THE POSITION OF THE FIRST RESPONDENT
10 It was accepted on behalf of the Applicants on 7 November 2007 that it was appropriate to make an order that they pay the costs of the First Respondent of and incidental to the vacation of the orders made by Gyles J of the two day hearing scheduled to then take place. The Applicants resisted, however, an order that those costs be paid on an indemnity basis in circumstances where it was contended that no notice had been given of the prospect of such an order being made.
11 Whether the absence of notice would have operated to delay considerations being given on 7 November 2007 to an order for indemnity costs may be left to one side. On that occasion it was the First Respondent that foreshadowed without notice that it was seeking an order for costs to be paid forthwith and possibly an order for the payment of a "lump sum" in order to avoid taxation. In the circumstances, no prejudice was suffered by any party in deferring the resolution of those matters concerning costs until today.
12 An order may be made for the payment of costs forthwith: see Federal Court Rules 1979 (Cth) O 62 r 3. That rule provides as follows:
(1) The Court may in any proceeding exercise its powers and discretions as to costs at any stage of the proceeding or after the conclusion of the proceeding.
(2) Where the Court makes an order in any proceeding for the payment of costs the Court may require that the costs be paid forthwith notwithstanding that the proceeding is not concluded.
(3) An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order.
13 The policy behind O 62 r 3 is that costs are normally paid at the conclusion of a hearing, but that the discretion conferred by O 62 r 3(2) is a discretion to be exercised in an appropriate case. In Bailey v Beagle Management [2001] FCA 60, 105 FCR 136 the Full Court made an order under O 62 r 3(2) that the costs of an application for leave to appeal against an interlocutory order be paid forthwith. In doing so, Heerey, Branson and Merkel JJ there observed:
[37] …We also think this an appropriate case for an order under O 62 r 3(2) that these costs be paid forthwith. The policy behind O 62 r 3 is that, in the ordinary course of litigation, costs awarded in interlocutory proceedings need not be paid until the conclusion of the proceeding when set-offs can be made in the light of the ultimate orders for costs. There is an access to justice aspect in this. Impecunious litigants who have a meritorious claim or defence should not be forced out of court because of inability to meet interlocutory costs orders. However applications for leave to appeal in interlocutory matters of practice and procedure stand on a different footing. There is a strong public policy against the proliferation of such applications, for the reasons given by Jordan CJ and endorsed by the High Court in Adam P Brown [Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170]…. The applicants in the present case having failed in this application, the respondents should not have to wait for a year or more before being paid.
14 By its written submissions the First Applicant accepts that an order should be made for the payment of the cost to the First Respondent forthwith pursuant to O 62 r 3(2). But for that concession, there may have been considerable argument as to whether or not such an order should now be made. The First Respondent would necessarily have had to incur some cost in preparation for the hearing of the preliminary questions proposed to be heard in October. The extent to which those costs have been thrown away by reason of the vacation of the orders made by Gyles J remains unknown.
15 There remains, however, a basis upon which the discretion can properly be exercised. The discretion may be exercised where, for example, costs have been incurred "as a result of ill-considered pleadings being drawn": see Airservices Australia v Jepperson [2006] FCA 906 at [31] per Graham J. See also Shahid v The Australasian College of Dermatologists [2006] FCA 414 at [5]-[6] per Nicholson J.
16 In the present proceedings the order is sought in respect to a discrete part of a rather complex case and where the identification of discrete questions was the very subject matter of the amendments effected on 8 October and abandoned on 1 November 2007. No fault can be attributed to the First Respondent. Moreover, the Applicants were put on notice no later than 26 October 2007 by APRA's written submissions that Breen v Williams [1995] HCA 63,186 CLR 71 stood in the way of the two questions posed by Gyles J being resolved in favour of the Applicants.
17 The discretion conferred by O 62 r 3 may be exercised in such circumstances: see All Services Australia v Telstra Corporation [2000] FCA 375, 171 ALR 330. Her Honour Kiefel J there observed:
[11] The making of an order under O 62 r 3 is justified where a Court can conclude that a party in whose favour costs orders have been made to date should not be required to wait until the finalisation of the proceedings to obtain payment of them. This may be so where, through no fault of that party, there has been substantial delay in the proceedings, having the effect of substantially postponing a final determination in the matter. This most commonly arises where an applicant has attempted a number of versions of the statement of claim with the result that additional directions hearings were necessary, which should not have been; interlocutory applications had to be brought; and, moreover, substantial delays were incurred in the attempt to plead a case…
18 There have been no substantial delays occasioned by the amendment on 8 October and the subsequent proposed abandonment of that claim on 1 November other than perhaps the intervening month. Indeed, the party most prejudiced by the most recent proposed amendment is the Trustee itself. It was the party seeking the assistance of the Court in resolving whether it was entitled to the information it sought prior to the 10 December 2007 visit by APRA. The price it paid for making the amendments it did in November rather than October was that such assistance could not be provided, but the absence of delay is but one of the factors to be considered.
19 When making an order for the payment of costs forthwith in circumstances where there is a proper basis upon which a discretion may be exercised, and where there is no opposition from the party against which an order is to be made, it is considered that an order should be made that the First Applicant pay the costs of the First Respondent forthwith.
20 The First Applicant, however, then seeks to rely upon such an order being made, together with other reasons, to resist an order that costs be paid on an indemnity basis. Those other reasons are said by the First Applicant to include the absence of any "special or unusual feature" of the present proceedings and the absence of any "delinquent conduct" on its part. The power of the Court to make such an order is not in doubt. Reliance is placed by the First Applicant upon the following summary of principles to be applied by Sheppard J in Colgate-Palmolive v Cussons (1993) 118 ALR 248 at 256-7:
In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. … there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule.
21 Although the discretion to order that costs be paid on an indemnity basis is a so‑called "absolute and unfettered discretion," it remains a discretion to be exercised judicially: see Australian Transport Insurance v Graeme Phillips Roads Transport Insurance (1986) 10 FCR 177. There must be "some special or unusual feature in a case to justify the court exercising its discretion in that way": see also Sony Computer Entertainment Australia v Dannoun (No 2) [2001] FCA 1530 at [4] per Lindgren J.
22 In PCRZ Investments v National Golf Holdings [2002] VSCA 24, Chernov JA usefully summarised the approach to the exercise of the discretion as follows (citations omitted):
[36] It is true that the categories of such circumstances are not closed. Nevertheless, the authorities indicate that, generally, the ordinary cost rule should only be departed from where the losing party has misconducted itself in relation to the proceeding or where the institution of the proceeding was plainly unreasonable, or where the proceeding was issued for an ulterior or collateral purpose.
Calloway and Buchanan JJA there agreed.
23 It is considered that the present case is one in which it is appropriate to make an order that costs be paid on an indemnity basis. The circumstances in which the First Applicant came to amend its Application in October 2007 and, thereafter in November 2007, abandoned reliance upon any asserted fiduciary duty remains unexplained. Also unexplained are the reasons why reliance was first sought to be placed upon fiduciary duty and then abandoned with little if any notice to the First Respondent in particular.
24 Considerable attention must necessarily have been given by the First Applicant to the manner in which it sought to advance its case when seeking the order pursuant to O 29 r 2 of the Federal Court Rules from Gyles J in October. Those seeking such an order must have recognised the procedure they were seeking to invoke was a procedure which "should be adopted with caution." Before making that application the First Applicant must necessarily have given detailed consideration to the facts to be alleged and the basis upon which any duty was to be characterised. In the absence of explanation, these factors are considered to be "special",and further, they present "unusual features" so as to attract the discretion to order indemnity costs. In the absence of explanation, reliance upon fiduciary duty was "plainly unreasonable."
25 It is not considered, however, that an order should be made assessing a "gross sum" pursuant to O 62 r 4(2)(c). The purpose of the rule is to avoid the expense, delay, and aggravation involved in protracted litigation arising out of taxation: see Beach Petroleum NL v Johnson (1995) 57 FCR 119 at 120. The power is appropriate to be used in complex cases but is a rule expressed in general terms and is not limited to cases of that type: see Sony Entertainment v Smith, [2005] FCA 228 at [189] per Jacobson J, 215 ALR 788.
26 In the present proceedings an estimate has been provided as to costs incurred by the First Respondent up to 7 November. Those costs are estimated at $92,956. A further sum of $8353 is the estimate for costs after 7 November and up to 26 November 2007. This estimate is taken from a letter written from those appearing for the First Respondent to the solicitors for the First Applicant. The letter contains little information as to how such costs have been calculated and does nothing other than to separately identify amounts of solicitors' fees, disbursements, and counsel's fees. If the discretion is to be exercised so that a "gross sum" may be assessed in order to avoid the expense, delay, and aggravation in having costs taxed, a more certain factual basis for the exercise for discretion must be provided.