Costs
102 I see no reasons why the respondents, who have been substantially successful on their motions, should not have their costs of them.
103 There remain outstanding some questions about costs in relation to earlier interlocutory proceedings. They concern earlier versions of the statement of claim, some of which were filed and a greater number of which were served, at least in draft. The history can be described relatively briefly.
104 Both respondents filed notices of motion seeking to strike out an amended statement of claim filed by the applicant on 24 August 1999. Femcare raised a constitutional point which was argued on 24 September, when the motions were initially set down for hearing. Both respondents also, however, contended that the amended statement of claim was seriously defective in a number of respects and did not plead a reasonable cause of action. In the event, only the constitutional point was argued on 24 September, other aspects of the motion being stood over to 13 October 1999. On 6 October 1999, I delivered judgment on the constitutional questions, declining to make declarations, sought by Femcare, that Pt IVA of the Federal Court Act was invalid and, in the alternative, that s 33J and s 33ZB of the Federal Court Act were invalid (Bright v Femcare Ltd (1999) 166 ALR 743; affirmed Femcare Ltd v Bright [2000] FCA 512).
105 By 13 October 1999, the applicant no longer sought to support the amended statement of claim, and when the respondents' motions came on for hearing on that day I ordered that it be struck out. I indicated also that I would order that the applicant pay to the respondents their costs of, occasioned by and thrown away in consequence of, the amendment of the statement of claim and successive proposed further amended drafts of the statement of claim, including correspondence between the parties as to the deficiencies claimed by the respondents to exist in relation to both documents. Both respondents submitted that those costs should be paid on an indemnity basis; should be taxed and paid forthwith; and should be paid by the applicant's legal advisers. I directed that written submissions be filed and served in relation to those matters. Each party filed and served submissions and I prepared reasons for judgment which I proposed to deliver on 16 November 1999. I was asked, however, and I agreed, not to deliver those reasons at that time or to make orders in consequence of them. The applicant filed further submissions, relying to a considerable extent on matters said to have been discussed between counsel. There matters rested, overtaken somewhat by more recent events. The applicant now submits that I should not make any orders in relation to costs (including the costs of those earlier motions) until I have heard further argument.
106 In the circumstances, it is appropriate that I give the parties an opportunity to make further submissions on costs. In a case where there have already been lengthy interlocutory proceedings, but nevertheless not a great deal of progress has been made, I think little purpose would be served by a reagitation at length of matters already fully canvassed. The further submissions made on behalf of the applicant after 16 November do not, of themselves, alter the views which I had already formed. In the rather unusual circumstances, I think it would be helpful if I were to set out, as representing my present tentative views, a substantial portion of the reasons which I had proposed to deliver on 16 November 1999:
"History
The applicant initially filed an application and statement of claim on 10 May 1999. It is unnecessary to say much of the first directions hearing which took place on 18 June 1999. There was some vigorous discussion, in the course of which the applicant's solicitor expressed what, in my view, were clearly unrealistic suggestions or expectations. Femcare, though not properly served with the applications and statement of claim, was represented by its solicitor. The matter was set down for further directions; I directed, among other things, that each party serve short minutes of the orders for which that party would contend.
On 8 July 1999, Femcare's solicitors wrote to the applicant's solicitors pointing out in some detail what they contended were deficiencies in the statement of claim. Endovasive informed the applicant that it supported Femcare's approach; its solicitors also sought detailed particulars of the statement of claim. The second directions hearing occurred on 13 July. The applicant's solicitor informed me that the applicant did not propose to file an amended application and statement of claim: she took the position that the statement of claim "sufficiently and adequately pleads the material facts" and that, in any event, the respondents were "well aware of the issues in the case". The respondents, particularly Femcare (then represented by senior counsel), made it clear that they maintained that the statement of claim was seriously defective and would, if it were not amended, seek to have it struck out. I directed, among other things, that not later than 3 August the applicant respond to the letter from Femcare's solicitors of 8 July and file such amended application and statement of claim as she may be advised.
The third directions hearing took place on 13 August. For the first time, the applicant was represented by senior counsel. The directions made on 13 July had not been complied with. Senior counsel for the applicant sought an extension of time to file an amended statement of claim. I directed that an amended statement of claim be filed and served not later than Monday, 23 August and that the applicant at the same time respond to the letter from Femcare's solicitors.
Copies of a proposed amended statement of claim were served on 24 August; the document, together with an amended application, was filed on 25 August. The response to the letter from Femcare's solicitors was brief:
'To the extent relevant and necessary, we are of the view that the issues raised in your letter dated 8 July 1999 have been addressed by the enclosed Amended Statement of Claim and Application.'
It is sufficient to say that they had not. So much the applicant has, at least implicitly, accepted, as the later history demonstrates. The next directions hearing was on 3 September. The respondents made it clear that they were by no means satisfied that the amended statement of claim was significantly less deficient than its predecessor. Directions were given for the filing of notices of motion together with evidence in support. The motions were to be returnable on 24 September. The respondents filed substantial submissions in support of their contentions that the amended statement of claim should be struck out. On 23 September, the applicant served on the respondents a proposed further amended statement of claim. Its form was significantly different from that of its predecessor which, on 24 September, senior counsel for the applicant made it clear he would no longer seek to support. Thus, substantial work had been done on a document which plainly would be superseded and (apart from the constitutional argument) the strike out motions could not have been dealt with on the day on which they were set down. In the event, the day was wholly occupied with argument on the constitutional question. The strike out motions were listed for further hearing on 13 October.
On 24 September, senior counsel for the applicant stated that the version of the statement of claim which he would seek to support was that which had been served the previous evening.
On 1 October, Femcare's solicitors spoke to the applicant's solicitors describing what they contended to be a number of deficiencies in that draft pleading. On 6 October, the applicant sought an adjournment of the hearing set down for 13 October; I refused the application but gave liberty to apply; no further application was made. On 11 October, a further proposed amended statement of claim was served; on 12 October, a further proposed amended application was served; on 13 October (in the hours before the hearing), a further proposed amended application and two successive further proposed amended statements of claim were served. When the matter came on for hearing, senior counsel for the applicant did not seek to file the then current proposed further amended statement of claim. Senior counsel for Femcare made a series of criticisms of it.
In view of that history I do not need to describe any of the successive pleadings, or proposed pleadings. There is no doubt that the first two versions were seriously deficient. The third version - that of 23 September - was a very significant improvement and, no doubt, successive versions have offered further improvements; but on 13 October, the applicant still had not arrived at a form of statement of claim to which her senior counsel was then prepared to commit.
Costs payable by legal advisers?
It was submitted that the preparation of pleadings is a matter clearly "within the purview of duties of the legal representatives", not a matter in which the lay client might be expected to play a part. Thus the applicant's lawyers should be regarded as responsible for what has happened and they, not she, should pay the costs. There can be no doubt about the jurisdiction of the Court to make an order of the kind sought: De Sousa v Minister for Immigration, Local Government and Ethnic Affairs (1993) 41 FCR 544; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 at 229‑231 (affirmed (1999) 163 ALR 744). But such an order is made only where the lawyers have committed a serious dereliction of duty (gross negligence may amount to such a dereliction): White at 230. I do not think it is established that what has happened here amounts to such a dereliction. There was a separate argument, on which both of the respondents relied. It was based on statements in Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 192, to the effect that costs might be awarded against a non‑party who played an active part in the conduct of litigation or had an interest in its subject matter where the party was insolvent or a "man of straw". Here, it was said, evidence relied on in another aspect of the proceeding indicated that the applicant was a person of small means and it might be inferred that her lawyers were acting on a contingency basis. That circumstance, together with the likelihood that the applicant would not be able to pay any costs awarded against her (at least, unless ultimately she was successful in the proceedings) made it just that the lawyers should pay the costs. I am not convinced, however, that the material before me is sufficient to enable me to draw the inference proposed, or even to establish that the applicant is a "person of straw", much less insolvent. In any event, I am by no means convinced that solicitors who act for persons of limited means should be made liable for costs in circumstances where no liability would attach to those whose clients are wealthy. In short, I do not think that this is an appropriate case in which to make an order for costs against legal advisers.
Indemnity costs?
The tests which the Court applies are well established: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at 401; Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 232‑234.
A particular application of the principles, in a case somewhat analogous to the present, was made by Goldberg J in Sammy Russo Supplies Pty Ltd v Australian Safeway Stores Pty Ltd (1998) ATPR 41‑641 at 41,098:
'In my opinion, an application of these principles to the circumstances of this case warrants an order for indemnity costs. Right from the start the applicants were put on notice of the deficiencies in the statement of claim. Each succeeding statement of claim did not cure the deficiencies and on each occasion the further statements of claim were propounded substantial reasons were advanced by the respondents as to why the pleading was deficient. The applicants could not help but have known of the problems they faced yet they persisted in propounding inadequate and deficient statements of claim.'
It is necessary, of course, to recognise that there are differences both of kind and of degree between cases and that it may be a mistake simply to apply a statement made with reference to particular pleadings and a particular history to another case which may appear to fit its literal terms. In my view the deficiencies identified in the original statement of claim were clear and serious; they were clearly brought to the applicant's attention; the applicant's first reaction was that nothing needed to be done. The applicant's second reaction was to file an amended statement of claim, after some delay, which plainly did not deal with the identified deficiencies. Nor did the applicant make any serious attempt to come to grips with the particular problems which the respondents had identified in some detail. The matter was allowed to reach the point where the respondents had prepared detailed submissions as to the defects in the amended statement of claim; and then, on the eve of the first hearing of the motions, a substantial proposed amendment was proffered. The failure to come to grips with what had been clearly pointed out and to do anything significant about it until the eve of the hearing necessarily had the result that substantial costs were incurred in circumstances where a significant portion of them need not have been incurred. That, I think, justifies an order at least that those costs incurred up to and including 23 September 1999 be paid on an indemnity basis.
I am inclined to think, however, though with some hesitation, that the test is not met in relation to costs incurred subsequently and that those costs should be payable on the ordinary party and party basis. The process by which the applicant has come to grips with the problems, particularly the issuing of a series of amendments and further amendments, is, at least, less than ideal: but it does not justify, I think, at this stage an order for indemnity costs.
Costs to be taxed and paid forthwith?
Goldberg J made such an order in Sammy Russo. There, as in this case up to 23 September, there had despite the clearest warnings been nothing approaching an adequate pleading. In effect, there, the real case would begin upon the filing of a new pleading as, in my view, here it may (depending on the fate of any further motions) be taken to have begun with the document of 23 September. There is, I think, no reason why, in circumstances such as those which have arisen in this case, the respondents should remain out‑of‑pocket, until the conclusion of the hearing, for substantial costs which they have incurred in the course of bringing the case to a position which, it may be hoped, is close to its proper starting point: see also Vasyli v AOL International Pty Ltd (Lehane J, 2 September 1996, unreported), where a similar course was taken in comparable circumstances.
Offset
Femcare failed in its constitutional argument and I have ordered that it pay the applicant's costs of that aspect of Femcare's motion. Senior counsel for Femcare accepted, in the course of argument, that those costs ought, if I should order immediate taxation and payment of its costs of other aspects of the motion, be offset against those costs. That would require that the applicant's costs of the constitutional question be taxed forthwith also. The position is, however, complicated by the pendency of an appeal, pursuant to leave, from my decision on the constitutional challenge. I shall hear counsel on the question of what orders, if any, can and should be made on that aspect of the matter."
107 Since those reasons were written, additional costs have been incurred in connection with the appeal to the Full Court (on the constitutional question) which was heard over three days in November 1999 and February 2000. The appeal was dismissed with costs. The position is further complicated by the circumstance that Femcare has applied to the High Court for special leave to appeal from the Full Court's decision. It was conceded on behalf of Femcare that the applicant was entitled to an offset, against any costs ordered to be taxed and paid forthwith, of costs payable to the applicant in relation to the constitutional question. But plainly, I think, it would not be appropriate to order the applicant's costs of the constitutional challenge be taxed and paid forthwith. Although Endovasive took no active part in the constitutional challenge, and therefore no question of offset arises as against it, my clear impression is that its costs in relation to the pleading issues are likely to be substantially less than those incurred by Femcare - even allowing for my tentative view that some of them should be paid on the indemnity basis. Overall, an appropriate course might be to make orders as contemplated in the draft reasons which I have quoted, except any order for the taxation and payment forthwith of any of the costs ordered to be paid by the applicant.
108 My view - again a tentative view, subject to further argument - is that the costs of the present motions should not be required to be paid other than on the usual party/party basis and at the conclusion of the proceedings. Although I have held the statement of claim to have been seriously deficient, the applicant succeeded, in the light of Philip Morris, on some points of principle which were argued, particularly on the degree of particularity with which, at the outset, it may be permissible to plead claims on behalf of represented parties. Those questions, on which the submissions in large part concentrated, were of some difficulty and had not, until the decision in Philip Morris, been the subject of any extended consideration, particularly by the Full Court.