Federal Court of Australia

Gemi Asset Management Pty Ltd v Australian Securities and Investments Commission [2026] FCA 1562

ORDERS

THE COURT ORDERS THAT:

1.    Each party bear its own costs of the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from the transcript)

LEE J:

A    INTRODUCTION

1    This is an application concerning costs. The substantive controversy between the parties has come to an end following the withdrawal by the Australian Securities and Investments Commission (ASIC) of a direction given to Gemi Asset Management Pty Ltd (Gemi) pursuant to s 912C(1) of the Corporations Act 2001 (Cth) (Act). What remains for determination is who should bear the costs incurred in the proceeding.

2    I have had the benefit of extensive written submissions from both parties, including submissions on costs settled by senior counsel on each side. I have further heard oral submissions for approximately one hour from senior counsel, accompanied by junior counsel, with three solicitors in Court. That is, to put it moderately, a somewhat unusual circumstance in a dispute now confined to costs and, as will become apparent, provides some illustration of one consideration which informs my approach to the exercise of the discretion.

3    Gemi contends that ASIC should pay its costs of the proceeding, including the costs of the present application. ASIC contends that there should be no order as to the costs of the proceeding and, additionally, seeks its costs of Gemi’s costs application.

4    The competing positions are developed at length in the written submissions, and I do not propose to rehearse them in detail. The world does not need another decision relating to costs. I will, however, make a few observations.

B    STATUTORY FRAMEWORK AND APPLICABLE PRINCIPLES

5    The jurisdiction to award costs is, as is well known, conferred by s 43(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). It was once commonplace to describe the discretion conferred by s 43 as unfettered. Whatever utility that expression may have had in conveying the width of the discretion, it requires qualification having regard to the statutory commands in Pt VB of the FCA Act: see Bellamy’s Australia Ltd v Basil [2019] FCAFC 147; (2019) 372 ALR 638 (at 645 [24] per Murphy, Gleeson and Lee JJ).

6    Section 37M(1) of the FCA Act provides:

The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:

(a)    according to law; and

(b)    as quickly, inexpensively and efficiently as possible.

7    Moreover, s 37M(2) provides that, without limiting the generality of subs (1), the overarching purpose includes the just determination of proceedings, the efficient use of judicial and administrative resources, the efficient disposal of the Court’s overall caseload, the disposal of proceedings in a timely manner and, importantly for present purposes, “the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute”.

8    Importantly, s 37M(3) requires the civil practice and procedure provisions to be interpreted and applied, and the powers conferred by them to be exercised, in the way which best promotes the overarching purpose. Section 37N(1) complements those provisions by requiring the parties to conduct a civil proceeding, including negotiations for settlement, in a way consistent with the overarching purpose.

9    These provisions are worth setting out because they have practical work to do. The actions of practitioners should match the rhetoric of seeking to resolve disputes consensually where that can be done and of invoking the time and attention of the Court only when it is appropriate and proportionate to the nature of the dispute.

10    Encouraging parties to resolve a controversy without the necessity for curial determination ordinarily advances the overarching purpose. Where a dispute has been brought to an end without a hearing, consideration of costs should not be approached in a way which provides an incentive for the parties to recreate, as a satellite controversy about costs, the very controversy which has ceased to require determination.

11    This brings me to Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622. At 624–625, McHugh J explained that, in an appropriate case, an order for costs may be made although there has been no hearing on the merits, but cautioned against determining a hypothetical action between the parties merely to resolve costs. To do so would burden the parties with the expense of the very litigation which settlement or extra-curial action could have avoided.

12    His Honour identified circumstances in which the position might be sufficiently clear to justify an order for costs. One is where a party has acted so unreasonably that the other party should obtain its costs (an example being an administrative law proceeding in which the respondent acted unreasonably in exercising or refusing to exercise a power and the applicant had no reasonable alternative but to commence litigation). Another is the comparatively unusual case in which, although both parties behaved reasonably, the Court is able to be confident that one party was almost certain to have succeeded had the matter been litigated.

13    McHugh J also dealt with the position in which neither conclusion is available. If both parties acted reasonably in commencing and defending the proceeding and their conduct remained reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the discretion will usually result in no order as to costs.

14    As may already be apparent, Gemi contends that its case falls within the exceptions identified. I was taken to a series of cases, all of which turn upon their particular circumstances and do not require explication. What matters for present purposes is that Gemi submits that ASIC’s conduct left it with no reasonable alternative but to commence the proceeding, that ASIC’s withdrawal of the direction was in substance a “capitulation”, and that Gemi was almost certain to have succeeded had the matter proceeded to a final hearing.

C    THE UNDERLYING DISPUTE

15    It is now necessary to turn briefly to the substance of the underlying dispute.

16    On 9 July 2026, ASIC issued a notice of direction pursuant to s 912C of the Act (July Direction). Among other things, it contained item 18, which required Gemi to: “Identify all legal advice received or considered by Gemi Asset” concerning four identified topics. Item 18 also required Gemi to identify other details, including the date of the advice, the persons who provided and received it, and the form in which it was provided.

17    On 16 July 2026, Gemi’s solicitors asserted that this aspect of the July Direction required Gemi to provide ASIC with information which, in effect, disclosed details of the existence and subject matter of legal advice within Gemi’s possession, power or control. Gemi objected to providing the information and invited ASIC to withdraw item 18.

18    On 17 July 2026, ASIC contended that item 18 did not require Gemi to disclose the contents of any legal advice and rejected the suggestion that the information had been sought for a collateral or improper purpose. Item 18 was not withdrawn at that stage.

19    On 24 July 2026, Gemi’s solicitors provided ASIC with a draft originating application for judicial review. They stated that, if ASIC did not withdraw the relevant items from the July Direction, they anticipated receiving instructions to file the draft application. They requested a response.

20    Six days later, following further correspondence in which ASIC again contended that item 18 did not require the disclosure of legal advice, ASIC indicated that it was prepared to withdraw item 18 and issue a reformulated direction under s 912C.

21    Then on 17 August 2026, ASIC issued the reformulated direction (August Direction). It is important to identify what the August Direction required.

22    The schedule to the August Direction contained the following definitions:

External Advice means any oral, electronic or written external advice, including accounting, corporate and/or legal advice, that was received by Gemi Asset in its capacity as trustee of the Gemi Principals Fund, Gemi Fund, Gemi First Fund, or Gemi Cash Fund.

…

External Advice Details means the following details of the External Advice:

1.    a communication or document ID number;

2.    the communication date;

3.    the title of the External Advice (if any);

4.    what the nature of the External Advice was (e.g. accounting, corporate and/or legal in nature);

5.    the form of the External Advice (oral, electronic or hard copy);

6.    the author of the External Advice including their position and employer;

7.    the recipients of the External Advice including their position and employer;

8.    the general subject matter of the External Advice;

9.    whether privilege is claimed over the External Advice (in whole or in part), and, if so:

9.1    the names of the person or persons asserting privilege;

9.2    the type of privilege claimed;

9.3    the basis for the claim;

9.4    the address at which the privileged communication is kept; and

9.5    if third-party privilege is claimed, why the document is in Gemi’s possession.

23    The written statement required by the August Direction was to state whether External Advice had been obtained between 24 April 2019 and 28 February 2025 and, if so, provide the External Advice Details by completing the prescribed table.

24    The August Direction was clearly broader than item 18 of the July Direction. It manifestly sought information concerning advice which could not conceivably be the subject of a claim for legal professional privilege. It also prescribed the details by which Gemi could properly specify any claim for legal professional privilege.

25    What then happened?

26    On 26 August 2026, some nine days after the August Direction was issued, Gemi’s solicitors sent correspondence asserting that the August Direction sought information concerning “accounting, corporate and/or legal advice … that was received by Gemi Asset … in its capacity as trustee” of various funds. The correspondence then set out a chronology which was said to give rise to serious and genuine concerns that the August Direction had been issued for an improper purpose and was otherwise oppressive. The improper purpose was said to be the obtaining of information whose provision would be inconsistent with Gemi maintaining legal professional privilege.

27    In this regard, and notwithstanding the terms of the schedule to the August Direction, senior counsel clarified that the information sought, if provided, might disclose the substance of the legal advice because its content could be inferred from the details provided.

D    COMMENCEMENT OF THE PROCEEDING AND WITHDRAWAL OF THE DIRECTION

28    The following day, without waiting for a response to the letter of 26 August 2026, Gemi commenced this proceeding. The letter had foreshadowed that Gemi’s solicitors anticipated receiving instructions to commence the proceeding and that the proceeding might be commenced “without further notice to ASIC”.

29    No undertaking was sought from ASIC that immediate compliance with the August Direction would not be required pending resolution of the proposed judicial review proceeding. Nor was ASIC otherwise afforded an opportunity to respond to the detailed letter before the proceeding was commenced.

30    In ordinary civil litigation, an applicant instituting a proceeding is required to file a genuine steps statement specifying the steps taken to resolve the issues in dispute. This proceeding, however, arose from the exercise of a power to compel a person to provide information under a law of the Commonwealth and was therefore an excluded proceeding for the purposes of s 15(1)(e) of the Civil Dispute Resolution Act 2011 (Cth).

31    After being served with the proceeding, ASIC did not press for immediate compliance with the August Direction. Evidence was adduced from the ASIC officer responsible for managing the investigation into Gemi and a related entity. That evidence explained that, on 3 September 2026, ASIC informed Gemi’s solicitors that it would withdraw the August Direction “to avoid the time and cost of dealing with the Application” and to permit ASIC to focus upon its substantive investigation. ASIC also invited Gemi to inform it, in an open letter, whether Gemi relied upon legal advice in relation to any particular matter concerning compliance with its obligations as the holder of an Australian financial services licence.

32    In those circumstances, the need for Gemi to pursue substantive relief was rendered otiose.

E    THREE RELEVANT POINTS

33    Several points ought to be made.

34    First, I am far from satisfied that it was anything like inevitable that Gemi would have succeeded in its judicial review application. As is evident from its terms, the August Direction sought information extending well beyond legal advice. Insofar as it sought information concerning legal advice, the schedule permitted Gemi to identify and specify any claim for privilege. Gemi’s case was that the history of the matter necessarily revealed that ASIC was motivated by an improper purpose in seeking to obtain information about the content or substance of legal advice. I do not suggest that this contention was unarguable or that it might not have been vindicated at a final hearing. But it was far from a lay-down misère.

35    Secondly, I was initially concerned that Gemi commenced the proceeding without waiting for a substantive response to its letter of 26 August 2026. Having reviewed all the material, however, I accept that Gemi had adopted a more conciliatory approach in July and that ASIC had been steadfast in maintaining the appropriateness of its course. Given that background, Gemi cannot properly be regarded as having acted unreasonably by commencing the proceeding when it did.

36    Thirdly, it is a considerable overstatement to submit that ASIC effectively “capitulated” or surrendered to Gemi. It is entirely rational that the collateral dispute concerning the August Direction was regarded by decision-makers within ASIC as something of a sideshow, given the other demands associated with conducting the substantive investigation. I would not infer that ASIC’s decision involved some road-to-Damascus realisation that the arguments it had maintained over a lengthy period were misconceived. In this regard, ASIC’s letter of 3 September 2026 expressly rejected Gemi’s grounds, maintained that the August Direction was “proper, reasonable and enforceable” and stated that it was being withdrawn “to avoid the time and cost of dealing with the Application”.

F    DISPOSITION

37    In short, I do not regard the conduct of either party as supplying a clear case of unreasonable conduct which would allow costs to be determined without investigating the merits of a dispute which has disappeared.

38    At bottom, Gemi commenced the proceeding seeking relief from the August Direction. ASIC then withdrew the August Direction and the substantive proceeding ceased to have utility. ASIC did not concede invalidity and, indeed, did precisely the opposite. On the other hand, Gemi obtained the practical result it sought, namely that it was no longer subject to the August Direction.

39    This brings me back to where I began. There is something decidedly unattractive about a costs dispute concerning a proceeding which did not require adjudication developing into a substantial contest which invites the Court to determine, albeit in abbreviated form, the very questions whose adjudication was avoided by the withdrawal of the impugned decision.

40    The point is illustrated by the course taken in this proceeding. As I have mentioned, both parties prepared detailed submissions settled by senior counsel addressing the merits sufficiently to invite findings concerning the reasonableness and legal effect of the August Direction, the operation of legal professional privilege, the likelihood of ultimate success and whether ASIC’s conduct amounted to capitulation. There comes a point, long passed in this case, at which the expenditure of further private and public resources upon the incidence of costs becomes disproportionate to the controversy.

41    The overarching purpose is advanced when parties take a sensible course which brings litigation to an end without requiring the Court to determine contested questions which have ceased to possess practical utility. It would tend in the opposite direction if a party contemplating such a course were encouraged to persist with unnecessary litigation for fear that withdrawal would later be treated, for costs purposes, as establishing that its position was legally untenable.

42    In circumstances such as these, Lai Qin provides the answer. I cannot conclude that ASIC acted so unreasonably that Gemi should receive its costs. I cannot conclude that Gemi was almost certain to succeed. Nor do I consider it appropriate to conduct the hypothetical judicial review necessary to reach either conclusion. The game is simply not worth the candle.

43    There remains ASIC’s submission that Gemi should pay its costs of the costs application. ASIC’s written submissions sought an order dismissing Gemi’s application and awarding ASIC “the costs of Gemi’s application”. To be frank, I did not take that submission seriously and this assessment is perhaps reflected in the fact that it was not developed orally. In language formerly familiar in industrial litigation, it might be described as something of an “ambit claim”. Gemi was entitled to seek an order for costs following withdrawal of the August Direction and had an arguable basis for doing so. ASIC was equally entitled to resist that application. I can see no sensible reason why the subsidiary contest about costs should itself produce a costs order.

44    Each party will therefore bear its own costs of the proceeding.

Associate:

Dated: 20 October 2026