the interrogatories were improper or demonstrating that a number of the interrogatories were proper and others might be sustained with the assistance of some degree of reformulation by the Court.”

However, his Honour noted that ([18]):

“the ACCC failed to comply with the earlier order and thus no obligation to answer any of the interrogatories arose in ANZ. It was quite entitled, as of right, to refuse to answer any of the interrogatories.”

It is here where ANZ’s argument in relation to the model litigant obligations under the Legal Services Directions became relevant.  

Justice Greenwood referred to the model litigant obligations in clause 2(a) of Appendix B to the Schedule to the Legal Services Directions, which provides:  

“2. The obligation to act as a model litigant requires that the Commonwealth and its agencies act honestly and fairly in handling claims and litigation brought by or against the Commonwealth or an agency by:  

(a) dealing with claims promptly and not causing unnecessary delay in the handling of claims and litigation.”  

His Honour found that a substantial number of the interrogatories which were delivered by the ACCC, and then the subject of the subsequent application for leave following its failure to deliver the interrogatories within time, contained a wide range of questions which amounted to 98 separate questions although, having regard to the interconnection factors, distilled to 74 questions. His Honour stated that ([22]):  

“A substantial number of those interrogatories were not framed as clearly and concisely as possible and were not simply directed to only those questions which really required an answer in the particular case having regard to the pleading which put in contest the number of matters which the ACCC sought to have conceded through the interrogatories.”

His Honour also stated that ANZ ([26]):

“might have responded in a more purposeful way by seeking to indicate as plainly as it could the matters it perceived each interrogatory to address and then suggest a way in which the information might be provided in a contained but balanced and proportional way.”

His Honour stated that ANZ could have answered a number of the interrogatories and that the ACCC was successful in respect of a number of the interrogatories. However, having considered the scope of the interrogatories, the consequential analysis they entailed and the challenge made to them by ANZ, his Honour found that ANZ was successful in the main on the matters of substance and ordered that the ACCC pay 80% of the costs of ANZ of and incidental to the applications.

Implications

As is evident from this case, it is important that Commonwealth departments and agencies comply with the model litigant obligations under the Legal Services Directions. A failure to do so is a relevant factor in considering the appropriate order as to costs. In this case, the ACCC’s failure to deliver the interrogatories within the time limited by the initial order was a factor that the court took into account in light of the requirement to deal with claims promptly and not cause unnecessary delay in the handling of claims and litigation. For this reason, it is important that Commonwealth departments and agencies comply with orders made by a court or tribunal and not cause any unnecessary delay in the conduct of litigation, otherwise it will be available to parties in litigation, or disputes involving the Commonwealth to raise any failure to do so as a relevant consideration in any costs application. This is an important decision for in-house lawyers in Commonwealth Government departments and agencies, as well as State and Territory departments and agencies where similar model litigant obligations exist, as well as external lawyers who act for such departments and agencies.