FEDERAL COURT OF AUSTRALIA Sereika v Cardinal Financial Securities Ltd [2001] FCA 687 JOHN ANTHONY SEREIKA v CARDINAL FINANCIAL SECURITIES LIMITED (formerly INTEQ CUSTODIANS LIMITED), PHILLIP WASS, LYALL WILLIAMS, STEVEN SEREIKA, STAPLETON PARTNERS PTY LIMITED, COOPERS & LYBRAND SECURITIES LIMITED, AUSTRALIAN TEA TREE MANAGEMENT LIMITED, TEA TREE PLANTATION LIMITED AND FARM FINANCE AUSTRALIA LIMITED now known as LANDMARK FINANCE PTY LIMITED N 654 of 2000 TAMBERLIN J SYDNEY 4 JUNE 2001 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 654 OF 2000 BETWEEN: JOHN ANTHONY SEREIKA APPLICANT AND: CARDINAL FINANCIAL SECURITIES LIMITED Formerly INTEQ CUSTODIANS LIMITED (ACN 058 560 212) FIRST RESPONDENT PHILLIP WASS SECOND RESPONDENT LYALL WILLIAMS THIRD RESPONDENT STEVEN SEREIKA FOURTH RESPONDENT STAPLETON PARTNERS PTY LIMITED (ACN 051 887 748) FIFTH RESPONDENT COOPERS & LYBRAND (SECURITIES) LIMITED (ACN 003 311 617) SIXTH RESPONDENT AUSTRALIAN TEA TREE MANAGEMENT LIMITED (ACN 064 159 842) SEVENTH RESPONDENT TEA TREE PLANTATION LIMITED (ACN 175 869 402) EIGHTH RESPONDENT FARM FINANCE AUSTRALIA PTY LIMITED now known as LANDMARK FINANCE PTY LIMITED (ACN 076 073 017) NINTH RESPONDENT JUDGE: TAMBERLIN J DATE: 4 JUNE 2001 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 10 May 2001 the sixth respondent filed a Notice of Motion in this matter for orders in relation to the dismissal of the proceedings and, in the alternative, the stay of the proceedings until costs awarded in favour of the sixth respondent against the applicant are paid. As it transpired in view of the applicant having filed a Second Amended Application and Statement of Claim on Friday last, these claims were not pressed today as it was considered that an opportunity should be afforded to consider the terms of the Second Amended Application and Statement of Claim. In my view, this is the appropriate course. On the hearing the applicant foreshadowed further amendments having regard to certain omissions in the second set of amendments. 2 The question which remains for consideration on the Notice of Motion is whether an order for indemnity costs should be made and permission given to tax and pursue those costs forthwith pursuant to O 62 r 3 of the Federal Court Rules. In my judgment of 9 March 2001, in which I found the Amended Statement of Claim in this matter to be totally inadequate, I made comments on the substantial inadequacies in the Application and Statement of Claim as framed and concluded that, having regard to the nature and extent of the inadequacies in the pleadings outlined in the course of that judgment, no useful function could be made by amendment to that Application or Statement of Claim. 3 There having been no arguments addressed to me in relation to the question of the basis for costs, I made an order simply that the applicant should pay the costs of the Application. Now it is necessary for me to determine whether those costs should be determined on an indemnity basis and/or whether leave should be given to tax and pursue those costs forthwith. It was conceded in relation to the first Application and Statement of Claim, the original Application and Statement of Claim, that the pleadings and Application were completely inadequate. 4 Consequently, an amendment was made pursuant to leave of the court and this amendment was the subject of the reasons for judgment of 9 March 2001. It is of course settled law that indemnity costs will only be awarded in exceptional circumstances or where there is a special context, the normal rule being that costs are paid on a party to party basis. 5 In this case I am satisfied after hearing argument from counsel for the sixth respondent that, in relation to the Amended Statement of Claim in this matter which was considered in the judgment I have referred to, the costs should be paid on an indemnity basis. I think that, having re-examined the terms of that judgment, the findings were strongly and firmly that there were gross inadequacies in the way in which the Statement of Claim was pleaded and the Application was framed. 6 Accordingly, on that question I consider, having regard to well settled principles, that it is an appropriate case for indemnity costs to be awarded. 7 In relation to the second question, namely the application of O 62 of the Federal Court Rules, I have been directed to a number of authorities in this Court which indicate that the Court, in not dissimilar cases, has taken the view that not only should indemnity costs be awarded but also that leave should be granted to pursue those costs forthwith in the application of O 62. 8 I refer to the line of authority beginning with the judgment of Branson J in the case of Life Airbag Company of Australia Pty Limited v Life Airbag Company (New Zealand) Limited (22 May 1998, unreported). It is not apparent in that case whether costs were awarded on an indemnity basis but her Honour clearly indicated that she considered, in relation to an Application for Amendment, that it was appropriate that leave should be granted to pursue costs forthwith. 9 In particular, her Honour referred to a decision of Lindgren J, which has since been endorsed by other members of this Court, in the case of Allstate Life Insurance Co v Australia and New Zealand Banking Group Limited (No 14) (18 August 1995, unreported) where his Honour expressed the view that the provision of the Federal Court Rules allowing orders that costs be paid forthwith has been possibly under utilised. 10 In a subsequent case, Batten v CTMS Limited (1999) FCA 1576, which deals with repeated Amendments of Statements of Claim over a period of time, her Honour, Kiefel J, formed the view not only that costs should be awarded on an indemnity basis but they should be paid forthwith. In that case her Honour had been faced with a series of amendments over a considerable period in which the pleadings had proven to be inadequate. Her Honour refers to a number of other authorities relating to this question and I concur with the observations which her Honour made and the approach which was taken in that case. 11 The most recent case to which I have been referred is the decision of Weinberg J in McKeller v Container Terminal Management Services Limited (1999) FCA 1639 where his Honour followed the approach taken by Branson J and that taken by Kiefel J in Harris v Cigna Insurance Australia Limited & Dicke (1995) ATPR 41-445, where her Honour accepted that an order that certain costs be taxed and paid forthwith was justified in circumstances where there had been a long delay in the course of proceedings by the pursuit of an ill considered and unnecessary claim. 12 Her Honour said, in relation to the costs incurred by respondents in that case, that they are costs in reality thrown away and in respect of which, in her view, the demands of justice require departure from the general principle envisaged by O 62 r 3. The courts which have considered these matters have observed that there is a general rule that costs ought not be prima facie awarded in interlocutory proceedings so that they can be pursued prior to the final determination of the matter. 13 However, in many of these matters relating to amendments of which the present is one, the final hearing may be delayed for a considerable period of time. The present case could possibly extend over many months, if not more than one year. Accordingly, on the principles which have been laid down in the above cases, I am satisfied in the present case that it is appropriate the applicant pay the costs of the sixth respondent which have been thrown away as a result of the Amended Statement of Claim which was the subject of my judgment of 9 March 2001 on an indemnity basis and leave should be given to pursue these costs forthwith. 14 I should say that, although the Notice of Motion was filed on 10 May 2001, there has been no evidence filed on behalf of the applicant to suggest that any hardship would be caused or to support an argument that any other order is appropriate. On the hearing, however, the opposition to indemnity costs and the deferral of those costs until the hearing was strongly advanced by Mr Cameron who appeared on behalf of the applicant. Nevertheless, in these circumstances and having regard to the evidence which has been filed and to the principles set down in the cases, it is my view that the orders which I have foreshadowed should be made. 15 Accordingly, I order that the costs awarded in the judgment of 9 March 2001 which had been thrown away as a result of the Amended Application and the Amended Statement of Claim should be paid on an indemnity basis and I grant leave to the sixth respondent who has made the present Application to tax those costs pursuant to O 62 and to pursue their collection forthwith. I express no view as to the quantum of the costs although an estimate was made in the evidence as to the approximate quantum of the costs. That is a matter for the taxing officer if costs cannot be agreed. 16 In addition, the fifth respondent has appeared today and I can see no reason in principle why a similar order should not be made in relation to the costs of the fifth respondent. In relation to other respondents, no application has been made before me but it is clear that a similar principle should apply in respect of other respondents. However, there should be an application made in relation to those matters before I make an order in relation to respondents who are not present before me today. 17 I have given directions as to the filing of the Third Amended Application and Statement of Claim and that is to be filed by Wednesday 6 June 2001 at 1pm. That matter is stood over for directions to Friday 8 June 2001 at 9.30 am. 18 In relation to the first costs order, made in relation to costs thrown away as a result of the pleading in the original Application and Statement of Claim, I make orders under O 62 to the effect that those costs can be taxed forthwith and proceedings can be taken for recovery after taxation. 19 In case there is any doubt I make similar orders in relation to those which have been made above with respect to the fifth respondent as I have made in relation to the sixth respondent. 20 The costs which I have referred to above in relation to the Amended Statement of Claim and Application shall include the costs of the Application which has been heard before me today and I make similar orders in relation to the fifth respondent. 21 I formally grant leave to file a Third Amended Application and Statement of Claim in this matter by Wednesday 6 June 2001. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. Associate: Dated: 20 June 2001 Counsel for the Applicant: R W Cameron Solicitor for the Applicant: Dennis & Co Solicitor for the Fifth Respondent: K Gillingham Phillips Fox Counsel for the Sixth Respondent: D Williams Solicitor the Sixth Respondent: Anthony Deal Coudert Brothers Date of Hearing: 4 June 2001 Date of Judgment: 4 June 2001