FEDERAL COURT OF AUSTRALIA

Cortis Exhaust Systems Pty Ltd v Kitten Software Pty Ltd [2000] FCA 491

COSTS – application for leave to file a further amended statement of claim – whether costs thrown away by the respondent should be taxed and paid immediately – whether respondent’s costs thrown away should be paid on an indemnity basis – where respondent would have financial difficulty in meeting new claims – where there has been considerable non-compliance with directions by the applicant

LIMITATION OF ACTIONS – application for leave to file a further amended statement of claim – whether a condition of leave should be that the respondent not be prejudiced by the expiry of any limitation period when filing a defence or cross claim.

PROCEDURE – stay of proceedings – application to file a further amended statement of claim – whether proceedings should be stayed until the costs thrown away by the respondent are paid – where respondent would have financial difficulty in meeting new claims

CORTIS EXHAUST SYSTEMS PTY LTD v

KITTEN SOFTWARE PTY LTD & OTHERS

NG 639 OF 1998

TAMBERLIN J

SYDNEY

30 MARCH 2000

REASONS FOR JUDGMENT

1                     This is an application to further amend the statement of claim in this matter, there having been a previous amended statement of claim filed in December 1999.  The original statement of claim and application were filed in the Court on 26 June 1998.  There have been a considerable number of directions hearings in the matter and considerable non compliance with many of those orders.  The case has had, in the hands of previous legal representatives, what I can only describe as a lamentable history of non-compliance.  The attention of the applicant was drawn at an early stage to the need for strict compliance because at one point directions were made subject to an automatic, self-executing order in relation to the dismissal of the proceedings.  This order was in fact activated, but there was an application by the applicant to the Court to vacate it and that indulgence was extended to the applicant.

2                     From that time onwards the applicant has been on clear notice, and the representatives of the applicant were also on clear notice, that there needed to be compliance with the orders.  This unfortunately has not occurred. 

3                     There has been a notice of change of solicitors filed by the applicant.  I note that there has been discovery of documents in this matter. A supplementary list of documents was filed on 23 September 1999 and I think it was indicated in argument that there was a further list of documents.  For the purposes of considering this application nothing turns on the question of discovery.

4                     So far as the application to amend is concerned, I am satisfied, having a regard to the statement of claim as originally filed and as amended by the amended statement of claim, in light of the proposed further amended statement of claim, that there remain substantial allegations which, properly formulated, could be raised by the applicant in this proceeding.  In those circumstances I think it is appropriate for the Court, having regard to the principles stated in State of Queensland v J L Holdings Pty Limited (1996) 141 ALR 353, to allow the very extensive amendments contained in the further proposed amended statement of claim.  This is on the basis that it is the interest of justice that claims, which on their face in the amended statement of claim appear to have some substance, be ventilated.  Accordingly I grant leave.

5                     The question which arises as a consequence is whether any order should be made in relation to costs thrown away?  It is quite obvious from the extent of the amendments that they are substantial and will require considerably more work to be carried out by the respondent.  This work would not have had to be carried out had the original statement of claim, or the amended statement of claim, proceeded to a hearing.

6                     I am not in a position, notwithstanding the affidavit of Mr Manning that has been filed, to fix any figure.  This is because the affidavit really outlines in an argumentative or assertive way the types of extra work and expenses that may be appropriate or necessary.  I think, at the end of the day, that the appropriate order to be made is that leave be granted to amend and that the applicant should pay any costs thrown away as a result of the amendments contained in the proposed further amended statement of claim.

7                     I would grant leave to the respondent to tax those costs forthwith and to pursue the order for costs after the taxation has taken place.  In saying that the costs should be taxed, I do not of course mean that they need necessarily be taxed by an officer of the Court but if the parties can agree, the question of taxation might be referred out to a taxing body or other entity.

8                     I have a concern that if leave is granted unconditionally the state of the pleadings may give rise to some prejudice to the respondents, arising from the expiry of a limitation period, in relation to the nature of any defence or cross claim which can be lodged.  For this reason I propose to make the grant of leave conditional on the non-assertion by the applicants of any limitation period should such an issue arise.  I would grant liberty to apply on seven days notice to both parties in relation to this matter should it eventuate.  It is important, in my view, that the parties should not be in any different position so far as the limitation period is concerned than that which they would have been under in relation to the original statement of claim.  In saying this I do not decide any question concerning the expiry of any limitation period under the Trade Practices Act 1974 (Cth) or otherwise.  That is a matter which may be raised for debate on the hearing of the matter.

9                     I have given considerable thought to the question of whether, in the light of the history of the matter, I should require that the costs be taxed on an indemnity basis.  I appreciate that the repeated non-compliance with Court orders was not caused by the applicant but I think it arose from the way in which the case was managed by, and proceeded under the hands of, previous legal advisers.  There have been a considerable number of cost orders made against the applicant, not so much for non-compliance by the applicant personally, but for a failure to observe directions given to the legal representatives in Court over the past two years. In these circumstances I am not satisfied that it is appropriate to visit the applicant with an indemnity cost order in relation to this matter.  It does happen, inevitably from time to time, that pleadings are further elaborated and the circumstance in this case, notwithstanding the non-compliance in the past, are not so exceptional that I should make an order that costs be paid on indemnity basis.

10                  Counsel for the respondent has suggested that I should impose a further condition of the grant of leave, that being a stay on the further progress of this matter until the costs are taxed and paid.  This is said to be due to the claimed financial impecuniosity of the respondent and the inability to proceed with the case unless funds are recovered after the taxation.  In my view there is considerable force in this submission.  There is no evidence to counter the respondent’s evidence that there is financial difficulty experienced by it, and indeed the probabilities are that there has been a considerable financial burden imposed upon the respondent as a consequence of the repeated non-compliance with directions, the vacation of the hearing, and the general conduct of the matter over the past two years.  Accordingly I think it is appropriate that there be a stay on any further steps being taken in this proceeding until costs have been determined as per my order, either by a taxing officer or by a taxation consultant, and paid to the respondent.

11                  Counsel for the respondent has also raised the question of costs in relation to the vacation of the hearing dates which had been fixed.  At the time this question was reserved.  This matter was raised at the last moment and I do not think it is fair to require the applicant to respond in relation to it.  However, if it is felt that there ought be a determination of this question then under the liberty to apply the parties can contact my Associate and arrange for the matter to be relisted to consider it, after both parties have had a chance to formulate their position more clearly on this aspect.

12                  Yet a further question has arisen in relation to the question of costs concerning the application before me today.  Having regard to the extent of the variations which have been made in the pleadings I expressed an initial concern as to whether the proposed further amended statement of claim was really an amendment or a fresh pleading.  I have been persuaded by the submissions of Ms Stuckey-Clarke that the changes amount to an amendment only, but these amendments are so substantial and so extensive that in my view it is appropriate that the costs of the application to amend should be borne by the applicant.  Accordingly I grant the application by counsel for the respondent for the costs of the application today.

13                  It is unfortunate that in a matter such as this, commenced almost two years ago, we are still at the stage of formulating a statement of claim and it will be necessary to file further pleadings and engage in further interlocutory proceedings such as discovery and the seeking of particulars.  Be that as it may, the overriding interest is in having the dispute between the parties properly and fully litigated and for that purpose it is appropriate that the matter proceed from here on in an expeditious and clear way.  I note that previous hearing days have been vacated as a result of the evidence not being ready.  That is unfortunate from the points of view of the Court and the parties, and is against the public interest.

14                  The orders that I make are those which I have formulated.  I direct the applicant to bring in draft Short Minutes reflecting these orders.  If the parties disagree in relation to the terms of the conditional order that I made regarding prejudice in relation to any amended defence or cross claim the matter can be relisted for hearing before me on that aspect on two days notice.  I reserve liberty to reply and those are the orders of the Court.

Associate:

Dated:              17 April 2000