FEDERAL COURT OF AUSTRALIA Abigroup Ltd v Network Asset Management Pty Ltd [2003] FCA 537 PRACTICE & PROCEDURE – costs – exercise of discretion – where notice of motion filed seeking various orders with respect to pleadings – where several directions and interlocutory hearings – no question of principle ABIGROUP LTD & ORS v NETWORK ASSET MANAGEMENT PTY LTD & ORS N1654 OF 2001 EMMETT J 11 APRIL 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N1654 OF 2001 BETWEEN: ABIGROUP LIMITED ACN 000358 467 FIRST APPLICANT ABIGROUP ASSET SERVICES PTY LIMITED ACN 081 540 847 SECOND APPLICANT ABIGROUP PROPERTIES PTY LIMITED ACN 002 153 068 THIRD APPLICANT ABIGROUP MANAGEMENT SERVICES PTY LIMITED ACN 000 304 745 FOURTH APPLICANT ABIGROUP MANAGEMENT & CONSULTANCY SERVICES PTY LIMITED ACN 000 948 092 FIFTH APPLICANT AND: NETWORK ASSET MANAGEMENT PTY LIMITED ACN 091 953 383 FIRST RESPONDENT CONFAM PTY LIMITED ACN 066 449 858 SECOND RESPONDENT FSC PTY LIMITED ACN 074 104 813 THIRD RESPONDENT LEESIDE CONSULTING PTY LIMITED ACN 087 564 305 FOURTH RESPONDENT STURZAKER QUEENSLAND PTY LIMITED ACN 095 681 628 FIFTH RESPONDENT STURZAKER PTY LIMITED ACN 052 351 167 SIXTH RESPONDENT STEPHEN ANDREW FRASER SEVENTH RESPONDENT JAMES FERGUSON CONNELLY EIGHTH RESPONDENT RICHARD NOEL DAVIES NINTH RESPONDENT GARRY SELLMAN TENTH RESPONDENT HORIZONTAL DD PTY LIMITED ACN 098 814 282 ELEVENTH RESPONDENT JUDGE: EMMETT J DATE OF ORDER: 11 APRIL 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. there be no order as to the cost of preparing and filing the notice of motion filed on 14 May 2002; 2. the applicants pay the costs of the fourth and ninth respondents ('the Moving Respondents') of and incidental to the hearings on 27 June 2002, 26 August 2002 except insofar as that hearing was concerned with the notices of motion filed by the Moving Respondents on 16 August 2002 and 11 October 2002; 3. the respective costs of the applicants and the Moving Respondents of and incidental to the hearings on 23 May 2002, 19 July 2002, 28 February 2003 and 11 April 2003 be those parties' costs of the proceeding; 4. there be no order as between the applicants and the Moving Respondents as to the costs of preparation and filing the affidavits of Eleanor Louise Padman, sworn 23 August 2002 and 25 February 2003. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N1654 OF 2001 BETWEEN: ABIGROUP LIMITED ACN 000358 467 FIRST APPLICANT ABIGROUP ASSET SERVICES PTY LIMITED ACN 081 540 847 SECOND APPLICANT ABIGROUP PROPERTIES PTY LIMITED ACN 002 153 068 THIRD APPLICANT ABIGROUP MANAGEMENT SERVICES PTY LIMITED ACN 000 304 745 FOURTH APPLICANT ABIGROUP MANAGEMENT & CONSULTANCY SERVICES PTY LIMITED ACN 000 948 092 FIFTH APPLICANT AND: NETWORK ASSET MANAGEMENT PTY LIMITED ACN 091 953 383 FIRST RESPONDENT CONFAM PTY LIMITED ACN 066 449 858 SECOND RESPONDENT FSC PTY LIMITED ACN 074 104 813 THIRD RESPONDENT LEESIDE CONSULTING PTY LIMITED ACN 087 564 305 FOURTH RESPONDENT STURZAKER QUEENSLAND PTY LIMITED ACN 095 681 628 FIFTH RESPONDENT STURZAKER PTY LIMITED ACN 052 351 167 SIXTH RESPONDENT STEPHEN ANDREW FRASER SEVENTH RESPONDENT JAMES FERGUSON CONNELLY EIGHTH RESPONDENT RICHARD NOEL DAVIES NINTH RESPONDENT GARRY SELLMAN TENTH RESPONDENT HORIZONTAL DD PTY LIMITED ACN 098 814 282 ELEVENTH RESPONDENT JUDGE: EMMETT J DATE: 11 APRIL 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I have before me an application for costs in respect of various hearings that have taken place before the Court and also the costs of a notice of motion filed on 14 May 2002. I begin by saying that it is most unfortunate that it has come to a state where virtually a whole day has been devoted to the question of who should pay costs of interlocutory applications, not to say the costs of written submissions that have been made in relation to the matter. Be that as it may, I will now give reasons for the way in which I propose to exercise my discretion in relation to the costs in question. 2 This proceeding was commenced on 20 December 2001 by application and statement of claim. The applicants seek damages, interest under s 51A of the Federal Court of Australia Act 1976 (Cth), equitable compensation, punitive damages, orders in respect of alleged infringement of copyright and orders for account in respect of funds alleged to have been misappropriated. 3 The fourth and ninth respondents filed their notice of motion on 14 May 2002 seeking, pursuant to O 11 r 16 of the Federal Court Rules, that the proceeding be struck out on the grounds that the claim constitutes an abuse of process of the Court, or, alternatively, pursuant to O 20 r 2, that the proceeding be dismissed on the grounds that the applicants had failed to disclose a reasonable cause of action. 4 The prayer in Order 1 of the notice of motion appears to be misconceived. It seeks an order that the proceeding be struck out. Order 11 r 16 does not authorise the striking-out of a proceeding but does authorise the striking-out of a pleading if one of the prerequisites of O 11, r 16(a), (b) or (c) is established. One of those prerequisites is that the pleading is an abuse of the process of the Court. The argument has proceeded on the basis that prayer 1 was in fact intended to raise a pleading issue and that prayer 2 was directed to summary dismissal. As I understand it, the intended contention was that the proceeding itself was an abuse of process, although, since that prayer has not been pressed, the matter has not been ventilated. 5 The return day for the motion was 27 May 2002. That date was chosen to coincide with the return day of a notice of motion filed previously on 9 May 2002. The solicitors for the applicants requested that there be no hearing on 27 May 2002 because they would not be ready in time for the hearing. The matter was, therefore, listed for directions on 23 May 2002, at the request of the applicants, to deal with that question. On that day I made orders that the hearing date of 27 May 2002 be vacated and that the motion be fixed for hearing on 7 June 2002. In so doing, I noted that there were outstanding requests for particulars and that it may be premature to deal with the motion until those particulars had been furnished. 6 On 3 June 2002, the fourth and ninth respondents wrote to the applicants' solicitors asserting that the statement of claim failed to comply with O 11 r 2(a) in that there was a failure to plead all the material facts upon which the applicants relied. On 5 June 2002, the applicants indicated to the fourth and ninth respondents that they would re-plead the matter. When the matter came before the Court again on 7 June 2002, orders were made that the applicants file and serve an amended statement of claim by 28 June 2002. The respondents were directed to inform the applicants by 17 July 2002 if they had any objections to the proposed amended statement of claim. A hearing date was fixed for 19 July 2002. 7 On 28 June 2002, the applicant's solicitors informed the fourth and ninth respondents that the amended statement of claim would not be filed in accordance with the order of 7 June 2002 but that it would be filed by 5 July 2002. The fourth and ninth respondents therefore made arrangements for the matter to be mentioned again on 5 July 2002 when orders were made extending the time for the service of the proposed amended statement of claim, up to and including that day. I ordered the applicants to pay the costs of that day. The proposed amended statement of claim was, in fact, served late on 5 July 2002. 8 On 15 July 2002, the fourth and ninth respondents wrote again to the applicants indicating that there were still objections to the proposed amended statement of claim. There was no hearing of substance on 19 July 2002 when the proceeding was stood over again for hearing on 26 August 2002. On that day, there was a substantive hearing when I made various rulings on objections raised to the form of statement of claim. The applicants were then given an opportunity to produce a further proposed amended statement of claim, no later than 25 September 2002, that reflected the rulings that I made in the course of that hearing. The proceeding was then stood over for further directions hearing on 4 October 2002. 9 On 1 October 2002, the applicants filed a further proposed amended statement of claim. By reason of the lateness of that service, the proposed directions hearing of 4 October 2002 was vacated and fixed for 11 October 2002. On that day, I made various orders including an order granting leave to the applicants to file the proposed further amended statement of claim that had been served on the fourth and ninth respondents on 1 October 2002. The notice of motion filed on 14 May 2002 was dismissed. Other directions were also given. 10 The proceeding was again before me for directions on 6 December 2002, when various procedural orders were made for the future conduct of the proceeding. The applicants submitted to an order that they pay the costs thrown away by the amended statement of claim. Questions arose as to the costs of the various hearings set out above, over and above the costs thrown away by the amendment of the statement of claim. 11 On 28 February 2003 and today, there were further directions and arguments concerning costs. In the meantime, the parties have prepared and exchanged written submissions concerning the appropriate orders for costs. I should also mention that shortly prior to the directions hearing of 26 August 2002, an affidavit of Eleanor Louise Padman, sworn 23 August 2002, was filed and served. A further affidavit by Ms Padman sworn 25 February 2003 was also filed and served on 26 February 2003. 12 As I understand it, the question presently before me is concerned with the costs of the motion of 14 May 2002, and of the various hearings to which I have referred. Prayer 2 of the notice of motion has not been pressed. It was supported by an affidavit, which was sworn, filed and served but that matter has not been pressed at all. As I have said, the prayer in Order 1 is misconceived in its language. I consider that it is appropriate that there be no order as to the costs of preparing and filing the notice of motion of 14 May 2002. 13 Nevertheless, it is clear enough that the motion was intended to raise pleading issues. The reference to O 11 r 16 makes that clear. In essence, the fourth and ninth respondents have achieved a measure of success in relation to the complaints that they made concerning the statement of claim as it stood as at 14 March 2002. That is not to say, however, that they are necessarily entitled to the costs of all of the hearings. Some of those hearings, it seems to me, are of a nature that one would normally expect in reasonably complicated litigation. I do not consider that it is appropriate that there be orders on an interlocutory basis in relation to directions hearings that might be said to be part of the management of the litigation. Rather, the costs of such hearings should be treated as the respective parties' costs of the proceeding. On the other hand, certain of the hearings would have been unnecessary but for the defective pleading in the statement of claim. 14 The hearing on 23 May 2002 is one that I would treat as a management hearing and, therefore, the parties' costs of and incidental to that hearing should be their respective costs in the proceeding. The parties agree that the costs of and incidental to the orders made on 19 July should be their respective costs in the proceeding. However, I consider that the costs of the fourth and ninth respondents of 7 June 2002, 26 August 2002 and 11 October 2002 should be paid by the applicants. Those hearings were occasioned by the deficiency in the applicants' pleading of their claim in the statement of claim and the consequent successive amendments to the statement of claim. 15 Ms Padman's affidavits were prepared and filed in response to a contention advanced on behalf of respondents, other than the fourth and ninth respondents, asserting an entitlement to indemnity costs and making a claim against the solicitors personally. I do not regard the costs of those affidavits as relating to the costs of the deficiencies in the pleading and I do not consider that it is appropriate that there be any order as to the cost of those affidavits as between the applicants and the fourth and ninth respondents. 16 The hearings on 28 February 2003 and today were concerned with the management of the proceeding. Certainly, today was necessary and other orders and directions were given and made today that affected other respondents. The same can be said of the proceeding on 28 February 2003. Both of those hearings should be treated as management hearings such that the parties' costs should be treated as their respective costs in the proceeding. I will have orders prepared that reflect that result. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 4 June 2003 Counsel for the Applicants: E A Collins Solicitor for the Applicants: Clayton Utz Counsel for the Fourth and Ninth Respondents: T J McLean Solicitor for the Fourth and Ninth Respondents: John Curtain & Associates Date of Hearing: 28 February, 11 April 2003 Date of Judgment: 11 April 2003