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ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd [No 2][2022] QSC 281

Reported at (2022) 12 QR 639

ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd [No 2][2022] QSC 281

Reported at (2022) 12 QR 639

SUPREME COURT OF QUEENSLAND

CITATION:

ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd & Ors; ANLP Pty Ltd atf AP Superannuation Fund v ISG Financial Services Ltd (No 2) [2022] QSC 281

PARTIES:

ISG FINANCIAL SERVICES LIMITED BS 10170/20

ACN 114 733 569

(plaintiff)

v

AUSTRALIAN FINANCIAL COMPLAINTS AUTHORITY LIMITED ACN 620 494 340

(first defendant)

ANLP PTY LTD AS TRUSTEE FOR AP SUPERANNUATION FUND

(second defendant)

GLENN BRESSOW

(third defendant)

YOGESH APTE

(fourth defendant)

AMBICA JHA

(fifth defendant)

WARREN LAW

(sixth defendant)

JAMIE SILVA

(seventh defendant)

BRESSOW PTY LTD ATF BRESSOW SUPER FUND

(first defendant by counterclaim)

YV & KY APTE PTY LTD ATF APTE FAMILY SUPER FUND

(second defendant by counterclaim)

A & P JHA PTY LTD ATF JHA FAMILY SUPER FUND

(third defendant by counterclaim)

W & S LAW PTY LTD ATF LAW FAMILY SUPER FUND

(fourth defendant by counterclaim)

J S SILVA PTY LTD ATF SILVA FAMILY SUPER FUND

(fifth defendant by counterclaim)

ANLP PTY LTD ACN 102 307 737 as BD 2152/20

trustee for the AP SUPERANNUATION FUND

(plaintiff)

v

ISG FINANCIAL SERVICES LIMITED

ACN 114 733 569

(defendant)

FILE NO/S:

BS 10170/20

BD 2152/20

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

15 December 2022

DELIVERED AT:

Brisbane

HEARING DATE:

Hearing on the papers; written submissions received on 2, 16, 27 and 28 September and 2 December 2022.

JUDGE:

Dalton J

ORDER:

  1. The plaintiff pay 90% of the first defendant’s costs of the proceeding (including the plaintiff’s claim and the first defendant’s counterclaims) and reserved costs if any, on a standard basis to be assessed or agreed.
  2. The plaintiff pay the second defendant’s costs of and incidental to the District Court proceeding BD 2152/20 up to and including 8 September 2021 on a standard basis to be assessed or agreed.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – COSTS FOLLOW EVENT – OTHER PARTICULAR CASES AND MATTERS – where judgment largely in favour of the Australian Financial Complaints Authority (AFCA) and wholly in favour of the second defendant at trial – where the plaintiff seeks an order that there be no order as to costs on the Hardiman principle – where AFCA is a private body that operates a complaints resolution scheme approved by a Minister – where AFCA does not exercise judicial power – where AFCA cannot enforce its own determinations – whether the Hardiman principle ought to be applied to proceedings involving AFCA

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – GENERALLY – where r 684(2) of the Uniform Civil Procedure Rules 1999 (Qld)  provides that the court may declare what percentage of costs of a proceeding is attributable to a part of the proceeding – where the plaintiff failed on most of its claims at trial – what percentage of costs ought to be awarded to AFCA 

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – INFORMAL OFFERS AND CALDERBANK LETTERS – where AFCA made a Calderbank offer – where the offer was made two and a half days before the commencement of trial – where the offer made various representations as to the positions of other defendants who did not formally join in the offer – whether it was unreasonable for the plaintiff not to have accepted the offer

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – GENERALLY – where the second defendant commenced proceedings against the plaintiff in the District Court to enforce an AFCA determination – where the plaintiff commenced this proceeding in the Supreme Court a year later – where the proceedings were consolidated – where the second defendant was wholly successful in its claim against the plaintiff – whether the second defendant should have its costs of the District Court proceeding up to the consolidation of the proceedings – whether the second defendant’s interests were sufficiently similar to AFCA’s interests such that it should not have incurred separate costs – whether it was reasonable for the second defendant to retain independent lawyers after the proceedings were consolidated – whether an order as to costs after the date of consolidation should be made 

Corporations Act 2001 (Cth), s 1051

Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Act 2018 (Cth)

Uniform Civil Procedure Rules 1999 (Qld), r 684

Calderbank v Calderbank [1973] 3 All ER 333, cited

Evans v Braddock (No 2) [2015] NSWSC 518, cited

Hamcor Pty Ltd & Anor v State of Queensland & Ors (No 2) [2015] QSC 069, cited

Investors Exchange Ltd v Australian Financial Complaints Authority Ltd & Anor [2020] QSC 74, cited

ISG Financial Limited v Australian Financial Complaints Authority & Ors [2022] QSC 120, related

MetLife Insurance Ltd v Australian Financial Complaints Authority (No 3) [2022] FCA 849, considered

Mickovski v Financial Ombudsman Service Ltd & Anor (2012) 36 VR 456; [2012] VSCA 185, cited

QSuper Board v Australian Financial Complaints Authority Ltd (2020) 276 FCR 97; [2020] FCAFC 55, considered

R v Australian Broadcasting Tribunal; ex parte Hardiman (1980) 144 CLR 13; [1980] HCA 13, considered

Statham v Shephard (No 2) (1974) 23 FLR 244, considered

COUNSEL:

MW Wise KC and AF Solomon-Bridge for the first defendant in BS 10170/20

MJ McDermott for the second defendant in BS 10170/20 and the plaintiff in BD 2152/20

SOLICITORS:

Cornwalls Lawyers for the plaintiff in BS 10170/20 and the defendant in BD 2152/20

Arslan Lawyers for the first defendant in BS 10170/20

Herd Lawyers for the second defendant in BS 10170/20 and the plaintiff in BD 2152/20

  1. [1]
    On 24 June 2022 I gave judgment in this proceeding.  Further orders were made by consent on 24 August 2022.  I now deal with submissions as to outstanding issues as to costs.
  2. [2]
    Although the plaintiff was almost entirely unsuccessful in this proceeding, it urged that it should not have to pay the defendants’ costs.  It urged that I should follow the single judge decision in the Federal Court, MetLife Insurance Ltd v Australian Financial Complaints Authority (No 3).[1]  The parties told me that an appeal from that decision had been dismissed without a hearing on the merits.
  3. [3]
    The decision in MetLife (No 3) was to make no order as to costs in a proceeding where a financial services licensee challenged AFCA determinations as to its liability to an investor.  Although his decision on the substantive issues was in AFCA’s favour, Colvin J refused to make an order that costs follow the event.  Instead he ordered that there be no order as to costs by reference to what has become known as the Hardiman principle, articulated in R v Australian Broadcasting Tribunal; ex parte Hardiman.[2] 
  4. [4]
    In MetLife (No 3) Colvin J said this of that case:

“In that case, the High Court described the Tribunal as having taken ‘the unusual course of contesting the prosecutor’s case for relief ... by presenting a substantive argument’. As to that course, the High Court said:

‘In cases of this kind the usual course is for a tribunal to submit to such order as the court may make. The course which was adopted by the Tribunal in this Court is not one which we would wish to encourage. If a tribunal becomes a protagonist in this Court there is the risk that by so doing it endangers the impartiality which it is expected to maintain in subsequent proceedings which take place if and when relief is granted. The presentation of a case in this Court by a tribunal should be regarded as exceptional and, where it occurs should, in general, be limited to submissions going to the powers and procedures of the Tribunal.’”

  1. [5]
    The Hardiman principle is complied with routinely in the case of judicial officers of inferior courts, and Magistrates, and in the case of statutory tribunals.  The question is whether it ought to apply in the case of AFCA.  Although AFCA acts as an impartial decision-maker between two litigious adversaries, it is not a statutory tribunal; it is a private body, albeit that it operates a scheme approved by the relevant Federal Minister and has obligations imposed upon it by legislation. 
  2. [6]
    As Colvin J noted, the AFCA scheme has a basis in the Corporations Act 2001 (Cth) introduced by the Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Act 2018 (Cth).  In my June judgment in this proceeding I noted some characteristics of AFCA (references are to the Corporations Act 2001):

[13]  Section 912A(1)(g) provides that if a financial services licensee provides services to retail clients, the licensee must have a dispute resolution system which complies with s 912A(2).  Section 912A(2) provides that the licensee must have an internal dispute resolution procedure but also have ‘membership of the AFCA scheme’. 

  1. [14]
    Sections 1050 and 1051 allow the relevant minister to authorise a private service provider to conduct the AFCA scheme.  The ‘operational requirements’ of that scheme at s 1051(4) are relevant to consider here.  They include that:

 ‘The complaints mechanism under the scheme is appropriately accessible to persons dissatisfied with members of the scheme’ – s 1051(4)(a).

 ‘Complaints against members of the scheme are resolved … in a way that is fair, efficient, timely and independent’ – s 1051(4)(b).

 ‘Appropriate expertise is available to deal with complaints’ – s 1051(4)(c).

  1. [15]
    Similar thinking is evident in s 1051A which provides that:

‘The general considerations for an external dispute resolution scheme are the following:

  1. (a)
    the accessibility of the scheme;
  1. (b)
    the independence of the scheme;
  1. (c)
    the fairness of the scheme;
  1. (d)
    the accountability of the scheme;
  1. (e)
    the efficiency of the scheme;
  1. (f)
    the effectiveness of the scheme.’
  1. [16]
    Rule A.1.3 provides that the AFCA complaint resolution scheme is free of charge for complainants and that ‘complainants do not generally need legal or other paid representation to submit or pursue a complaint through AFCA’.
  1. [17]
    Section 1051(4)(e) provides that determinations made by AFCA are binding on members of the scheme, but not binding on complainants to AFCA.  The AFCA rules provide at A.1.4 that a person is not obliged to use the AFCA complaint resolution process to pursue a complaint against a financial licensee but instead may institute court proceedings or any other available dispute resolution forum.  Likewise, r A.15.3 provides that after AFCA has made a determination it is binding upon the parties to the dispute ‘if accepted by the complainant within 30 days of the complainant’s receipt of the determination’.  Rule A.15.4 goes on to provide that if a complainant does not accept a determination, the complainant is not bound by the determination and may bring action in the courts or take any other action available to it.
  1. [18]
    It was common ground that the AFCA rules constituted a tripartite agreement between AFCA, ISG and the individual complainants – see r A.1.2.[3]
  1. [7]
    The decision in QSuper Board v Australian Financial Complaints Authority Ltd[4] explains that AFCA is not a court, and does not exercise judicial power.  As part of its reasoning the Full Federal Court accepted that at law AFCA had no power to determine complaints except by its members’ agreement – [177]ff. 
  2. [8]
    As argued in QSuper, and acknowledged by Colvin J in MetLife (No 3), so far as the financial services licence holder is concerned, it has no choice but to become a member of AFCA, and submit to the scheme it administers, if it wishes to carry on the business of providing financial services.  However, there is no compulsion for, in this case, the plaintiff to undertake such a business.  If it chooses to, it becomes subject to the AFCA scheme as part of the licensing arrangements enacted by the Federal Parliament.  Therefore, I doubt Colvin J’s reasoning at [16] of MetLife (No 3) that, “it is inaccurate to describe the [AFCA] scheme as being voluntary in any meaningful sense”, and his drawing from that, “These matters give AFCA attributes of a statutory decision-maker”.  In fact, as recognised in QSuper, the federal government has entrusted the administration of the AFCA scheme to a company limited by guarantee whose functions are not exclusively judicial – [185].  That company has power to make determinations affecting financial services licensees and investors because they agree to it doing so.  The relevant cause of action, by and against AFCA, is in contract, ie., private law, not public law.
  3. [9]
    One of the features which the Full Federal Court in QSuper regarded as showing that AFCA was not a court, was its inability to enforce its own determinations.  In fact, there are decisions allowing AFCA to sue for specific performance (as well as declaratory orders) in order to compel compliance with its determinations.[5]  AFCA’s ability to take such a role against one of the parties who has appeared before it in an adversarial process is an indication that it is not bound by the Hardiman principle.  As noted by Colvin J in MetLife (No 3), AFCA is obliged by legislation to take reasonable steps to ensure compliance by its members with the determinations it makes – s 1051(4)(d) of the Corporations Act.  It may be true that there are indirect ways in which AFCA could perform its obligation (by reporting the non-compliance to the Australian Securities and Investments Commission, as Colvin J suggests – [20]).  However, where AFCA has the ability to enforce its determination by bringing an action for specific performance, it could not be inapt for it to do so.  The very fact that it is obliged to take reasonable steps to ensure compliance with its determinations is another indication that it is not bound by the Hardiman principle.
  4. [10]
    Another indication that AFCA is not bound by the Hardiman principle is found in the nature of the AFCA scheme.  It is to provide a timely, cheap and efficient way for investors to seek redress from financial services licensees.  To achieve this, the parliament has chosen to entrust the determination of disputes to a private company, rather than a statutory tribunal or a court, and it has chosen to empower AFCA to determine disputes on the basis of fairness, having regard to legal principles, rather than according to law.  There is now a wellestablished set of judicial decisions to the effect that even if a decision by AFCA is wrong, there will be no judicial interference unless it is a decision to which no reasonable decision-maker could properly come.[6]
  5. [11]
    Aspects of the scheme established by the Federal Parliament may be affronting to some, particularly those of us who have trained as lawyers.  Aspects of the scheme involve compromise.  Overwhelmingly, it can be seen that Parliament has preferred accessible and efficient remedies, saving investors time and the costs involved with engaging lawyers and prosecuting proceedings in court. 
  6. [12]
    The purpose of the legislative scheme would be significantly thwarted if financial services licensees, which receive an adverse determination from AFCA, do not pay in accordance with the determination, but commence court proceedings making the type of complaints made in this litigation, and insisting that, according to the Hardiman principle, the individual investor, not AFCA, defend the court proceedings, or indeed sue for specific performance of the contractual determination by AFCA.  The time, cost and need for lawyers to be involved in the court proceeding would significantly subvert the “operational requirements” of the AFCA scheme at s 1051(4) of the Corporations Act, see [14] of my original decision in this proceeding, in the quotation above. 
  7. [13]
    Further, the decision in MetLife (No 3) means that if a licensee receives an adverse determination in AFCA, it can take its chances in trying to reverse that result in the Supreme Court without risking an adverse costs order, even if it runs proceedings which must, on any sensible view of it, have poor prospects of success.  Other results of a licensee conducting litigation after an unfavourable AFCA determination are that delay is introduced in respect of the investor recovering monies AFCA has determined it should have, and that AFCA itself is burdened with its own costs of any litigation it chooses to defend, no matter how meritorious its stance.
  8. [14]
    For these reasons I decline to apply the Hardiman principle as Colvin J did in MetLife (No 3).  I proceed to make determinations as to costs on the basis that all parties to this litigation were private persons who were parties to a tripartite contract and who sued to vindicate their rights and obligations under that contract.

Costs as between the plaintiff and AFCA

  1. [15]
    The plaintiff commenced this proceeding seeking declarations that it need not comply with six determinations of AFCA in favour of the second defendant and the five defendants by counterclaim.[7]  The first defendant by counterclaim and third defendant settled with the plaintiff before the hearing.  None of the remaining defendants by counterclaim appeared, they were content to allow AFCA to conduct the proceedings.  The second defendant did appear separately on its own behalf, although its lawyers played a subsidiary role to that of AFCA’s lawyer.  AFCA counterclaimed for orders that the plaintiff pay the amounts of its determinations, and its costs of the determinations. 
  2. [16]
    While the plaintiff’s primary submission was that I should make no order as to costs, following MetLife (No 3), it made the alternative submission that if I did not do so, I should make an award that it pay 80% of AFCA’s costs assessed on a standard basis.  It was acknowledged that costs should follow the event and, so far as a percentage apportionment was sought, reliance was placed on r 684(2) of the Uniform Civil Procedure Rules 1999 (Qld) which provides that the court may declare what percentage of costs of a proceeding is attributable to a question or part of the proceeding to which a costs order relates.
  3. [17]
    AFCA agreed with the plaintiff’s submission, except that it said I should order the plaintiff to pay 90% of its costs. 
  4. [18]
    As discussed, the plaintiff challenged six separate AFCA determinations.  The issues in relation to one settled prior to trial.  Of the five remaining determinations under challenge, I declared that one was not binding, otherwise I made orders that the plaintiff pay in accordance with the AFCA determinations, and also pay the hearing costs in relation to those determinations.  The plaintiff advanced nine separate bases for its claim that the AFCA determinations were not binding on it.  One of those related only to the second defendant; the remaining eight related to the second defendant and each of the defendants by counterclaim.  Only one of these bases succeeded against one defendant by counterclaim (the third defendant by counterclaim).
  5. [19]
    Of the nine bases for complaints advanced by the plaintiff in the proceeding, three relating to procedural fairness[8] took by far the most time at trial and, I think it is fair to assume would also have accounted for by far the most costs during the interlocutory stages of the proceeding.  The plaintiff’s claim was that it had been denied procedural fairness because certain documents had not been given to it by AFCA before it made submissions to AFCA. 
  6. [20]
    The plaintiff’s solicitors proceeded in a very inefficient way in relation to this basis for complaint.  They prepared a trial bundle of over 20,000 documents on the basis that it was necessary to tender that bundle in order to show that the 40 or so documents it relied upon as not being provided to it were not in the bundle which was provided to their client.  Needless to say, I rejected the tender of that bundle at trial. 
  7. [21]
    It was AFCA which provided a schedule of the documents in dispute.  Had it not done so, there would have been no sensible framework to hear the plaintiff’s complaints at trial.  Once AFCA provided the schedule, the plaintiff disclaimed reliance on 12 of the 40 documents it had previously complained about.  Well over half the trial time was taken up with a discussion of the remaining documents, about which complaint was made.  Of those documents, I found that three ought to have been provided to the plaintiff before AFCA made its determinations. 
  8. [22]
    The AFCA determination in favour of the third defendant by counterclaim involved the least money of all the determinations.  The determination was in the amount of $25,000.  AFCA’s fee was $20,530.  The remaining monies sought by AFCA in the proceeding was $409,235.  I do think it is relevant to my assessment of costs that essentially the plaintiff succeeded on a claim, below the jurisdiction of the District Court, after running proceedings in the Supreme Court for two years, including a three day trial.  I am not persuaded by submissions that the plaintiff gained something more than monetary value from its success against the third defendant by counterclaim.  In particular, I reject the idea that the AFCA determination against it in relation to the third defendant by counterclaim now not being published, and there now not being a public finding of misleading conduct on its part (as against the third defendant by counterclaim), was of any value, where what it achieved by this proceeding in general was publication, in the form of my original judgment in the proceeding, which noted adverse findings against it, and, I assume, had a wider reach than the publication of the AFCA determinations.
  9. [23]
    For these reasons, I accede to AFCA’s submission that it ought to have 90% of its costs in the proceeding.
  10. [24]
    AFCA further submitted that from 16 March 2022 it ought to have its costs on an indemnity basis because of a Calderbank letter which it sent to the plaintiff on 16 March 2022.  The letter was marked “without prejudice save as to costs”.  It referred to the unsuccessful mediation which had been held in the proceeding, and two costs orders in favour of AFCA against the plaintiff on interlocutory matters.  It referred to the fact that written outlines on the trial had been exchanged, and expressed the view that the plaintiff’s prospects at trial were poor.  It offered to forego costs of the proceeding if the plaintiff would capitulate in relation to its claims and consent to judgment on the counterclaims brought by AFCA.  It did not offer to forego the amounts of extant costs orders in its favour.  The letter said that the unrepresented defendants would consent to judgment on those terms and that the second defendant had advised that it would join in the offer, foregoing its own costs of the proceeding other than an extant costs order in its favour.
  11. [25]
    The offer was expressly made pursuant to the principles in Calderbank v Calderbank[9] and was expressed to be open for acceptance until 9.00 am on 20 March 2022.  The trial was to start on the following day, Monday 21 March 2022.
  12. [26]
    It should have been obvious to the plaintiff’s legal advisers from the beginning that the plaintiff’s prospects in this litigation were poor.  As it turned out, there was one good point hidden in masses of detail in submissions that were otherwise, on any realistic assessment prior to trial, unlikely to succeed.  In those circumstances, I accept that the offer by the first defendant to forego its costs and see an end to the litigation was a genuine and reasonable position for it to take.[10] 
  13. [27]
    Even so, I do not find that it was unreasonable for the plaintiff not to have accepted the Calderbank offer.  The offer was made two-and-a-half days before the trial was to start.  It is true that by then written submissions had been exchanged and the plaintiff should have been under no misapprehension as to the (lack of) merits in its case.  However, the time for consideration was short, and there was the complication that, although the solicitors acting for AFCA made various representations as to the position of the other defendants, and the defendants by counterclaim, these parties did not formally join in the offer, and there was very little time for the plaintiff to ascertain whether or not they were all prepared to settle on the basis put forward by AFCA.  Furthermore, the decision of Colvin J in MetLife (No 3) had recently been delivered before the offer was made and, where the only compromise AFCA offered was to forego its costs, there must have been some doubt as to whether that was an offer of value. 

Costs as between the plaintiff and the second defendant

  1. [28]
    As mentioned above, the second defendant was the only defendant other than AFCA to appear at trial.  It appeared by counsel instructed by solicitors.
  2. [29]
    The AFCA determination in favour of the second defendant was dated 11 October 2019.  It was in an amount of $200,000.  The plaintiff did not pay in accordance with the determination and the second defendant commenced proceedings in the District Court, BD 2152/20.  It was nearly a year later that ISG commenced this proceeding in the Supreme Court.  On 12 October 2020 solicitors acting for the second defendant called on the solicitors acting for the plaintiff to discontinue the Supreme Court proceeding against the second defendant; to consent to summary judgment in the District Court, and to pay the second defendant’s costs in the District Court, which were said at that stage to be slightly more than $50,000.  This letter from the second defendant’s lawyers calling on the plaintiff to agree to a summary judgment in the District Court was against a background of negotiations where the plaintiff admitted liability to pay the amount at issue in the District Court proceeding. 
  3. [30]
    On 9 October 2020 the solicitors acting for AFCA called on the solicitors acting for ISG to have the District Court proceeding removed to the Supreme Court and consolidate the proceedings.
  4. [31]
    On 8 September 2021 Brown J made an order bringing the District Court proceeding to the Supreme Court and consolidating the proceedings. 
  5. [32]
    At trial, counsel for the second defendant accepted that if I granted the relief sought by AFCA in the Supreme Court proceeding, the District Court proceeding could be dismissed.  For that reason I did dismiss the District Court proceeding.  The plaintiff failed in its claim against the second defendant and the second defendant was wholly successful in its claim against the plaintiff.  The starting point is that costs as between the plaintiff and the second defendant should follow the event.  In the circumstances, it seems to me that the second defendant should have its costs of and incidental to the District Court proceeding up to and including the date of Justice Brown’s order of 8 September 2021.
  6. [33]
    The second defendant submitted that it should have its costs of the District Court proceedings, and the Supreme Court proceedings, and that after 16 March 2022, the costs of the Supreme Court proceedings should be on an indemnity basis.
  7. [34]
    The second defendant wished to rely upon the Calderbank letter sent on 16 March 2022 on the basis that that letter included the sentence, “As for ANLP Pty Ltd, its representatives have advised us that it would also join in with this offer, and would forego its own costs of the proceeding to date, save for the costs order of 1 September 2021 of which it has the benefit”.  For reasons explained in relation to the first defendant, I do not think it was unreasonable for the plaintiff not to accept this Calderbank letter.  I would add that for the second defendant to rely upon the letter, it needed to have advised the plaintiff’s lawyers in writing that it made the same offer.  In any event, the Calderbank offer is only relevant to whether or not costs awarded after 16 March 2022 are awarded on a standard or indemnity basis.
  8. [35]
    The plaintiff resisted an order that it pay the second defendant’s costs.  It argued that the second defendant’s interests were the same, or sufficiently the same, as AFCA’s interests, and that the second defendant ought to have been content with AFCA running the proceeding, rather than incurring a separate set of costs.  It relied upon the principles in Statham v Shephard (No 2).[11]  In that case Woodward J held:

“The principle which I deduce from these authorities, and which I believe I should follow in spite of the two cases earlier cited, is that the court will not normally allow two sets of costs to defendants where there is no possible conflict of interest between them in the presentation of their cases.  I would add to this basic proposition three provisoes.  In the first place, if a conflict of interest appears possible but unlikely, the defendants should make any necessary inquiries from the plaintiff as to the way in which his [or her] case is to be put if this would resolve the possibility of conflict between the defendants (see In Re Lyell [1941] VLR 207). 

Secondly, there could be circumstances in which, although the defendants were united in their opposition to the plaintiff, their relationship to each other might be such that they would be acting reasonably in remaining at arm’s length during the general course of litigation.

Thirdly, even if defendants are acting reasonably in maintaining separate representation for some time or for some purposes, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time.”

  1. [36]
    Submissions on behalf of the second defendant accepted that the principles in Statham applied, but relied upon the second proviso.  It was submitted that AFCA’s interests and the second defendant’s interests were so different that it was appropriate for there to be separate representation.  There was almost no factual basis for this submission, other than the rather obvious point that AFCA’s concern was wider than that of the second defendant because it was concerned with all six determinations, and that AFCA’s interests as the decision-maker were different to those of the second defendant as an investor.  Both those points of distinction may be accepted, but they do not, to my mind, put the second defendant’s case within the second proviso of Justice Woodward’s judgment in Statham.  I cannot see that the second defendant’s interests could conflict with AFCA’s interests, nor can I see a reason that the second defendant would reasonably or properly, wish to remain at arm’s length throughout the litigation.
  2. [37]
    The sole director of the second defendant is a solicitor, and I can understand her concern that the proceedings on behalf of the second defendant be run as well as possible.  Nonetheless, after the proceedings were consolidated, I cannot see why she could not have come to an arrangement with the solicitors for AFCA that she be copied into all correspondence so that she could, in effect, conduct a watching brief to satisfy herself that AFCA’s conduct of the proceeding was reasonable.  Because she had independent solicitors who had acted for her in the District Court proceedings, it seems to me that would have been sufficient to protect her interests; had she determined on short notice that she needed separate representation in the Supreme Court, there were lawyers who knew her case.  In fact, from what I could judge from the conduct of the trial, AFCA’s case was conducted efficiently and well by solicitors and counsel experienced in the area, and it would have been most unlikely that the second defendant would not have been satisfied with their conduct of the matter.  Full written submissions were exchanged prior to trial.  Nothing significant outside those submissions was advanced on behalf of the second defendant at trial and counsel appearing for the second defendant had almost no role in the trial.
  3. [38]
    While I have given the matter anxious consideration, particularly in light of the plaintiff’s having failed in its proceeding against the second defendant, I cannot see that the second defendant’s retaining independent lawyers after the date of the consolidation was reasonable.  Thus, in accordance with the principles in Statham, I will make no order as to costs after the date of consolidation.
  4. [39]
    Lastly I will mention, for the avoidance of doubt, that the extant costs orders in favour of the first and second defendants are not affected by my orders made today. 

Footnotes

[1]  [2022] FCA 849.

[2]  (1980) 144 CLR 13, 35-36.

[3]Investors Exchange Ltd v Australian Financial Complaints Authority Ltd & Anor [2020] QSC 74, [13], citing Mickovski v Financial Ombudsman Service Ltd (2012) 36 VR 456.

[4]  (2020) 276 FCR 97; [2020] FCAFC 55.

[5]Investors Exchange Limited v Australian Financial Complaints Authority Limited, above; Utopia Financial Services Pty Ltd v Financial Ombudsman Service Ltd [2012] WASC 279.

[6]  See [169]-[170] of my original decision in this proceeding.

[7]  The third to seventh defendants were directors of the defendants by counterclaim.

[8]  Paragraphs [45]-[103] of my original decision in the proceeding.

[9]  [1973] 3 All ER 333.

[10]Hamcor Pty Ltd v State of Queensland (No 2) [2015] QSC 069, [8]; Evans v Braddock (No 2) [2015] NSWSC 518, [57]-[60].

[11]  (1974) 23 FLR 244, 246-247.

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Editorial Notes

  • Published Case Name:

    ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd & Ors; ANLP Pty Ltd atf AP Superannuation Fund v ISG Financial Services Ltd (No 2)

  • Shortened Case Name:

    ISG Financial Services Ltd v Australian Financial Complaints Authority Ltd [No 2]

  • Reported Citation:

    (2022) 12 QR 639

  • MNC:

    [2022] QSC 281

  • Court:

    QSC

  • Judge(s):

    Dalton J

  • Date:

    15 Dec 2022

  • Selected for Reporting:

    Editor's Note

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