Case Note: Litigious warfare on a grand scale – Palmer v Citic Ltd [No 2] [2019] WASC 14 (S)

By Nathan Ebbs Michael Nas

12 April 2019

The indicative position of the Honourable Justice Kenneth Martin in Palmer v CITIC Ltd [No 2] [2019] WASC 14 to award costs in the cause for an interlocutory hearing, despite an unsuccessful outcome for one party, has been reinforced.

The prima facie costs position foreshadowed by his Honour in handing down a decision in relation to applications regarding the framing of a preliminary issue was subsequently challenged by the CITIC parties. They argued that the successful party should have received the costs of the applications, in accordance with the ‘ordinary rule’.

His Honour noted the unique nature of the dispute, and the nature in which the litigation had been conducted, which was described as “trenchant disputation… extending beyond more typical commercial disputes”.

Specifically, his Honour cited the “mind boggling” sums of money at issue in the litigation, and the absence of any “rational and sensible commercial approach to litigation” by the parties involved. In other words, this was “no usual situation of litigation as between rational and sensible corporate parties”.

His Honour stated that an order for costs in the cause was “fully appropriate” for the following reasons:

1. Although the ordinary rule is the “loser pays”, the question of costs is ultimately one of judicial discretion.
2. This dispute is particularly unique, concerning extensive and ongoing “litigious warfare” between the parties.
3. The costs order did not strain any of the parties’ resources, which costs his Honour considered to represent a mere “drop in the bucket” for the parties, assessed against the scale of the litigation.
4. Both parties failed to adopt a “sensible, rational and commercially co-operative” approach to their preliminary issue positions. Both parties also failed to agree to any underlying facts. Both parties were held accountable.
5. Most importantly, the significant stress on the Court’s limited resources that this dispute may cause (if heard at trial over 8 to 9 months in relation to all issues) was re-emphasised. His Honour stated that such an outcome would be a “completely disproportionate waste of resources” where the dispute essentially distilled down to the true meaning of one clause. The parties ought to have deployed a more co-operative effort to frame a preliminary issue in order to avoid that outcome. A costs order needs to meet the exigencies of a particular interlocutory scenario.

Central in his Honour’s reasoning was the need for adherence to principles of proportionality in litigation, and greater co-operation between parties to that end. The absence of rational co-operation between parties should be discouraged.

The Court may in future, as occurred here, utilise the “one small weapon in [its] arsenal” – the discretion as to costs – to address such scenarios.

The decision highlights the “attritional approach” taken by the parties involved and serves as a warning to parties planning to follow suit.

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