FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Cassimatis [2011] FCA 796

THE COURT ORDERS THAT:

1.    The respondents may tax and collect their costs of the interlocutory orders of 15 June 2011 forthwith.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

The application and its setting

1    This is an application for an order that the costs order made on 15 June 2011 be taxed and paid forthwith. Since that costs order was an interlocutory order, without an order to the effect sought, O 62 r 3(3) of the Federal Court Rules provides that the costs of proceedings are not to be taxed until the principal proceedings are concluded. It follows that the order sought involves an exception to the general principle applying to interlocutory costs orders.

2    It is appropriate to record at the outset that the costs order of 15 June 2011 was made on the second day of an application by the respondents to strike out the Australian Securities and Investments Commission’s (“ASIC”) amended statement of claim. Moreover, it came after ASIC was given leave to deliver a further amended statement of claim to address deficiencies in the amended statement of claim, which deficiencies were identified in written and oral submissions made for the purposes of that strike-out application.

The contentions

3    Mr Doyle SC for Mr and Mrs Cassimatis, the respondents, submitted that the particular circumstances of this case justify an exception being made under O 62 r 3(3). He relied upon a number of matters including the following:

(a)    As an arm of the Federal government, ASIC has considerable resources at its disposal. Therefore, if it has to pay these interlocutory costs forthwith, there is no risk it will be unable to prosecute these proceedings to a conclusion and it will therefore not suffer any prejudice in the conduct of the litigation.

(b)    The respondents gave ASIC notice of their complaints about the deficiencies in the original statement of claim soon after it was served. In response, ASIC obtained leave to file and serve an amended statement of claim. It took two months to do that, delivering its amended statement of claim on 21 April 2011. Now it has sought leave to file and serve a further amended statement of claim to remedy deficiencies that still exist in the amended statement of claim.

(c)    Because of this history, the pleadings are at an early stage and the trial of these proceedings, and therefore their ultimate conclusion, is still a long way off.

4    At this point it is appropriate to record that Mr Doyle initially sought to rely upon the financial hardship his clients would suffer if the order sought was not made. However, ultimately, he did not pursue that ground. In my view, that was well advised, because the material before me as to the state of Mr and Mrs Cassimatis’ finances is opaque, to say the least.

5    Mr Flanagan SC, for ASIC, opposed the order being made. He submitted that ASIC had dealt with many of the respondents’ complaints about the original statement of claim and the respondents’ remaining complaints essentially related to peripheral issues and not to the substantive allegations made in relation to their alleged breaches of s 180 of the Corporations Act 2001 (Cth). Furthermore, the amendments ASIC has made, and proposes to make, will serve to limit and clarify the issues in dispute in the proceedings such that the time and resources of the parties and the Court will not be wasted. He also submitted that the respondents had delayed in raising their complaints about the original statement of claim. He pointed out it was filed and served on 21 December 2010 and the respondents’ complaints about it were first made about two months later, in a letter dated 23 February 2011. Finally, he submitted it would be unfair if ASIC is ultimately successful in these proceedings and, because of the order sought, it has had to pay costs to the unsuccessful respondents.

6    In reply, Mr Doyle submitted that the respondents had not delayed in raising their complaints. He pointed to the fact that the Christmas/New Year period intervened and the respondents’ solicitors had served a notice to produce documents on the applicant’s solicitors, early in February 2011, as a precursor to its letter of complaint about the statement of claim. As to the suggestion that the respondents’ complaints were directed to peripheral issues, he submitted that most of the matters the respondents have identified involved preconditions to the alleged breaches of s 180 of the Act.

Consideration

7    In Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136; [2001] FCA 60, the Full Court (Heerey, Branson and Merkel JJ) described the policy behind O 62 r 3 as follows (at [37]):

The policy behind O 62, r 3 is that, in the ordinary course of litigation, costs awarded in interlocutory proceedings need not be paid until the conclusion of the proceeding when set-offs can be made in the light of the ultimate orders for costs. There is an access to justice aspect in this. Impecunious litigants who have a meritorious claim or defence should not be forced out of court because of inability to meet interlocutory costs orders.

8    As I have already observed, I do not consider the evidence before me establishes that Mr and Mrs Cassimatis are impecunious, or will suffer any relevant financial hardship if the order sought is not made. It follows that I do not consider this access to justice aspect arises in this matter.

9    Nonetheless, there are other authorities that identify situations where broader interests of justice considerations may provide justification for making an order of the kind sought. Those considerations and some of the situations where they may arise were summarised by Bennett J in Spotwire Pty Ltd v Visa International Service Association (No 2) [2004] FCA 571 (at [104] as follows:

•    The general principle is that costs ought to be resolved when the proceeding has been concluded and the rights of the parties have been finally determined. However, Order 62 rule 3(3) contemplates that, in certain circumstances, the general principle can be varied, as a matter of the court’s discretion.

•    The exercise of the discretion should only be exercised where the interests of justice in the particular case require a departure form the general practice.

•    The discretion should be exercised in favour or a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule.

•    One consideration is the length of time that the proceedings will conclude, in the ordinary course of events.

•    Where costs are sought in respect of a successful strike out application, the fact that the unsuccessful party failed to remedy defects despite clear notice of those defects, may make appropriate immediate taxation and payment.

•    Costs incurred by reason of an ill-considered pleading may give rise to an exception to the principle that the costs await the final resolution of the issues between the parties.

•    In ordinary circumstances, it would be inappropriate that an unsuccessful party in an interlocutory proceeding be required to pay costs immediately, since that party might ultimately be entitled to an order for costs in the substantive proceeding.

10    The ill-considered pleadings situation described by Bennett J has also been singled out in other decisions. It has been described as arising where: “an applicant has attempted a number of versions of the statement of claim with the result that additional directions hearings were necessary, which should not have been; interlocutory applications had to be brought; and, moreover, substantial delays were incurred in the attempt to plead a case”: All Services Australia Pty Ltd v Telstra Corporation Ltd (2000) 171 ALR 330; [2000] FCA 375 at [11] per Kiefel J; and: “In lengthy and complex cases where substantial costs have been thrown away as a result of ill-considered pleadings being drawn”: Airservices Australia Pty Ltd v Jeppesen Sanderson Inc [2006] FCA 906 per Graham J.

11    In my view, this situation has arisen in this case. ASIC is now on its third attempt to plead its statement of claim in these proceedings. Before its second attempt, the respondents gave detailed notice of the deficiencies they claimed existed in the original statement of claim. Furthermore, the third attempt, which is still in prospect, was allowed following a strike-out application, the exchange of detailed written submissions and the first day of oral submissions. While some of the proposed further amendments may have arisen from matters raised by the Court, that does not detract from the fact that they were matters that ASIC should have pleaded in its original statement of claim. Similarly, even if some of the respondents’ complaints are peripheral to the central issues in the proceedings, viz the alleged breaches of s 180 of the Act, if ASIC wished to rely upon those matters then they should have properly pleaded them at the outset.

12    Given that the original statement of claim was filed and served on 21 December 2010 and ASIC now has until mid-July 2011 to file and serve its further amended statement of claim, approximately seven months will have elapsed during which time ASIC has been attempting to put its pleadings into proper order. This, of course, assumes this third version of the statement of claim will achieve that. Furthermore, while that process has not involved any additional directions hearings, it has precipitated the respondents’ strike-out application which, as I have already observed, in turn brought about ASIC’s proposal to deliver the further amended statement of claim. I should add that, in this sense, I consider the respondents can be regarded as being substantially successful in that strike-out application. All of this means that the trial and conclusion of these proceedings are, as Mr Doyle submits, still “a very long way off”. In all these circumstances, I do not consider it is in the interests of justice that the respondents should have to wait whatever period of time elapses until these proceedings are concluded, to collect the costs they have incurred in this process to date. I am conscious of the fact that this order may deprive ASIC of a set-off in relation to these costs if it is ultimately successful. However, I consider this is one of those exceptional situations where the general principle about interlocutory costs orders should not apply.

Conclusion

13    For these reasons, I will order that the respondents may tax and collect their costs of the interlocutory orders of 15 June 2011 forthwith.

Associate:

Dated:    18 July 2011