FEDERAL COURT OF AUSTRALIA Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus [2007] FCA 1878 MOTOR TRADES ASSOCIATION OF AUSTRALIA SUPERANNUATION FUND PTY LTD AND MTAA SUPERANNUATION FUND (DIRECTOR CO) PTY LTD v JOHN RICKUS AND AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY ACD 36 OF 2007 FLICK J 26 NOVEMBER 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY ACD 36 OF 2007 BETWEEN: MOTOR TRADES ASSOCIATION OF AUSTRALIA SUPERANNUATION FUND PTY LTD First Applicant MTAA SUPERANNUATION FUND (DIRECTOR CO) PTY LTD Second Applicant AND: JOHN RICKUS First Respondent AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY Second Respondent JUDGE: FLICK J DATE OF ORDER: 26 NOVEMBER 2007 WHERE MADE: SYDNEY THE COURT ORDERS: 1. The First Applicant to pay the taxed costs of the First Respondent forthwith pursuant to Federal Court Rules 1979 (Cth) O 62 r 3(1). 1. The costs of the First Respondent to be paid by the First Applicant on an indemnity basis. 1. The Application by the First Respondent to have those costs assessed by the Court as a gross sum pursuant to Federal Court Rules 1979 (Cth) O 62 r 4(2)(c) is refused. 1. The First Applicant to pay the costs of the Second Respondent. Those costs to be taxed or agreed. 1. Order 1, as made on 7 November 2007 granting leave to amend the existing Statement of Claim and Application, is revoked. 1. The Applicants to file and serve any Application for leave to amend the Amended Application and the Amended Statement of Claim on or before 14 December 2007. 1. The proceedings be stood over to 18 December 2007 at 9:30 am with a view to hearing any motion seeking leave to amend and for further directions. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY ACD 36 OF 2007 BETWEEN: MOTOR TRADES ASSOCIATION OF AUSTRALIA SUPERANNUATION FUND PTY LTD First Applicant MTAA SUPERANNUATION FUND (DIRECTOR CO) PTY LTD Second Applicant AND: JOHN RICKUS First Respondent AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY Second Respondent JUDGE: FLICK J DATE: 26 NOVEMBER 2007 PLACE: SYDNEY REASONS FOR JUDGMENT 1 In September 2007 the Applicants commenced proceedings seeking declaratory and other relief pursuant to the Corporations Act 2001 (Cth). 2 In summary form, it is contended that the First Respondent has improperly used information obtained because of his position as a director and chairman of the First Applicant, the Motor Trades Association of Australia Superannuation Fund Pty Ltd. The Second Applicant is the MTAA Superannuation Fund (Director Co) Pty Ltd. Relief is also claimed pursuant to the Trade Practices Act 1974 (Cth). Relief for contractual and other claims are also advanced. 3 The Motor Trades Association ('the Trustee') is the trustee of the Motor Trades Association of Australia Superannuation Fund. The First Respondent, Mr Rickus, is a former chairman and director of the Trustee. The board of directors of the Trustee resolved on 10 October 2006 to remove him as a chairman and to remove him as director as from 10 December 2006. 4 The Application and Statement of Claim were amended on 8 October 2007. One of the amendments made to the Statement of Claim was to add allegations concerning the provision to the Australian Prudential Regulation Authority ('APRA') of documents by Mr Rickus pursuant to a notice served upon him pursuant to s 255(1) of the Superannuation Industry (Supervision) Act 1993 (Cth). Mr Rickus, it was then contended, owed fiduciary duties to the Trustee, including a duty to keep the Trustee informed as to his dealings with the Authority and a breach of those duties. 5 On 9 October 2007 Gyles J ordered two questions to be separately determined pursuant to O 29 r 2 of the Federal Court Rules 1979 (Cth). Those separate questions were framed to raise for resolution the duties imposed upon the First Respondent to keep the Applicants informed as to his dealings with APRA. The urgency dictating an early hearing of those two questions arose because of the supervisory visit by APRA upon the Applicants scheduled to take place on 10 December 2007. The questions were to be heard in Canberra on 7 and 8 November 2007. 6 At the outset of those proceedings, APRA invoked its right to intervene conferred by s 320 of the Superannuation Industry (Supervision) Act 1993 (Cth). APRA, it should be noted, had previously filed a Notice of Motion on 17 October seeking to intervene pursuant to s 320 upon terms, one of those terms being that it would not seek costs from any party. Other than adding APRA as a party to the proceedings, there has to date been no resolution of the terms upon which it should hereafter participate in the proceedings. 7 Also at the outset of those proceedings, the Applicant sought leave to further amend the existing Amended Application and Amended Statement of Claim. The gist of those amendments was to abandon reliance upon fiduciary duties and to substitute reliance upon the status of the First Respondent as an agent. It was properly and correctly conceded by senior counsel on behalf of the Applicants that reliance upon the status of the First Respondent as a fiduciary was misplaced by reason of the decision of the High Court in Breen v Williams [1995] HCA 63, (1995) 186 CLR 71 at 113 per Gaudron and McHugh JJ. For reasons then given, leave was granted to further amend but it was further considered that the orders made by Gyles J on 9 October 2007 should be vacated. Indeed, those questions were framed by reference to the then state of the pleadings. Once the pleadings were amended and the conceptual basis for the duty altered, the questions as framed became inappropriate to answer. 8 Some time was taken on 7 November 2007 with a view to determining whether or not it was possible to formulate different questions pursuant to O 29 r 2. The power to order the separate determination of questions is a "procedure that should be adopted with caution and can be fraught with difficulties": see Save the Ridge v Cth [2005] FCAFC 203 at [15], 147 FCR 97. The pleadings as sought to be amended, it was considered, did not lend themselves to any immediate revision or amendment of the questions as formulated by Gyles J, nor was it considered appropriate to then formulate any different questions. The two days set aside accordingly could not be utilised. 9 The Applicants were ordered to pay the costs of the First Respondent but the question as to whether or not those costs should be paid on an indemnity basis, or an order made for what was then described as a "lump sum payment", or that costs should be paid forthwith, was reserved until today. The question as to whether the Applicants should pay the costs of APRA and, if so, on what basis was also reserved until today. 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. The position of the second respondent. 27 On 17 October 2007 APRA filed its Notice of Motion seeking to intervene in the proceedings. That Notice of Motion sought orders in the alternative. One order sought that APRA be "admitted to the proceedings as an intervener pursuant to s 320(1)". The alternative order was that leave be granted for it to intervene upon terms confining its role (in summary form) to those matters requiring the production of documents given to it by the First Respondent. Those orders in the alternative proposed a term that it not "lead or tender evidence or examine or cross-examine any witnesses without further leave of the court", and a term that it would not "seek costs from any party". 28 On 7 November, 2007 an order was made joining APRA as the Second Respondent to these proceedings. The order for joinder was made upon the basis that s 320 did confer a right upon APRA to intervene. Section 320(1) and (2) of the Superannuation Industry (Supervision) Act 1993 (Cth) provides as follows: (1) The Regulator may intervene in any proceeding relating to a matter arising under this Act. (2) If the Regulator intervenes in a proceeding referred to in subsection (1), the Regulator is taken to be a party to the proceeding and, subject to this Act, has all the rights, duties and liabilities of such a party. … Section 320 stands in contrast to other provisions which reserve unto the Court a discretion as to whether or not to grant leave to a party seeking to intervene, eg: Federal Court Rules, O 6 r 17(1). It may be noted that APRA having intervened in the proceedings thereafter "has all the rights, duties and liabilities" of a party. 29 When the order was made on 7 November 2007 there was then no debate or discussion as to the consequences of it having done so. One consequence which will have to be addressed is the role which it wishes to pursue in respect to the calling of evidence and the cross-examination of witnesses, in addition to those matters in respect of which it wishes to make submissions in the case brought by the Applicants against the First Respondent. These are matters which will have to be resolved. 30 It has also been foreshadowed today that an amendment will be sought to bring a case against the Second Respondent of a "public law" nature. That will remain the subject of future directions if the application is successful. The issue that must now be resolved is the entitlement of APRA to an order for costs. No application is made by APRA that its costs be paid on an indemnity basis or that an order be made that its costs be paid forthwith pursuant to O 62 r 3. 31 In the absence of any express restriction on an order for costs that may be made concerning intervention, s 43 of the Federal Court of Australia Act 1976 (Cth) applies: see O'Keefe Nominees v BP Australia (1995) 55 FCR 591. An intervener may in an appropriate case be granted an order for costs: see Mallina Holdings v Biala (Unreported, Federal Court of Australia, Carr J, 4 February 1997). Equally an order for costs may not be made against an intervener whose submissions have not prevailed: see Australian Industry Group v Automotive Food, Metals, Engineering, Printing, and Kindred Industries Union [2003] FCAFC 226. There is, however, no usual practice of ordering costs in an intervener's favour when the outcome of the proceeding accords with the arguments advanced by them: see Johnston v Cameron [2002] FCAFC 301 at [19]. 32 Statutory powers conferring rights to intervene in proceedings are not uncommon. Reference may thus be made to provisions such as s 18 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 78A of the Judiciary Act 1903 (Cth). Section 78A of the 1903 Act provide as follows. (1) The Attorney‑General of the Commonwealth may, on behalf of the Commonwealth, and the Attorney‑General of a State may, on behalf of the State, intervene in proceedings before the High Court or any other federal court or any court of a State or Territory, being proceedings that relate to a matter arising under the Constitution or involving its interpretation. (2) Where the Attorney‑General of the Commonwealth or of a State intervenes in proceedings in a court under this section, the court may, in the proceedings, make such order as to costs against the Commonwealth or the State, as the case may be, as the court thinks fit. When considering the terms of s 78A(2), Spender J observed in O'Keefe Nominees, supra at 595, that: …where there is intervention by an Attorney-General under that section, the court does not have power to order costs in favour of the intervening Attorney-General. Spender J further observed, citing Australian Postal Commission v Dao (No 2) (1986) 6 NSWLR 497, that s 78A(2) it was a provision: …introduced to protect litigants from having to pay increased costs as a result of intervention by the Attorney-General. 33 Unlike s 78A(2) of the Judiciary Act 1903 (Cth), s 320 of the 1993 Act contains no comparable limitation upon the power of the Court to exercise its discretion pursuant to s 43 of the Federal Court Act 1976 (Cth). 34 Although APRA has intervened in the proceedings and thereafter has all the rights, duties, and liabilities of a party, its interests are in no way the same as those of the other parties. An order as to costs either in its favour or against it must take into account the role it has assumed and its participation in the proceedings. If APRA's only legitimate interest is in the making of submissions, then any costs as may be awarded may be confined to the undertaking of that task. Its future participation in the current proceedings must await a consideration of the fate of any application for leave to further amend the existing pleadings. 35 In respect to the limited matter now before the Court, however, it is considered that APRA should be entitled to its costs of the aborted hearing of the resolution of the questions placed by Gyles J on 9 October. A notice had been served upon the First Respondent pursuant to s 255(1) of the Superannuation Industry (Supervision) Act 1993 (Cth). APRA, it is considered, had a legitimate interest in intervening and assisting the Court as to the obligations imposed upon persons to whom such notices had been given. Its interests, in respect to the resolution of those questions, were different to the interests of the First Respondent and it was entitled to be separately heard and represented. 36 Had the proceedings continued on 7 and 8 November, the Outline of Submissions as filed on behalf of APRA indicated that it intended to make submissions peculiar to its own interests. Although there may be no usual practice of the Court to make an order in favour of an intervener, it was the written submissions as filed on behalf of APRA on 26 October 2007 that first clearly pointed out to the First Applicant that the fiduciary duty sought to be relied upon was not a duty recognised in law. This was also a submission made by the First Respondent in its written outline of submissions dated 6 November and filed on 7 November. 37 It is assumed in the absence of explanation forthcoming from the First Applicant that the submission as made by APRA, reinforced as it subsequently was by the First Respondent, may have been instrumental in causing it to abandon its reliance upon any such duty. Whether or not the submission of APRA was influential in the approach pursued by the First Applicant, APRA was in the position on 7 November where it was seeking to intervene in proceedings and to make submissions. It had incurred costs. Its written Outline of Submissions may well have duplicated submissions more appropriately made by the First Respondent and, had the separate questions been heard on 7 and 8 October 2007, directions may have been made as to which party was to advance which submission. 38 However, the fact remains that APRA had a right to intervene in proceedings and incurred costs in preparation for a hearing during which it had a legitimate role to play which was separate and discrete from that of the other Respondents. Its participation would have been of assistance to the Court. It is entitled to its costs. ORDERS 39 The orders of the Court are: 1. The First Applicant to pay the taxed costs of the First Respondent forthwith pursuant to Federal Court Rules 1979 (Cth) O 62 r 3(1). 2. The costs of the First Respondent to be paid by the First Applicant on an indemnity basis. 3. The Application by the First Respondent to have those costs assessed by the Court as a gross sum pursuant to Federal Court Rules 1979 (Cth) O 62 r 4(2)(c) is refused. 4. The First Applicant to pay the costs of the Second Respondent. Those costs to be taxed or agreed. 5. Order 1, as made on 7 November 2007 granting leave to amend the existing Statement of Claim and Application, is revoked. 6. The Applicants to file and serve any Application for leave to amend the Amended Application and the Amended Statement of Claim on or before 14 December 2007. 7. The proceedings be stood over to 18 December 2007 at 9:30 am with a view to hearing any motion seeking leave to amend and for further directions. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. Associate: Dated: 19 December 2007 Counsel for the Applicant: Mr S Robb Counsel for the Respondent: Mr M Livesy Counsel for the Second Respondent Mr C Lenehan Date of Hearing: 26 November 2007 Date of Judgment: 26 November 2007