The State of South Australia and the State Bank of South Australia v Peat Marwick & Co and Ors No. Scgrg-94-983 Judgment No. 6243 Number of Pages 13 Procedure Costs

[1997] SASC 6243

IN THE SUPREME COURT OF SOUTH AUSTRALIA

OLSSON, J

Procedure - costs - departing from the general rule - orders giving effect to reasons for decision published on 15 May 1997 in relation to strike out application - application to revoke directions order of 29 March 1997 and to permit an alternative pleading regime relying on computer technology refused - consideration of issue of costs - whether the costs ordered ought to be awarded on a party and party basis or an indemnity basis - whether costs awarded ought to be paid forthwith.

Australian Flight Test Services Pty Ltd v Minister for Industry, Service and Technology and Ors (Federal Court of Australia, O'Loughlin J, 3 May 1996, unreported); Thunderdome Racetiming and Scoring Pty Ltd and Another v Dorian Industries Pty Ltd and Another (1992) 36 FCR 297; Navellan Pools Pty Ltd and Ors v Compass Ceramic Composite Pty Ltd (Federal Court of Australia, Lehane J, 18 April 1996, unreported); Vasyli v AOL International Pty Ltd and Anor (Lehane J, 2 September 1996, unreported); Copping and Others v ANZ McCaughan and Another; Tillett Nominees Pty Ltd and Others, Third Parties (1994) 63 SASR
523; Cretazzo v Lombardi (1975)13 SASR 4; Queensland Wire Industries Pty Ltd v Broken Hill Co Ltd (1987) 78 ALR 407; Cummings v Lewis and Others (1993) 113 ALR 285; Singleton and Anor v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103; Jehovah's Witnesses v Pegasus Leasing and Anor (Olsson J, 24 December 1996 (judgment number 5968, unreported, available in SCALEplus); Colgate Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd
(1988) 81 ALR 397; Allstate Life Insurance Co and Ors v Australia and New Zealand Banking Group Limited and Ors (Federal Court of Australia, Full Court, 17 August 1995, unreported, available in SCALEplus); Bruce v Odhams Press Limited [1936] 1 RD 697, considered.

ADELAIDE, 27 June 1997 (hearing), 9 July 1997 (decision)

#DATE 9:7:1997

#ADD 23:7:1997

Appearances:

Plaintiffs:

Counsel: Mr J Wells QC with him Mr P Slattery, Mr J Blue and Mr B Jenner

Solicitors: Crown Solicitor

Defendants:

Counsel: Mr D Ryan with him Ms J Warner

Solicitors: Freehill Holllngdale & Page

Order:

OLSSON J

On 15 May 1997 I published my reasons for decision (judgment number 6129 - available in SCALEplus) ("the May decision") in relation to the defendants' application to strike out the Amended Formulation of Claim ("AFOC") filed by the plaintiffs in these proceedings. At that time I stood the matter over to enable the parties to consider the content of those reasons, with liberty to them to address me as to the form of the order which ought to be made to give effect to my conclusions; and as to what order should be made as to costs. Those aspects were fully canvassed by counsel on 27 June 1997.

At the same time submissions were made on behalf of the parties with regard to an application filed by the plaintiffs on 21 May 1997, in which, inter alia, they sought orders - 1. Revoking, ab initio, my order made in these proceedings on 29 March 1996 ("the directions order"); and

2. Granting leave to the plaintiffs to file and deliver a further amended statement of claim in lieu of the AFOC. For the purposes of these reasons I will employ the same terminology as was adopted in the May decision.

The present reasons are directed to the matters canvassed before me on 27 June 1997.

I will not recapitulate the detailed content of the May decision, which must be read in conjunction with these reasons. Suffice to say that it focused on the AFOC, which was filed and delivered pursuant to the directions order - an order which, in its final settled form, was consented to by the parties after careful consideration by them and thus never challenged on appeal.

As I pointed out in the May decision, the plaintiffs originally filed a massive and complex amended statement of claim ("ASOC") which was approximately 2600 pages in length. I took the view (from which I do not resile) that this, in its attempt to come to terms with the concepts of SCR
46, was, in practical terms, an unworkable document.

I here pause to say that, on several occasions in the course of submissions Mr Wells QC stated that I had conceded that I had never read that document. That statement, taken literally, is quite incorrect. What I indicated to the parties was that I did not read the 2600 pages in fine detail. I did, however, scan the document and am (and was) generally familiar with its contents.

In an attempt to provide a more practical pleading regime I made "the directions order", the relevant provisions of which were expressed as under - " 1.(a) That, pursuant to SCR 3.04, compliance by the parties with the provisions of the Supreme Court Rules as to the requirements for and form and filing of pleadings be dispensed with, to the intent that documents in the nature of pleadings shall be filed and delivered in this action only in accordance with directions of the Court given, from time to time, in that regard: provided that this order is not intended to abrogate the settled principles of law and practice of this Court related to content and mode of pleadings - save as is expressly stated in it or shall otherwise be directed by the Court.

(b) That compliance with such rules of Court as are inconsistent with this order or any directions from time to time given in this matter be dispensed with, pursuant to SCR 3.04, provided that, SCR 46.04(a), (b), (c), (d), (e) and (g) shall continue to apply, so far as relevant, to any document in the nature of a pleading herein or hereafter ordered to be filed and delivered.

2.(a) That the document entitled Amended Statement of Claim filed on 11 March, 1996 ("the Amended Statement of Claim"), which shall be taken for all purposes, to stand in lieu of the Statement of Claim filed herein on 30 June, 1994, do not stand as a pleading in this matter, but shall have the status hereafter referred to in this order.

(b) That the Amended Statement of Claim do, insofar as it contains assertions of fact, stand as

(i) an intimation to the defendants of facts and circumstances sought to be relied upon by the plaintiffs in the prosecution of their case and a basis upon which relevance of documents may be tested for the purposes of discovery; and

(ii) a statement of facts and circumstances which may, by way of particular specification in a separate document, conveniently be adopted and referred to as particulars of the plaintiffs' claim.

3. That, if, in addition to the matters specified in the memorandum forwarded to the trial Judge on or about 20 March 1996, the defendants contend that there are any other matters of substance which would have warranted a strike out order, or materially contributed to founding such an order, the defendants shall notify the plaintiffs of the general nature of such matters on or before 10 April, 1996.

4. That, within six weeks of the notification referred to in paragraph 3, the plaintiffs do file and deliver a formal instrument to be styled 'Plaintiffs' Formulation of Claim', setting forth in no greater detail than is requisite to give to the defendants fair notice of the case which they have to answer, a statement, without amplifying particulars, of the following matters -

(a) the bare material facts necessary to constitute the causes of action relied upon by the plaintiffs.

(b) the nature of the legal causes of action identifying specifically the material facts said to give rise to each cause of action and any statutory provisions sought to be relied on.

(c) the amount of damages, but not the precise particulars of computation thereof, claimed with respect to each cause of action and the footing upon which those damages are alleged to be recoverable upon such cause of action. Provided, however, that:

(i) the mode of drafting of the Plaintiffs' Formulation of Claim shall conform with the established principles of pleading, and

(ii) nothing contained in this paragraph shall be construed as limiting the right of the defendants to require of the plaintiffs reasonable particulars of the matters asserted therein, as hereinafter referred to." In prosecuting their application to rescind that order, Mr Wells QC, of senior counsel for the plaintiffs, declaimed that, given that they had consented to it, a perusal of the May decision indicated that there remained substantial uncertainty as to what were the plaintiffs' obligations pursuant to it. It was, he contended, an experiment that had failed. The order had "not achieved what was intended".

As I understood it, his proposition was that, to avoid these alleged uncertainties, it was preferable to revert to a situation in which the tried and true rules related to statements of claim should be adhered to; and that the plaintiffs ought to be entitled to file what he described as a "reworked" version of the 2600 page ASOC, on the basis that it would be accompanied by a supplementary document called a statement of issues derived from it, as well as a separate series of explanatory summaries of various facets or "themes" of the plaintiffs' claims, of the nature of those which were tendered by Mr Wells QC on the strike out application and are adverted to in the May decision.

Within such a proposed regime the defendants would, he said, merely be called upon to plead to the statement of issues. The plaintiffs would, he indicated, provide to the court computer technology with appropriate hypertext links to all of the three tiers of pleading documentation, to enable the resultant mass of material to be managed and navigated with relative ease, thereby rendering that process "workable".

The foregoing proposition was put forward on the implicit assumption that the "reworked" ASOC would probably be no less in size than the current version of it. It was also based on his assertion that "At the end of the day, we are embroiled in what is ultimately a dispute about form" - an assertion which would strongly indicate to me that the plaintiffs' advisers have failed to read and truly comprehend much of the May decision.

Indeed, a somewhat revealing statement was made by Mr Wells QC, in the course of his reply, to the effect that -

"AFOC is not, and never was, our primary plea. The plaintiffs pleaded its case ... in full in ASOC."

It must be said that such a statement also indicates a fundamental misunderstanding of the terms, intention and effect of the directions order, namely that ASOC was not to stand as any form of pleading - but was merely to serve as a data bank of particulars, to which short-hand reference might be made, as necessary.

In pursuing his submissions Mr Wells QC sought to amplify his assertion that the directions order was fraught with uncertainty, because it remained unclear as to what was intended to be the essential content of the AFOC, given that it was not to include "amplifying particulars". In this regard he drew attention to references in my reasons for decision concerning the absence in the AFOC of essential particulars (as referred to at page 4 of those reasons). He also complained of the use by me of the expressions "primary facts" and "secondary facts"; and said that these were expressions unknown to the plaintiffs' advisers. He spent some time on a semantic critique of the May decision and implied that it was inconsistent with the terms of the directions order.

It is not surprising that Mr Ryan, of counsel for the defendants, vehemently contended that there was no substance in the points sought to be made on behalf of the plaintiffs and that their application was, in substance, "a confession of failure by the plaintiffs" in relation to the proper pleading of their case. He argued that there was no room for misunderstanding the clear terms of the directions order and that this was yet another attempt to resurrect the ASOC to the status of a pleading when the directions order specifically denied it such a status. He referred to the contention of Mr Wells QC to the effect that the plaintiffs must be allowed to present their case as they wish; and went on to submit that the attempted resort to technology proposed by the plaintiffs simply sought to ignore the fundamental defects of substance in the mode of pleading sought to be adopted by them, as discussed in the May decision. To revert to the ASOC, reworked in some undefined fashion, would merely precipitate a further strike out application. That document was, he said, no less objectionable, in its form and substance, than the AFOC. Indeed, the AFOC merely mirrored the problems inherent in its progenitor - the ASOC.

Mr Ryan summarised his contentions by saying that the directions order did not, in any sense, set out to create some new and unique pleading regime, it simply contemplated the production of what he described as a "stand alone pleading complying with the rules and principles of pleading", with any desired amplifying particulars to be separately sought and given, if required. He went on - somewhat colourfully - to contend as follows -

"What this case has to do with is the ability or the inability of the plaintiffs to properly plead a case. If they can do so; good, it can be put into a computer programme, it can have such level of particularisation as they choose to give and we choose to ask, and it can be tied into all sorts of documents, and then the case can proceed. But step 1 in making jugged hare is to catch your hare. That's the one thing they haven't done. That hare's still jumping around the paddock with our learned friends running in all directions, and it's that inability which had led to this application, and not any objective problems with the case itself, or any objective problems the rules of pleading, or any objective problems with your Honour's orders." He said that the assertion that the parties were merely embroiled in a dispute about form merely served to indicate "a failure to understand" the May decision and the issues contended in it. Such a suggestion totally ignored the basis of the strike out.

Mr Ryan went on to refer to the recent report of Lander J proposing a review of the rules related to pleading. He made the points that - * the mere adoption of computer technology will do nothing to overcome what he described as a "prolix, uninformative confused pleading";

* the rule changes proposed by Lander J were designed to ensure that the pleadings in actions were designed to perform what have always been the basic functions of defining "with clarity the issues between the parties and ... to limit the evidence to be led at trial";

* the plaintiffs' proposal, if adopted, would "again leave the case in a totally amorphous state". This is, he said, the inevitable end result of the plaintiffs' technology proposal, which speaks of "developing themes" as the trial proceeds and moving to various levels in their desired three tiered pleading structure. In my opinion, to state the plaintiffs' present proposal is to indicate the preposterous nature of it. In essence, Mr Ryan's contentions are unerringly accurate.

I take as my commencement point the report by Lander J, to which counsel made reference.

In that report Lander J proposed a reversion to earlier concepts of pleading, in which a plaintiff was required to file and deliver a statement of claim which merely set out to plead - (1) the material facts necessary to constitute the relevant cause(s) of action relied upon;

(2) such material facts as are necessary to give other parties fair notice of the case which they have to answer; and

(3) the general nature of the legal causes of action and any statutory provisions to be relied on. Although not expressed in precisely those terms, it is plain, on a fair reading of it, that it was precisely that concept that the directions order sought to adopt. At the time at which the order was ultimately pronounced, it had been reviewed with care and settled by the parties. No-one remotely suggested that its meaning and intention were in any way obscure or ambiguous. The concept was clearly that adverted to in pages 32-35 inclusive of the May decision.

True it is that, in that decision, reference was made by me to primary and secondary facts, but this in no way qualified the fundamental concepts referred to above. I merely used those expressions to differentiate between what were primary narrative facts and what were relevant secondary facts alleged to arise (whether by way of inference or otherwise) from, and be established by, those primary facts - the totality of which constitute the material facts relied upon by the plaintiffs, either as constituting the relevant causes of action or which are necessary to give the defendants fair notice of the case to be answered.

It is equally true that, at page 4 of the reasons for decision, I made reference to "essential particulars", but I made it plain that I did so solely in the sense adverted to at page 34, adopting the point made by Scott LJ in Bruce v Odhams Press Limited [1936] 1 KB 697 at 712. I reiterate His Lordship's comment to the effect that there is sometimes a grey area in which it is well nigh impossible to distinguish between what is, technically, a "material fact" and what is a "particular" piece of information which it is necessary to give to a defendant in order to inform him of the case he has to meet.

When, in my order, I referred to the omission of "amplifying particulars" I was, of course, speaking of the typical SCR 46.20 type particulars which have, in practice, given rise to so much abuse.

As I have said on more than one previous occasion, there is no real doubt as to what was intended and what is now put forward concerning the directions order is, in my view, quite without logical or legal foundation. It really is a case in which there are none so blind as those who do not wish to see.

I agree with Mr Ryan that the problems which have arisen in this case are, for the most part, not matters of form and expression, but fundamental technical difficulties attendant on the manner in which the plaintiffs have sought to propound the core of their case.

It should be unnecessary to reiterate what has already been expressly spelt out in the directions order. The ASOC is not, by virtue of that order, the plaintiffs' primary, or any other form of, pleading. Its sole status is that conferred by paragraph 2 of the directions order.

Equally, the AFOC is stipulated by the order to be the plaintiffs' primary pleading in the action, to which the defendants will be required to plead in due course. It is to stand as the plaintiffs' statement of claim, for pleading purposes. It was simply given another name to distinguish it from the ASOC already filed.

Moreover, it ill behoves the plaintiffs to complain of the creation of uncertainty and confusion. If any proposal was ever intended to achieve that end result it must surely be the plaintiffs' so-called proposed three level structure consisting of a base statement of claim of inordinate length and complexity (not intended to be pleaded to), a statement of issues (intended to be pleaded to) and a series of expanded theme summaries (the status of which seems quite indeterminate). Such a proposal, if implemented, would constitute a parody of the principles of pleading discussed by Lander J and, essentially, embodied in the directions order.

The plain fact of the matter is that the plaintiffs are required to produce a properly crafted statement of claim satisfying what are basic pleading requirements stipulated in the directions order. If this is not done the defendants are placed in a hopeless situation in terms of defining legal and factual issues by their own pleading. They are simply not presented, in the relevant sense, with a proper statement of the case which they must meet. Moreover, the situation would be bereft of any proper and useful means of limiting evidence at the trial and making determinations as to relevance.

To assert, as the plaintiffs seek to do, that the 2600 page ASOC achieves the aim of the principles of pleadings is little short of ludicrous - the more so as it begs the question of how far it, when stripped of amplifying particulars and statements of what are little more than evidence, can withstand scrutiny in light of the conclusions expressed in the May decision. One need do no more than read the defendant's voluminous memorandum prepared in accordance with paragraph 3 of the directions order (see page 61 et seq of the defendant's "Materials for Hearing 27 June 1997") raising objections to ASOC to appreciate that point.

In the May decision I have gone to considerable lengths to indicate proper bases of pleading, provided that the plaintiff can tease out what are fairly arguable and properly articulated causes of action. I do not accept that a competent pleader will need to produce a document which seeks to compete with Tolstoy's War and Peace in length to achieve the requisite end result.

I, therefore, unhesitatingly, dismiss the plaintiffs' application to rescind the directions order. That order will stand and must be complied with.

To give effect to my reasons for decision I now pronounce the following orders - "1. That the AFOC be struck out.

2. That the plaintiffs' application filed on 3 March 1997 for leave to amend the AFOC be dismissed.

3. That the proceedings against the Fifth Defendant, Peat Marwick, be stayed until further order.

4. That the plaintiffs be at liberty, within sixteen weeks of this day, to file and deliver a further Formulation of Claim (to stand as its Statement of Claim) in conformity with the requirements of my order with directions dated 29 March 1996, such order to be construed in conformity with the reasons for decision published by me this day.

5. (1) That this action be dealt with pursuant to SCR 50.

(2) That the practice of the Court, as expressed in Supreme Court Rule 36.01, be modified, as far as it may be necessary to do so, so as to permit those persons said to be liable as partners in respect of any cause of action properly pleaded against them to be sued in the name of the firm of which they were partners at the time of any breach of duty alleged against them, from which any alleged cause of action is said to derive.

(3) That this paragraph shall operate nunc pro tunc as of the date of institution of this action.

(4) That, accordingly, pursuant to SCR 3.04(e) and all other enabling powers, any deficit in the form of those proceedings, related to the institution of such proceedings in the name of the present defendants, be and is hereby validated." There remains for consideration the vexed question of what order ought to be made concerning the costs of and incidental to the strike out application, including the issues the subject of the present reasons.

It is the defendant's contention that, in the circumstances of this case, special orders as to costs are warranted. They seek orders to the following effect - "1. (T)hat the plaintiffs pay the defendants' costs of and incidental to:

(a) the preparation of the document referred to in Order 3 of the Court's orders made on 29 March 1996, such document being that served on the plaintiffs on or about 9 April 1996;

(b) the consideration by the defendants of the Formulation of Claim filed and served on 17 June 1996;

(c) the drawing of the request for particulars of the Formulation of Claim served on 15 July 1996 and the consideration by the defendants of the response thereto by the plaintiffs served on 7 August 1996;

(d) the consideration by the defendants of the documents entitled Amended Formulation of Claim served on 17 September 1996, 16 October 1996, 4 November 1996 and 15 November 1996, save insofar as such costs have already been the subject of an Order by the Court;

(e) the application to strike out the Formulation of Claim filed on 12 September 1996, as amended from time to time and of the hearing thereof on and from 17 December 1996, including the hearing of the plaintiffs' application to further amend the Amended Formulation of Claim dated 3 March 1997, (but excluding therefrom the costs of and incidental to the defendants' application and submissions relating to arguments base upon abuse of the process of the Court in relation to which there will be no order as to costs);

on an indemnity basis.

2. (T)hat the said costs referred to in ...[1]... above be payable forthwith, in such sum as is agreed between the parties, or after taxation thereof." The plaintiffs contend that such orders are inappropriate. They argue that costs should be apportioned between the parties in relation to the issues decided, such costs ought to be on the normal party and party basis and that it is contrary to principle to direct that they be paid forthwith.

I will deal with those questions, successively, in that order.

It is trite to say that, as a general principle, a proper exercise of judicial discretion will normally lead to an order that costs follow the event; i.e., that a successful applicant in disputed proceedings will be awarded the whole of its costs of and incidental to that application (see SCR
101.02(1), read in light of Copping and Others v ANZ McCaughan and Another; Tillett Nominees Pty Ltd and Others, Third Parties (1994) 63 SASR 523 at 527-8 ("Copping")). However, as King CJ pointed out in Copping, that principle is by no means absolute and there, nevertheless, exists an "unfettered discretion of the judge to fashion the order for costs as he sees fit in the interests of justice" (see also Cretazzo v Lombardi (1975) 13 SASR 4 at 11 ("Cretazzo")).

It is also settled law that, in proper cases, the court may well be justified in considering the relative success of parties on specific issues, notwithstanding that, technically, the eventual outcome is that one party succeeds on a particular application. So much is apparent from Cretazzo at p 12, approved in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd
(1987) 78 ALR 407 at 418 and Cummings v Lewis and Others (1993) 113 ALR 285 at 327.

In considering the matter it must be borne in mind that the strike out application was based, in part, on what were asserted to be fundamental defects in pleading technique and, in part, on assertions that the AFOC sought to propound propositions which were not sustainable in law or which did not effectively sustain viable causes of action.

In the latter regards the defendants, in reality, sought to deal, in limine, with issues which would otherwise have surfaced at trial, in an endeavour, at this stage, to limit the asserted causes of action sought to be relied on. In the event, considerable time was occupied in canvassing some issues, particularly in the latter category, as to which the defendants did not succeed. These included aspects such as the principles related to causation and the scope of audit duties. Similarly the defence did not succeed as to the discrete issue of alleged abuse of process. Also certain of their contentions as to misleading and deceptive conduct and the effect of section 29 of the State Bank Act were not accepted. There were some discrete aspects of the attack on the pleadings as to which the defence submissions were not accepted. In their totality these matters occupied a not insubstantial amount of hearing time, although the bulk of hearing time did relate to issues as to which the defendants succeeded.

It is to be remembered that the application brought really constituted a series of discrete heads of attack on specific segments of the AFOC, each of which had to be resolved, separately, on their own merits. At the end of the day, these having been the subject of detailed findings, it was decided by me that the most convenient course was to strike out the AFOC and replace it with a new, redrafted pleading. However, this was not to suggest that the whole of the AFOC was defective.

In the course of submissions, competing arguments arose as to how the time occupied in dealing with various issues should be computed in relative empirical terms. I have studied the material put to me by the parties and conducted my own appraisal of the situation. It is quite impossible to arrive at other than a broad assessment, in a situation in which the parties themselves differ in estimate by over 100 per cent.

I am satisfied that, whilst the defendants substantially carried the day, the justice of the case demands that there be a set off against them in respect of certain issues on which the plaintiffs succeeded - as to which they ought to be entitled to costs against the defendants.

I do not pretend to absolute precision in the matter, for such precision is impractical. However, wielding the broad axe as best I can, I have concluded that the proper order is that, as a net situation, the plaintiffs must pay to the defendants 70 per cent of their costs of and incidental to the strike out application (to include the preparation of the document referred to in paragraph 3 of the directions order and work done incidental to it) and also of the plaintiffs' application dated 21 May 1997 to vary the lastmentioned order. In their proposed minutes of order the defendants refer to certain other work done. I regard this as work which would normally constitute costs in the cause generally, rather than costs which ought, specifically, to be dealt with by this order.

The question then arises as to whether the costs so ordered to be paid ought to be taxed as between party and party or on some other basis.

Despite what fell from Rogers CJ Comm D in Singleton and Anor v Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 103 at 105 (which, as I said in Jehovah's Witnesses v Pegasus Leasing and Anor (Olsson J, 24 December 1996 (Judt S5968), unreported ("Jehovah's Witnesses")) is somewhat difficult to align with other reported authorities), there cannot be any doubt that the general rule is that stated by Sheppard J in Colgate Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 -

"The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis ...". He there pointed out that some special or unusual feature must exist in relation to the litigation if the Court is to be justified in departing from the ordinary practice.

As I stressed in Jehovah's Witnesses the categories in which the discretion to award costs on some special basis may properly be exercised are not closed, although -

"It is usual to confine orders for indemnity costs to situations in which the court considers that it ought to mark its disapproval of inappropriate conduct on the part of the party ordered to pay costs. This may be either improper motive or conduct on the part of the party concerned, which has inevitably imposed an undue burden on the other party." That summation is not in discord with what was said by Sheppard J, on the same topic, in Colgate Palmolive.

In the instant case the defendants sought to found their asserted entitlement to an order for indemnity costs on what appear to be two broad bases.

First, it was, in effect, contended that, in various respects, the plaintiffs stubbornly persisted in propounding the AFOC as a valid pleading in full knowledge of the defendant's criticisms of it, when they must have realised that they had no chance of success in doing so. Moreover, it was said, the conduct of the plaintiffs in relation to the situation which has developed displays an "arrogance" which has precipitated the problems which have arisen, in a manner which ought to attract a special order as to costs.

In essence the defendants contend that -
* the AFOC "entirely failed to reflect" the directions order;
* the defendants repeatedly complained about the pleading deficiencies of the ASOC and supplied to the plaintiffs full written details of their concerns in accordance with paragraph 3 of the directions order and in later correspondence, but the plaintiffs largely ignored those criticisms and persisted with patently invalid pleading approaches. As to this the defendants assert -
* "the plaintiffs were afforded a unique opportunity, in order to abbreviate or dispense with the need for a lengthy hearing of a strike out application, of being told in advance what the problems with their pleading were. They simply ignored those criticisms and produced AFOC in its manifestly deficient form. In essence, the purpose of the 29 March 1996 orders was set at nought by the intransigence of the plaintiffs;"
* "a final opportunity for the plaintiffs to avoid inflicting the strike out hearing on the Court and the defendants was the filing in September 1996 of the defendants' application. Again, in an effort to promote a common sense and reasonable result the defendants were ordered to give detail of their attack upon the pleading in the application, and did so in considerable detail. Again, the plaintiffs simply ignored those criticisms and obdurately insisted upon fighting out the whole of the application. Indeed, on 17 September 1996, Counsel for the plaintiffs said that the plaintiffs had considered the application and the defendants' criticisms had 'absolutely no merit whatsoever';"
* "the judgment of the Court has vindicated the defendants' position. In essence this is a case where, had the plaintiffs either been properly advised, or accepted proper advice that may have been given, they would not have persisted in defending the indefensible in AFOC;"
* "a further, compounding, matter was the insistence upon a meaning of the 29 March 1996 orders which quite clearly flew in the face of both the words used in the Court's order and the spirit and intent of those orders. Such a view was persisted in at the hearing of the strike out application, notwithstanding the clearest indication from the Court well prior to that time that such an approach was misconceived, and notwithstanding that the plaintiffs formally abandoned an attempt to vary such orders in their application of 25 October 1996 (which was dismissed with costs on 13 November 1996). This attitude flowed into the hearing itself, to the extent that whilst not seeking to vary the orders governing the pleading, the plaintiffs sought to insist that they bore the meaning that they clearly did not. This attitude was that the AFOC was only intended to be a 'working document' that summarised the ASOC, rather than the 'old fashioned pleading' that the Court many times stressed it was to be. This attitude both led to an unreasonable resistance of criticisms of the pleading and to the extension of the time necessary for the hearing;" and

* the whole history of the case to date has been one of enormous instability and delay in relation to the pleading of the plaintiffs' claims, with the result that the defendants have been put to a very large amount of work, which has largely been wasted in terms of progressing the case towards trial. There is no doubt in my mind that the plaintiffs' advisers have been extremely intransigent at all stages, notwithstanding that they have had detailed advance particulars of the concerns and criticisms of the defendants. Not only have they steadfastly refused to acknowledge the validity of those criticisms, but also they have, in fact, continued to argue the unarguable - as evidenced by their application dated 21 May 1997. They have simply refused to accept either that the ASOC has been set aside as their primary pleading by the directions order, or that (like the AFOC) it was manifestly defective. Whilst it is true that some of the criticisms of the defendants have, ultimately, not been upheld, there can be no doubt that the plaintiffs have been quite obdurate concerning many aspects of what is a patently defective pleading. To that extent the dictum of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401, is apposite. He there said -

"... it is appropriate to consider awarding ... indemnity costs whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motives, or because of some wilful disregard of the known facts or the clearly established law."

In this regard there has, in large measure, been a stubborn refusal to acknowledge the obvious in relation to some, but not all, aspects of the defendants' criticisms - until very late in the hearing of the strike out application and, even then, only as to limited aspects.

Like Woodward J I consider that, whilst some special order as to costs is warranted, it ought not to be a blanket order, because the plaintiffs were justified in standing firm on certain specific matters. Moreover, I do not consider full indemnity costs to be appropriate.

I therefore propose to order that the proportion of costs payable by the plaintiffs to the defendants be computed on the basis of a taxation of those costs as between party and party up to 13 February 1997 and, thereafter, on the basis of a taxation as between solicitor and client. Once again this does not pretend to be other than a broad axe approach, designed to recognise, as best possible, the respective degrees of justification, or lack of it, of what actually transpired.

It remains only to consider the contention of the defendants that the plaintiffs ought to be directed to pay the costs awarded against them forthwith, upon the footing that it is clear that this litigation will not be finalised for some years and that, having incurred very substantial costs for no good reason, it would be unjust that they should have to bear the burden of those costs for a long period of time. (Cf. Allstate Life Insurance Co and Ors v Australia and New Zealand Banking Group Limited and Ors (Federal Court of Australia, Full Court, 17 August 1995, unreported).)

It is beyond question that the normal rule is that, where an order for costs is made on an interlocutory application, such costs are not to be taxed and paid until the principal proceedings are concluded. It is only in exceptional cases that the court will order taxation and payment forthwith (see Thunderdome Racetiming and Scoring Pty Ltd and Another v Dorian Industries Pty Ltd and Another (1992) 36 FCR 297; Navellan Pools Pty Ltd and Ors v Compass Ceramic Composite Pty Ltd (Lehane J, 18 April 1996, unreported)). This is because it would be "highly inconvenient and may be oppressive if, before proceedings are finally concluded, there is a series of taxations of costs of a series of interlocutory applications" (Vasyli v AOL International Pty Ltd and Anor (Lehane J, 2 September 1996, unreported)) and, dependent upon the outcome of the principal proceedings, it might well deny a successful party of the right of set off.

There is a clear onus on any party who seeks a departure from the general rule to establish that the justice of the case requires such a departure.

So far as I can determine the only instances in which such orders have been made are situations in which the costs relate, for all practical purposes, to discrete processes which are finally disposed of and would never again arise at trial. (See, for example, Australian Flight Test Services Pty Ltd v Minister for Industry, Science and Technology and Ors (O'Loughlin J, 3 May 1996, unreported).) That is not really the present situation. Further, there is force in the plaintiffs' point that, if they are substantially successful, it is most unlikely that the defendants will have the resources to meet the judgment against them in full and they stand in serious jeopardy of losing any right of set off to which they might become entitled.

In my view this is not a situation which warrants immediate taxation and payment and I decline to make such an order. On the contrary, I order that taxation and payment be stayed until such time as final judgment is pronounced in the proceedings, or until further order.

The order, as sealed and entered will record a certificate that the matters have been fit for counsel, including senior counsel. The parties will be at liberty to apply as they may be advised.

Both parties have made application for leave to appeal against various aspects of my conclusions set out in the May decision and have placed before me drafts of their proposed grounds of appeal. However, it seems to me that one or both of them may also wish to revise those grounds to include some aspects of my rulings set out above. I therefore propose, now, to make formal orders as envisaged in these reasons. The applications for leave to appeal will be adjourned for further consideration, in light of these reasons, until a time and date which I will appoint after hearing the parties. I will require appropriately updated draft grounds of appeal, if there is intended to be any variation of the grounds already submitted.