Reported Decision : (2002) 55 NSWLR 1 New South Wales Supreme Court CITATION : Fiduciary v Morningstar [2002] NSWSC 432 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 5308/01 HEARING DATE(S) : 16/04/02 JUDGMENT DATE : 21 May 2002 Fiduciary Limited - First Plaintiff Graham John Rich - Second Plaintiff Morningstar Research Pty Ltd - First Defendant PARTIES : Morningstar Inc - Second Defendant Joe Mansueto - Third Defendant Tao Huang - Fourth Defendant Donald James Phillips II - Fifth Defendant Bevin Desmond - Sixth Defendant JUDGMENT OF : Barrett J COUNSEL : Mr M.A. Jones - Plaintiffs Mr S.A. Goodman - Defendants SOLICITORS : Nash O'Neill Tomko - Plaintiffs Clayton Utz - Defendants CATCHWORDS : PROCEDURE - costs - jurisdiction to order that costs be payable forthwith - relevant factors considered LEGISLATION CITED : Corporations Act 2001 Supreme Court Rules Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (unreported, FCA, 18 August 1995) Bagley v Pinebelt Pty Ltd [2000] NSWSC 830 Charlie Brown Pty Ltd v Green (unreported, NSWSC, McLelland CJ in Eq, 3 July 1995) CASES CITED : Doran Constructions Pty Ltd v University of Newcastle (unreported, NSWSC, 16 December 1994) Gattellari v Meagher [1999] NSWSC 1279 Horrobin v Australia & New Zealand Banking Group Ltd (unreported, NSWCA, 6 June 1997) Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 DECISION : Costs payable forthwith - 7 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J TUESDAY, 21 MAY 2002 5308/01 – FIDUCIARY LIMITED & ANOR v MORNINGSTAR RESEARCH PTY LIMITED & ORS JUDGMENT 1 The substantive proceedings involve allegations by the first plaintiff, a shareholder of the first defendant, Morningstar Research Pty Limited ("the company"), of conduct in the affairs of the company which was oppressive, unfairly prejudicial or unfairly discriminatory in such a way as to warrant relief based on ss.232 and 233 of the Corporations Act 2001. There is one other shareholder in the company, namely, Morningstar Inc, an American corporation. It is, to a significant extent, conduct of Morningstar Inc and its officers in relation to the affairs of the company that is the subject of the claims by the first plaintiff. 2 On 23 November 2001, I heard an application by the plaintiffs for interlocutory relief by way of injunctions restraining the company from issuing shares to Morningstar Inc and restraining the company and other defendants from being party to actions culminating in the dismissal of the second plaintiff as managing director of the company. The plaintiffs' application for this interlocutory relief was dismissed with costs. 3 On 16 April 2002, I heard an application by the defendants for an order that the costs of the proceedings of 23 November 2001 be payable forthwith. Oral submissions were made by Mr Goodman of counsel for the defendants and Mr Jones of counsel for the plaintiffs. These supplemented written submissions which had previously been filed in accordance with directions made by me. 4 The submissions raise a preliminary question of construction concerning Part 52A rule 9 of the Supreme Court Rules, namely, whether rule 9(3) represents an exhaustive catalogue of the circumstances in which the court may order that costs be payable forthwith; or whether, on the other hand, the words "unless the court otherwise orders" in rule 9(1) are sufficient to preserve a discretion to make such an order in circumstances not within rule 9(3). 5 Rule (3) was added, with effect from 1 March 2000, by rules made by the Rules Committee on 20 December 1999. It was part of a collection of measures the object of which was stated to be "to make it clear that the overriding purpose of the rules is to facilitate the just, quick and cheap resolution of the real issues in civil proceedings." 6 The "unless the court otherwise orders" exception in rule 9(1) existed before rule 9(3) was added and was an acknowledged source of jurisdiction to order that costs be payable forthwith. That being so, I find it very difficult indeed to think that the new rule 9(3) was intended to cover the field in any restrictive way. The more likely intent, in my judgment, is that rule 9(3) would, by way of emphasis, identify particular circumstances intended to be within the discretionary power to depart from the principle that costs are payable at the conclusion of proceedings by ordering that they be payable forthwith. I see no basis on which it would be safe to assume that the "unless the court otherwise orders" qualification in rule 9(1) was confined by the introduction of rule 9(3) in such a way that it could no longer be the source of a separate and independent power to order that coasts be payable forthwith, that, clearly enough, having been the main form of exception to the general rule in sub-rule (1) for a considerable time, as is confirmed by the commentary on Part 52A rule 9 in Ritchie's Supreme Court Procedure NSW. 7 The debate about the effect, if any, of the introduction of rule 9(3) on the "unless the court otherwise orders" specification in rule 9(1) is, in any event, somewhat sterile. One of the circumstances in which rule 9(3) contemplates the making of an order that costs, or a specified amount on account of costs, be payable forthwith is where "it appears to the court that … justice otherwise demands it". That, it seems to me, is in the nature of a restatement of the guiding principle which would, in the ordinary course, be applied in determining, under rule 9(1), whether it is appropriate that the court "otherwise orders". In the end, the demands of justice are the only determinant, with the result that the possibility of conflict of some kind between the exception in rule 9(1) and rule 9(3) is one which can, in every practical sense, be disregarded. 8 That the demands of justice determine how an exception of the kind in rule 9(1) should be approached is borne out by the following observation of Olney J in Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297, a decision on the provision of the rules of the Federal Court similar to that in rule 9(1): "The rule does not suggest any particular criteria by which the court should be guided in approaching such an application, and accordingly I take the view that the discretion should be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule, namely, that an order for costs of an interlocutory proceeding should not entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded." 9 I might say that, for reasons which will be obvious in light of my comments about the interaction between rules 9(1) and 9(3) of Part 52A, I regard decisions on the Federal Court rule similar to this court's Part 52A rule 9(1) to be of assistance, despite the absence from the Federal Court rules of any equivalent of Part 52A rule 9(3). 10 It becomes necessary now to consider the factors which have caused courts to depart from the normal rule in Part 52A rule 9(1) that costs are payable at the conclusion of the proceedings. A convenient and useful starting point is the following passage in the judgment of Priestley JA in Horrobin v Australia & New Zealand Banking Group Ltd (unreported, NSWCA, 6 June 1997): "None of the cases is on all fours with the present one; indeed, a reading of them emphasises the need for cases to be considered by reference to their own particular facts. Nevertheless, those relied on by counsel for H and S show there is a tendency for costs orders to be made payable forthwith and without waiting for the conclusion of further proceedings when the proceedings in respect of which the costs orders have been made are regarded as sufficiently self-contained and detached or detachable from proceedings yet to be heard, whether between the same or associated parties, as to make it seem just for an actual payment to be made in the meantime." 11 This identifies the first recognisable category of case, namely, where the application or aspect in respect of which the particular costs order is made before conclusion of the proceedings represents the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect. Examples of this may be found in Charlie Brown Pty Ltd v Green (unreported, NSWSC, McLelland CJ in Eq, 3 July 1995) and Bagley v Pinebelt Pty Ltd [2000] NSWSC 830. 12 A second factor which may incline the court to order that costs be payable forthwith is some unreasonable conduct on the part of the party against whom costs have been ordered. That was a factor taken into account by Simpson J in Gattellari v Meagher [1999] NSWSC 1279, although, in the end, her Honour did not think that the particular conduct warranted such an order. 13 A third factor is, as it was put by Giles J in Doran Constructions Pty Ltd v University of Newcastle (unreported, NSWSC, 16 December 1994), that "there is much to come in the proceedings" and "one can see a fairly long time before the proceedings are disposed of". In Horrobin (above), the decision of Priestley JA to order that costs be payable forthwith was influenced to some extent by the fact that the controversy between the parties would run for at least a further year. In Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (unreported, FCA, 18 August 1995), Lindgren J said that it may be appropriate for greater use to be made of the analogous provision in the Federal Court Rules, "particularly in cases such as this one where the final determination of the proceedings is so far away". 14 The defendants who now seek an order that the costs awarded to them on 23 November 2001 be payable forthwith put forward several factors in support of their application. These really boil down to three central points. The first is that, on the view of matters taken by the defendants, the issue of the company's solvency (which really became, on the hearing of the application for interlocutory injunctions, the crucial issue in the balance of convenience) had been raised and flagged when the matter first came before Santow J as Duty Judge some three weeks earlier on 1 November 2001 and statements on that occasion by the plaintiffs' counsel were contrary to the defendants' understanding and led to costs being incurred in obtaining evidence which should not have been needed. 15 The second point the defendants make is that the plaintiffs served a "mountain of paper" in a very short period before the hearing on 23 November 2001, running to over 1,000 pages, of which some 600 were served after the close of business on 22 November 2001. The vast bulk of this was not relied upon by the plaintiffs at the hearing on the following day. 16 Third, there is the point that the hearing is still some time off. I have, as I believe is open to me, had regard to orders and directions made by the court since 23 November 2001 as disclosed by records of proceedings in the court's file. These show the following sequence of events after that date: · 6 December 2001: Directions that the proceedings proceed on pleadings; that the plaintiffs' statement of claim be filed and served by 25 January 2002; that defences and any cross-claims be filed and served by 8 March 2002. · 28 February 2002: Directions of 6 December 2001 vacated; directed in lieu that the plaintiffs' statement of claim be filed and served by 14 March 2002, that any request for particulars be served by 28 March 2002, that the response to any such request be served by 11 April 2002 and that defence and any cross claims be filed and served by 9 May 2002. · 19 March 2002: Statement of claim filed · 10 May 2002: Directions of 29 February 2002 vacated; directed that the defendants provide particulars by 31 May 2002 and that defence and any cross claims be filed and served by 26 July 2002. 17 No hearing dates have yet been fixed and I believe I may safely infer that the hearing will take place, at the earliest, late this year. 18 These timing factors indicate, to my mind, that the interlocutory hearing may be regarded as a separate and completed phase of the proceedings. After that hearing, there was a direction that the matter proceed on pleadings which, in a sense, involved a new beginning. The statement of claim pleading the claims of oppression and the like in full form was filed more than three months later. The defence and any cross claims are not due to be filed until more than two months from now. I think it is also fair to view this matter as one in which the defendants costs of the interlocutory application were abnormally increased by the service of very voluminous material at the last moment, the vast bulk of which was not referred to on that application. These factors, viewed in light of the likely timing of the final hearing – probably something of the order of a year after the interlocutory hearing – represents a sufficient reason, in the interests of justice, for departing from the general rule reflected by Part 52A rule 9(1). 19 I therefore order that the costs the subject of the order for costs made by me on 23 November 2001 be payable forthwith. ********** Last Modified: 05/22/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.