Australian Securities and Investments Commission v Cassimatis

AND: EMMANUEL GEORGE CASSIMATIS First Respondent JULIE GLADYS CASSIMATIS Second Respondent

BETWEEN: EMMANUEL GEORGE CASSIMATIS First Appellant

AND: AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION Respondent

order made by: SARAH C DERRINGTON J DATE OF ORDER: 9 June 2023

1. The Interlocutory Application insofar as it relied on paragraphs 1(a)-(c) of the Application be dismissed.
2. The remainder of the application be listed for case management hearing on a date to be advised administratively.
3. The costs of the determination of the preliminary issues be reserved until the balance of the interlocutory application is concluded. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 This matter concerns extensive litigation, which over more than a decade, has been heard by several judges and been the subject of numerous interlocutory hearings, trial, an appeal to the Full Court, and an application for special leave to the High Court. It is neither practicable nor necessary to set out a detailed history of the matter in these reasons. 2 For present purposes, it is relevant that by the following orders made throughout the course of the litigation, the respondents were ordered to pay the Australian Securities & Investments Commission's (ASIC) costs: (a) Order 5 of the orders of Dowsett J, made on 29 March 2018, in proceeding number QUD574/2010 (Order 5 in QUD574/2010); (b) Order 4 of the orders of Dowsett, Rares and Barker JJ, made on 22 May 2014, in proceeding number QUD460/2013 (Order 4 in QUD460/2013); (c) Order 2 of the orders of Rangiah J, made on 20 November 2013, in proceeding number QUD709/2013 (Order 2 in QUD709/2013); and (d) Order 2 of the orders of Greenwood, Rares and Thawley JJ, made on 27 March 2020, in proceeding number QUD247/2018. 3 By its interlocutory application dated 4 November 2022, ASIC seeks orders that those costs orders be awarded in a lump sum of $2,047,516.31 pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth). ASIC also seeks an order that the respondents pay its costs of the interlocutory application fixed in the amount of $87,649.74. 4 By written submissions filed on 16 March 2023, the respondents raised several preliminary issues which are said to arise in relation to ASIC's application for lump sum costs. ASIC provided written submissions in response on 11 April 2023. 5 At a case management hearing on 12 May 2023, the parties consented to the determination of those preliminary issues by the Court on the papers in advance of any determination of ASIC's substantive application.

Preliminary Issues Raised by the Respondent 6 The respondents' contend this Court does not have power to determine ASIC's application. Three arguments are advanced by the respondents in support of that contention. The first jurisdictional issue alleged by the respondents is that Dowsett J had already determined an application by ASIC for lump sum costs of and incidental to the proceedings up to that date, such that this Court is functus officio. Secondly, the respondents say ASIC's application in relation to the costs order made by the Full Court on 27 March 2020 is incompetent, because it involves asking a single judge of the Court to revisit an order for costs made by the Full Court. Thirdly, the respondents allege ASIC's application was "too late", as any application for a lump sum costs order needed to be made within 6 weeks from the determination of any entitlement to costs. 7 The remaining preliminary issues raised by the respondents relate to the matters they allege must weigh against any exercise of the Court's discretion to grant ASIC's application. Those matters are: (a) ASIC's timing in bringing the application; (b) the alleged prejudice that was occasioned to the respondents by that timing; and (c) the next steps that should be taken to resolve ASIC's entitlement to costs.

Legislative Framework 8 Section 43(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) relevantly provides that the Court or a Judge has jurisdiction to award costs in all proceedings before the Court. 9 The Court's power to award costs on a lump sum basis arises by reason of s 43(3)(d) of the FCA Act and r 40.02(b) of the Rules. Rule 40.02 applies where a party "is entitled to costs", and lump sum costs may be ordered "instead of, or in addition to, any taxed costs". 10 A well-recognised purpose of r 40.02(b) is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (No 2) [1995] FCA 350; 57 FCR 119, 120 per von Doussa J (in respect of an earlier version of the Rules). This is especially so in circumstances where there has already been protracted litigation. 11 It is true that, in some circumstances, the Court has the power to make a lump sum costs order notwithstanding that costs orders have already been made which envisaged taxation in the ordinary way: Beach Petroleum. Several subsequent decisions of this Court have acknowledged that principle: see Dunstan v Seymour [2006] FCA 917 per Mansfield J; Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 7) [2018] FCA 1217 per McKerracher J. In Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2020] FCA 598, Bromwich J dealt with an interlocutory application as to whether costs already ordered to be paid by a Full Court "as assessed or agreed" should be awarded on an indemnity basis. 12 The question that arises is whether or not the present circumstances permit or justify the exercise of that power?

Is the Court functus officio? 13 The respondents contend Dowsett J has already determined an application by ASIC for lump sum costs in Australian Securities and Investments Commission v Cassimatis (No 9) [2018] FCA 385, in which proceedings, it is said, ASIC made detailed submissions in support of a fixed costs order, as opposed to a taxation. The respondents submitted that this Court is accordingly functus officio, and ASIC cannot seek a lump sum award in relation to the costs orders mentioned in [2(a)-(c)] above. 14 ASIC submitted "there are many decisions of the court that refer to the soundness of the principle that the court retains power under the Federal Court Rules 2011 to make a lump-sum costs order notwithstanding that an order has already been made that envisaged that costs would not be taxed". It referred in particular to Beach Petroleum at 120E; Dunston v Seymour [2006] FCA 917 at [7]-[8]; Hudson v Sigalla [2016] FCA 1204 at [27] and [33]. 15 Order 5 of the Orders made by Dowsett J in QUD574/2010 on 29 March 2018 is in the following terms: 5. the respondents pay the applicant's costs of and incidental to the proceedings, including costs of and incidental to the respondents' interlocutory application filed on 17 January 2017, save to the extent that any such costs have been dealt with in any other order, and excluding costs relating solely to one, or any combination of, the following issues: • the allegation of criminal conduct by Storm; • the allegation that Mr Bleckley, Mr Laymore, Mr and Mrs Sodegeld, Mr Jones and Mr McConnell were retail investors; • the allegation that Storm had contravened s 945A(1)(a); • the allegation that Storm had contravened s 1041E; and • the applicant's interlocutory application filed on 27 January 2017; (the "respondents' issues") 16 That Order contemplated within the "costs of and incidental to the proceedings" the inclusion of the Order 4 in QUD460/2013 and Order 2 in QUD709/2013 of the Interlocutory Application. So much is apparent from the Reasons in Cassimatis (No 9). In the Reasons, Dowsett J said: [139] [O]n 20 November 2013, Rangiah J gave leave to appeal, ordering that the costs of the application be the parties' costs in the appeal [Order 2 in QUD709/2013]. … The appeal was heard by the Full Court (Dowsett, Rares and Barker JJ) on 21 and 22 May 2014. … [141] The Court further ordered that: … • The costs of the appeal be costs in the proceeding below. 17 His Honour explained, at [154], that the meaning of that order is: [T]he costs of those interlocutory proceedings are to be awarded according to the final costs in the action. If the plaintiff wins, and gets an order for his costs, he gets those interlocutory costs as part of his costs of the action against the plaintiff. Vice versa, if the defendant wins and gets an order for his costs, he gets those interlocutory costs as part of his costs of the action against the plaintiff. 18 At [157], Dowsett concluded that it followed "that ASIC should have its costs of the appeal, including those of the application for an extension of time and leave to appeal, as part of its costs in the action as a whole", being the costs of the proceedings. 19 Ultimately, his Honour ordered, at [172], that the respondents should pay ASIC's costs of and incidental to the proceedings, save to the extent that any such costs had been dealt with in other order, and excluding costs relating to certain specified issues which are not presently relevant. 20 ASIC concluded its written Submissions on Penalty and Costs, dated 9 December 2016, in the following terms: 124. Given the potential complexity of the taxation of these various orders, and the consequent cost and delays caused by the taxation process, ASIC submits that all of the costs (including the costs which are the subject of the order which has been remitted for taxation) should be dealt with by way of gross sum costs orders. A gross sum costs order can be made notwithstanding that the normal process of taxation has already commenced. (Emphasis added.) 21 That concluding submission was arrived at having previously submitted: Gross sum costs orders 116. The discretion to award costs under s 43 is wide enough to permit the Court to make an order for payment of costs in a particular amount without taxation in the usual way. The Court also has the express power to make such an order under r 40.02(b) of the Federal Court Rules 2011. 117. The power is particularly suited to complex litigation where the costs, delay and inconvenience involved in taxation might be substantial. The purpose of such an award is to avoid an ongoing and counter-productive dispute as to costs in order to achieve finality, subject to the need to ensure that the amount of costs awarded is reasonable. 118. In determining whether it is appropriate to make a gross sum costs order, the Court may take into account its own observations of the proceedings, as well as its own experience. 22 The respondents' Submissions on Penalty and Costs, dated 17 January 2017, did not address the issue of whether or not costs should be awarded on a gross sum basis, rather than being subject to taxation. 23 It is clear from Dowsett J's reasons in Cassimatis (No 9), that his Honour considered ASIC's submissions that a gross sum costs order should be made, and rejected them. His Honour said, at [127]: ASIC, in its written submissions, concedes that it was not successful on all issues at trial but asserts that it should have its costs of the proceedings, save to the extent that costs orders have already been made. ASIC then submits that costs should be dealt with by an award in a particular amount, without taxation. However, it gives no indication as to how I might go about that exercise, particularly as it seems that even now, the parties find co-operation to be difficult. (Emphasis added.) 24 At [173], Dowsett J further stated: I see no reason for ordering that costs be taxed other than on a party and party basis. The respondents' application to the contrary appears to have been based on ASIC's rejection of their offers to settle. I have dealt with that matter. 25 It is tolerably clear from his Honour's reasons that he rejected ASIC's application for a lump sum costs order and considered it to be both necessary and appropriate that the costs be taxed on a party and party basis. 26 On publication of the Reasons on 22 March 2018, Dowsett J ordered that "within 7 days the parties provide agreed draft orders giving effect to these reasons." Presumably, it was that draft that formed the basis of the orders pronounced on 29 March 2018. It should not be inferred that, in preparing the formal orders, the parties would have done other than ensure the orders gave true effect to the Reasons. Had there been any lack of clarity as to the terms of Order 5, the parties could have availed themselves of rr 39.04 or 39.05 of the Rules to vary or set aside the orders before or after entry. They did not do so. 27 There is no doubt that the Court retains power to order that an earlier costs order be varied to provide the mode by which those costs are to be determined. A wide discretion is available to judges to award lump sum costs whenever the circumstances warrant it: LFDB v Ms S M (No 2) [2018] FCA 2062 at [6] per Markovic J quoting Su v Australian Fisheries Management Authority (No 3) [2008] FCA 2018 at [1] per Reeves J. However, that discretion cannot be exercised to vary or modify an order where the original power of the Court is spent. In circumstances where the mode of assessment of costs was the subject of argument before the Court, and so that issue has been determined on the merits, the power is spent. The Rules do not contemplate a further costs order being made in such circumstances, which would necessarily require Dowsett J's order to be vacated. 28 In my view, all questions of costs associate with the proceedings up to 29 March 2018, including Order 4 in QUD460/2013 and Order 2 in QUD709/2013, were disposed of by Order 5 in QUD574/2010. 29 Consequently, the Court cannot entertain ASIC's application in relation to the orders sought in paragraphs 1(a)-(c) of the Interlocutory Application.

Is the application incompetent? 30 The second jurisdictional issue raised by the respondents relates to the costs order made by the Full Court comprised of Greenwood, Rares and Thawley JJ on 27 March 2020 in Cassimatis v Australian Securities and Investment Commission [2020] FCAFC 52; 376 ALR 261. By this ground, the respondents submit this Court, constituted by a single Judge not sitting as the Full Court, cannot, or ought not, exercise the jurisdiction of the Full Court who heard the appeal and made the relevant order as to costs. 31 The respondents rely on s 25(1) of the FCA Act which provides that "the appellate jurisdiction of the Court shall, subject to this section and to the provisions of any other Act, be exercised by a Full Court". However, s 25(2B)(ab) expressly provides as follows: (2B) A single Judge (sitting in Chambers or in open court) or a Full Court may: … (ab) make an interlocutory order pending, or after, the determination of an appeal to the Court; … 32 ASIC's application plainly seeks interlocutory orders after the determination of the appeal. Whether ASIC's costs should be awarded in a lump sum is distinct from whether ASIC is entitled to costs, which was determined by the Full Court. 33 In Colgate-Palmolive, Bromwich J dealt with an interlocutory application that costs already ordered to be paid by a Full Court "as assessed or agreed" be awarded on an indemnity basis. Though his Honour did not consider indemnity costs to be appropriate, his Honour observed, at [3], by reference to s 25(2B)(ab) of the FCA Act, there was no dispute between the parties that he had jurisdiction to hear and determine the application. See also Mineralogy where McKerracher J granted an application for lump sum costs in relation to costs orders made by the Full Court. 34 The respondents' submissions as to the incompetency of the application in respect of the order sought in paragraph 1(d) of the Interlocutory Application are misconceived.

Is the application time barred? 35 The respondents contend that any application for a lump sum costs order must be made within six weeks from the determination of the costs entitlement. 36 As has already been explained, the Court is empowered to award costs on a lump sum basis: s 43(3)(d) of the FCA Act; r 40.02(b) of the Rules. Applications for lump sum costs orders are otherwise addressed by the Court's Costs Practice Note (GPN-Costs), which was issued on 25 October 2016. That Practice Note simply contemplates that, ordinarily, a costs hearing dealing with lump sum costs will take place within six weeks from the determination of the costs entitlement question. 37 Neither the Practice Note, nor the relevant provisions of the Rules or the FCA Act mandate the time in which an application for a lump sum costs order must be brought.

Discretionary considerations in respect of delay 38 ASIC is not precluded from bringing the application by reason of any alleged or actual delay on its part in doing so. Such delay may, however, be relevant to the exercise of the Court's discretion of whether to grant the orders sought on the hearing of the substantive application. The respondents point to the following matters in particular which they say should preclude the exercise of the discretion in favour of ASIC: (a) the inordinate and unexplained delay in bringing the present application; (b) the prejudice the delay has caused to the respondents in respect of their ability to retain legal representation; (c) the stress and anxiety sustained by the respondents; (d) the health issues suffered by Mr Cassimatis during the period of delay; (e) the lack of utility in the order given the respondents' impecuniosity; (f) the weakness of ASIC's evidence and speculative nature of its methodology; and (g) the fact that ASIC is not without a remedy; the orders permit ASIC to have their costs taxed. 39 There is little doubt that there has been a very long period between the dismissal of the respondents' application for special leave to appeal by the High Court on 5 August 2020 and the filing of the Interlocutory Application on 4 November 2022. It is not, however, entirely unexplained: Affidavit of Hugh Copley filed 11 April 2023 [8]-[24], [26]-[29]. Whether it evinces the level of diligence expected by s 37M and s 37N of the FCA Act is not a matter that needs to be determined for the purposes of determining the preliminary issues. It would certainly need to be considered on any subsequent hearing of the substantive application.

Disposition 40 For these reasons, ASIC cannot succeed in respect of the orders it seeks in paragraphs 1(a)-(c) of the Interlocutory Application. To that extent, its application must be dismissed. 41 ASIC is not, however, precluded from proceeding before a single judge in respect of the order sought in paragraph 1(d) of the Interlocutory Application, subject to the necessary amendment to the quantum sought. 42 The matter will be listed for a further case management hearing to progress the balance of the Interlocutory Application. 43 The costs of this determination of the preliminary issues should be reserved until the remaining matters of the Interlocutory Application have concluded. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Sarah C Derrington.