FEDERAL COURT OF AUSTRALIA

White (Trustee) v MWL Financial Group Pty Ltd, in the matter of MWL Financial Group Pty Ltd (No 2) [2019] FCA 364

ORDERS

Upon the undertaking to the Court of the first to fifth, seventh to thirteenth, sixteenth and seventeenth applicants, that they will pay and bear and indemnify the first respondent against all costs, charges and expenses of and incidental to the bringing of the proceeding brought by them pursuant to Order 1 below, except to such extent, if any, as the Court may in future otherwise direct or allow.

THE COURT ORDERS THAT:

1.    The first to fifth, seventh to thirteenth, sixteenth and seventeenth applicants have leave to bring a proceeding on behalf of the first respondent substantially in the form of the draft statement of claim handed up to the Court at the hearing of the application on 31 October 2018.

2.    The applicants’ costs of this application be the costs of MWL Financial Group Pty Ltd in the proceeding brought pursuant to Order 1 above.

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

EX TEMPORE REASONS FOR JUDGMENT

(Revised from transcript)

DAVIES J:

1    On 18 December 2018 I delivered judgment granting the applicants leave to bring derivative proceedings against the respondents pursuant to an application under s 237 of the Corporations Act 2001 (Cth). The applicants now seek the costs of their application.

2    Although the grant of relief on a derivative action application is in the nature of final not interlocutory relief, the weight of authority on the appropriate order as to costs is that the successful applicant’s costs should be costs in the proceedings in respect of which leave is granted, akin to the usual order upon the grant of an interlocutory injunction: see Maher v Honeysett & Maher Electrical Contractors [2005] NSWSC 859 (“Maher”) which courts in other jurisdictions, including the Federal Court, have applied.

3    Senior counsel for the applicants, nonetheless, urged the Court to follow the recent decision of Brereton J in Re Jimmy’s Recipe Proprietary Limited [2018] NSWSC 1331 (“Jimmy’s Recipe”), in which his Honour made a costs order in favour of the applicant. Brereton J reasoned that the plaintiff, having succeeded on the application over opposition, was entitled to costs against the defendants, although his Honour noted at [35] that his mind had “wandered to some extent between whether that should be contingent on the successful outcome of the ultimate proceedings or not”. His Honour considered that because the nature of the proceedings was final, not interlocutory, a final costs order should be made and not left to the judge determining the derivative proceedings brought pursuant to leave. His Honour did not refer to his earlier decision in Maher or to other authorities which have applied it. Brereton J also placed weight on the conduct of the respondents in opposing the grant of leave, noting that had leave not been opposed it would have been dealt with as a short matter without requiring a two day hearing at a substantially greater expense. His Honour said at [36] it was not to the point that the plaintiff would have had to seek leave anyway but “[t]he fact is that when parties elect to oppose applications though they would have had to be made in any event, they thereby elect to expose themselves to the applicant’s costs of making the application”. Earlier, his Honour, amongst the reasons why he considered that it was desirable that the costs of the leave proceedings be finalised by the judge who hears those proceedings, stated it was important that parties not be encouraged to think that a proceeding under s 237 is an opportunity for those who oppose it to have a “free kick”, for want of a better term, at the plaintiff’s case.

4    In the present matter, senior counsel for the applicants submitted that the respondents had attempted a free kick at the applicants’ case through their opposition to the grant of leave on the basis, amongst other things, of contesting the bona fides of the applicants in bringing their application when the Court was satisfied that the applicants were acting in good faith.

5    In any case, an award of costs is at the discretion of the Court and will depend upon the particular facts and circumstances of the case. In some cases it may be appropriate, as his Honour considered in Jimmy’s Recipe, to make an order that the applicants’ costs of the leave application be paid by the respondents. In the present case, I am not persuaded to depart from the usual order that is adopted in leave applications, that is, that the costs be costs in the cause of the derivative action commenced with leave. Although the respondents opposed the application, it could not be said, in my view, that the nature of the opposition was such that the respondents were having a “free kick” at the applicants’ case. True it is that the respondents were unsuccessful in their opposition but I would not regard the opposition as wholly unmeritorious and, in the circumstances, the appropriate order is, in my view, that the costs of the application should follow the result of the derivative action. For those reasons, I will make the order as sought by the second respondent.

Associate:    

Dated:    15 March 2019

SCHEDULE OF PARTIES