FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Storm Financial Limited (Receivers and Managers Appointed) (in liq) [2012] FCA 750

THE COURT ORDERS THAT:

1.    There be no order for costs in relation to the hearings on 14 and 21 December 2011.

2.    Challenger Limited and Challenger Managed Investments Limited’s costs of and incidental to the hearings on 1 March and 5 April 2012 be paid equally by:

(a)    Macquarie Bank Limited;

(b)    the plaintiffs in QUD 590 of 2010; and

(c)    the plaintiffs in NSD 811 of 2010.

3.    Challenger Limited and Challenger Managed Investments Limited be removed as parties to proceedings QUD 577 of 2010, QUD 590 of 2010 and NSD 811 of 2010.

4.    The interlocutory application of Challenger Limited and Challenger Managed Investments Limited filed on 16 December 2011 is otherwise dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT ORDERS THAT:

1.    There be no order for costs in relation to the hearings on 14 and 21 December 2011.

2.    Challenger Limited and Challenger Managed Investments Limited’s costs of and incidental to the hearings on 1 March and 5 April 2012 be paid equally by:

(a)    Macquarie Bank Limited;

(b)    the plaintiffs in QUD 590 of 2010; and

(c)    the plaintiffs in NSD 811 of 2010.

3.    Challenger Limited and Challenger Managed Investments Limited be removed as parties to proceedings QUD 577 of 2010, QUD 590 of 2010 and NSD 811 of 2010.

4.    The interlocutory application of Challenger Limited and Challenger Managed Investments Limited filed on 16 December 2011 is otherwise dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT ORDERS THAT:

1.    There be no order for costs in relation to the hearings on 14 and 21 December 2011.

2.    Challenger Limited and Challenger Managed Investments Limited’s costs of and incidental to the hearings on 1 March and 5 April 2012 be paid equally by:

(a)    Macquarie Bank Limited;

(b)    the plaintiffs in QUD 590 of 2010; and

(c)    the plaintiffs in NSD 811 of 2010.

3.    Challenger Limited and Challenger Managed Investments Limited be removed as parties to proceedings QUD 577 of 2010, QUD 590 of 2010 and NSD 811 of 2010.

4.    The interlocutory application of Challenger Limited and Challenger Managed Investments Limited filed on 16 December 2011 is otherwise dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION

1    The history of these proceedings insofar as they involve Challenger Limited and Challenger Managed Investments Limited (together referred to as “Challenger”) is set out in the rulings I made in December 2011 and April 2012: see Australian Securities and Investments Commission v Storm Financial Limited (Receivers and Managers Appointed) (In Liq) (No 4) [2011] FCA 1536 and, particularly, Australian Securities and Investments Commission v Storm Financial Limited (Receivers and Managers Appointed) (in liq) [2012] FCA 355 at [1]–[11]. Since those rulings are readily available on the Court’s website, it is unnecessary to repeat that history in these reasons.

2    This decision concerns some of the parties in each of these three proceedings: QUD 577 of 2010, QUD 590 of 2010 and NSD 811 of 2010 (the “proceedings”), namely:

(a)    Challenger;

(b)    the Australian Securities and Investments Commission (“ASIC”), the plaintiff in QUD 577 of 2010;

(c)    Tracey Richards & Ors and Leslie James Sherwood & Ors (the “Class Action Parties”), the applicants in QUD 590 of 2010 and NSD 811 of 2010 respectively; and

(d)    Macquarie Bank Limited (“Macquarie”), the defendant in QUD 577 of 2010 and QUD 590 of 2010.

ORDERS SOUGHT

3    Challenger now seeks the costs of those two sets of rulings, along with other orders directed to terminating its involvement in the proceedings.

4    The precise orders it seeks are as follows:

(a)    ASIC should pay Challenger’s costs of and incidental to the hearings on 14 and 21 December 2011; and

(b)    Macquarie Bank Limited and [the Class Action Parties] should each pay half of Challenger’s costs of and incidental to the hearings on 1 March and 5 April 2012;

(c)    Challenger Limited and Challenger Managed Investments Limited be removed as parties to the Proceedings; and

(d)    The interlocutory application of Challenger Limited and Challenger Managed Investments Limited dated 16 December 2011 be otherwise dismissed.

5    It is appropriate to deal separately with the costs of each set of rulings. That is so because the main protagonists differed in each. In the December 2011 ruling the main protagonists were Challenger and ASIC, whereas in the April 2012 rulings they were Challenger, Macquarie and the Class Action Parties.

CONSIDERATION

6    Challenger relies upon two bases to seek the costs of the December 2011 rulings. They are:

(a)    that ASIC consented to the Discovery Plan, which was a schedule to the trial programming orders made on 23 September 2011 (“Discovery Plan”), without consulting Challenger and, as a consequence, Challenger claims it was forced to rely on its rights to object under that Discovery Plan in order to prevent ASIC making wholesale production of the 27,700 documents (the “Challenger Documents”) to the other parties in these proceedings; and

(b)    that Challenger was largely successful in its objections to the wholesale production of the Challenger Documents by ASIC.

7    I do not consider that either basis has any merit.

8    ASIC obtained the Challenger Documents using its investigatory powers under the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). Once those documents were in its possession and these proceedings had been commenced against the three banks, if any of the Challenger documents were relevant to any issues in these proceedings, ASIC was obliged to make discovery of those documents to the defendants. I therefore fail to see how ASIC was under any obligation to consult with Challenger before it consented to the Discovery Plan. Nonetheless, ASIC and the other parties did provide a mechanism in the Discovery Plan whereby the interests of third parties, such as Challenger, could be protected. Challenger availed itself of that mechanism by objecting to ASIC “making wholesale production” of the Challenger Documents. In doing so, I do not consider it was forced into that course by anything ASIC did, or did not do.

9    It is true to say that Challenger was ultimately successful in preventing the wholesale production of the Challenger Documents by ASIC. However, that success did not flow from the submissions Challenger made before me on 21 December 2011, viz that ASIC had some obligation under the ASIC Act to keep the Challenger Documents confidential and/or some obligation under the Federal Court of Australia Act 1976 (Cth) and Federal Court Rules 2011 to discover only those documents that were relevant: see Australian Securities and Investments Commission v Storm Financial Limited (Receivers and Managers Appointed) (In Liq) (No 4) [2011] FCA 1536. Instead, that success arose out of the need to accommodate the unusual situation in which ASIC was placed.

10    That situation meant that, while ASIC clearly had the Challenger Documents in its possession, only about 140 of the 27,700 documents were relevant to its case against the three banks. As a result, it did not have the interest that an ordinary party has in limiting its discovery obligations in relation to the balance of the Challenger Documents to those documents that were relevant to the issues in these proceedings. Moreover, it was hardly in a position to make any assessment as to which of the Challenger Documents may be relevant to the defence the three banks wished to make in its action against ASIC, much less the relevance of the Challenger Documents to the Class Action Parties: see Australian Securities and Investments Commission v Storm Financial Limited (Receivers and Managers Appointed) (In Liq) (No 4) [2011] FCA 1536 at [11]–[12]. It was these matters that led to my making the rulings of 21 December 2011.

11    For these reasons, I do not consider that Challenger was “largely successful” in its objections, such that it should be entitled to any costs of the December 2011 rulings.

12    Turning then to the April 2012 rulings, Challenger submits it was wholly successful in its objections in relation to the disputed categories 3A and 4A and that costs should therefore follow the event.

13    In response, Macquarie submits that two broad issues were determined in the April 2012 rulings, namely:

(a)    who should bear the costs of undertaking the review of the agreed categories of documents; and

(b)    whether the disputed categories 3A and 4A in the schedule of categories provided to the Court were adjectivally relevant.

14    Macquarie submits Challenger was unsuccessful on the former and successful on the latter and that since the time devoted to these two issues was “relatively equal”, it would be unreasonable to require it to pay the whole of Challenger’s costs.

15    The Class Action Parties accept that they and Macquarie should bear some part of Challenger’s costs of the April rulings. However, like Macquarie, they submit that a substantial proportion of the hearing on 1 March 2012 involved the issue described in [13]a and other related issues.

16    While Macquarie and the Class Action Parties are correct in saying that some part of the hearing on 1 March 2012 was devoted to the question of who should bear the costs of undertaking the review of the agreed categories of documents, I consider that the main argument at that hearing related to the disputed categories 3A and 4A. While the oral submissions on both issues at that hearing may have taken up approximately equal time, that ignores the fact that the sole focus of the written submissions filed by the parties was the disputed categories issue. As a consequence, the sole focus of the April 2012 ruling itself was the disputed categories issue.

17    For these reasons I consider Challenger was wholly successful in its objections in relation to the disputed categories 3A and 4A and the costs of the April 2012 rulings, including the hearing on 1 March 2012, should therefore follow that event.

18    Finally, Challenger and Macquarie have submitted that if an order for costs is made in relation to the April 2012 rulings, then the burden of that order should be shared equally between Macquarie and the Class Action Parties. Since both Macquarie and the Class Action Parties pursued almost identical submissions on the disputed categories issue, I consider it is appropriate that they should share this costs order equally.

CONCLUSION

19    Accordingly, I consider that there should be no order in relation to the costs of the December 2011 rulings, but Challenger should have its costs of and incidental to the April 2012 rulings, including the hearing on 1 March 2012. Those costs should be paid equally by Macquarie and the two Class Action Parties.

Associate:

Dated:    16 July 2012