FEDERAL COURT OF AUSTRALIA

Caason Investments Pty Limited v Cao (No 3) [2020] FCA 91

ORDERS

THE COURT ORDERS THAT:

1.    To the extent it is necessary Mr Timothy Burke be granted leave to appear for the Second Applicant.

2.    Pursuant to ss 33V and 33ZF of the Federal Court of Australia Act 1976 (Cth) (the Act):

(a)    subject to further order, Order 11(b) of the Orders of Justice Murphy made 6 December 2017 be stayed;

(b)    the costs of and incidental to the First Applicant and Second Applicant’s application for approval of the Caason Representative Costs and Wise Plan Representative Costs, as referred to in Order 10(c) and (d) of the orders dated 6 December 2017, be approved in the amount of $19,224.69 and paid to the First Applicant and Second Applicant by the Scheme Administrator in the same proportions as they incurred such expenses or otherwise as agreed between them;

(c)    the amount of $28,995.15 be approved as reasonable costs incurred by the First Applicant and be paid to the First Applicant and Second Applicant by the Scheme Administrator in the same proportions as they incurred such expenses or otherwise as agreed between them; and

(d)    the Applicants’ interlocutory application dated 1 March 2019 be otherwise dismissed.

3.    The amount of $115,651.97 be approved as reasonable and paid to the Scheme Administrator in respect of its costs and disbursements.

4.    Within 14 days of these orders the Scheme Administrator provide a short note to the Court outlining the outstanding steps required to be undertaken to finalise the administration of the Settlement Scheme, and any orders sought.

5.    Within 14 days of these orders the parties and the intervener confer and endeavour to reach an agreement as to the appropriate order as to the costs of the applications, and file draft minutes of consent orders. If the parties cannot reach agreement within 14 days, each party must file short submissions (of no more than three pages) within seven days thereafter.

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

REASONS FOR JUDGMENT

MURPHY J:

INTRODUCTION

1    On 6 December 2017 the Court made orders approving settlement of this securities class action pursuant to s 33V of the Federal Court of Australia Act 1976 (Cth) (the Act): see Caason Investments Pty Limited v Cao (No 2) [2018] FCA 527 (Caason (No 2)). There has been an interim distribution to class members, but the final distribution of the settlement monies has been delayed by claims made by the applicants, Caason Investments Pty Ltd (Caason) and Wise Plan Pty Ltd (Wise Plan) (together the applicants), against the settlement fund. The applicants also made claims against the litigation funder of the proceeding, International Litigation Partners No. 3 Pte Ltd (the Funder).

2    These reasons concern the following three interlocutory applications. I use the same defined terms as in Caason (No 2).

3    First, the applicants’ interlocutory application dated 1 March 2019 which sought orders including that amounts be paid to them from the settlement fund:

(a)    for “reasonable costs of and incidental to” their application for Representative Costs pursuant to the settlement approval orders made on 6 December 2017. I have approved costs in the amount of $19,224.69, which is less than one third of the amount they sought; and

(b)    for legal, accounting and administrative costs, including in relation to the GST Refunds Issue, of $508,547.24 which Caason claimed to have incurred, and in relation to which Wise Plan agreed to pay a share. I have approved an amount of $28,995.15, which is about 5% of the amount the applicants sought.

4    Second, Caason’s interlocutory application dated 16 May 2019, seeking orders that the Funder pay Caason’s reasonable legal, accounting and administrative expenses under the Variation Letter it entered into with the Funder. This application was not required to be decided because Caason failed to comply with the timetable set for filing its application and evidence in support. The reasons concern my refusal to allow it to file the application outside the time limit set by orders made on 3 April 2019.

5    Third, the Scheme Administrator seeks reimbursement of costs and expenses incurred in the administration of the Scheme.

THE FACTS AND PROCEDURAL HISTORY

6    On 6 October 2017 the application for approval of the proposed settlement of the class action came before the Court. It became clear in the course of the hearing that the applicants were not ready to proceed with all parts of the application. Accordingly I heard the parts of the application which concerned whether the quantum and terms of the settlement were fair and reasonable, and adjourned the balance of the application to 16 November 2017.

7    The balance of the application included the following ‘personal’ claims made by Caason and/or Wise Plan:

(a)    Caason and Wise Plan sought orders for $80,073.88 and $76,708.27 respectively, payable from the settlement fund, to reimburse them for time they claimed to have spent prosecuting the case on behalf of the class (the Representative Costs Claim, although called “the Reimbursement Claims” in Caason (No 2)); and

(b)    Caason and Wise Plan sought orders for payment of amounts from the Funder, pursuant to side agreements they entered into with the Funder to vary their funding agreements (the Variation Letters). Under the Variation Letters they were entitled to reimbursement of their “reasonable costs for [their] own legal, accounting and administrative work” including the time of senior company officers to be calculated at specified hourly rates (the Variation Letter Costs Claims). Caason and Wise Plan did not particularise the amounts claimed at that point but they subsequently claimed $1,014,644.37 and $116,260.14, respectively; and

(c)    Caason sought an equitable set-off of its Variation Letter Costs Claim against input tax credits (GST refunds) it had received for GST on legal invoices paid by the Funder on its behalf. Caason had claimed GST refunds from the Australian Taxation Office (ATO) for the periods up to 30 June 2017 and had been paid a total of approximately $397,251.51. It had also claimed a further amount of approximately $220,385 from the ATO which had not yet been accepted. Under the funding agreement and the Variation Letter, Caason was obliged to remit to the Funder any GST refunds it had received within seven days of receipt or crediting, but it failed to do so. Caason argued that the Funder had agreed that it could offset the GST refunds against its Variation Letter Costs Claim, which agreement the Funder denied. Further, at the time of the 16 November 2017 hearing the ATO was conducting an audit of Caason’s entitlement to claim GST refunds in relation to the legal costs paid by the Funder in the proceeding (the ATO review) and it had not yet made a decision as to Caason’s entitlement (the GST Refunds Issue). Subject to the outcome of the ATO review, Caason proposed to lodge further claims for GST refunds of $80,072.66 once the review was complete.

8    There was a substantial overlap between the applicants’ Representative Costs Claims and Variation Letter Costs Claims because both sought reimbursement of costs and expenses the applicants claimed to have incurred in acting as the applicants in the proceeding. The Representative Costs Claims were more modest in quantum (at least initially) and claimed against the settlement fund whereas the Variation Letter Costs Claims were claimed from the Funder.

9    Insofar as the applicants made claims against the settlement fund, in my preliminary view there was a conflict between their personal interest in maximising the amount of Representative Costs which were to be deducted from the settlement fund and paid to them, and their fiduciary obligations to act in the class members’ interests. Class members’ interests lay in minimising the deduction for Representative Costs or at least in ensuring that only fair and reasonable deductions were allowed. There was not however a conflict of interest in relation to the applicants’ Variation Letter Costs Claims because they were made against the Funder rather than the settlement fund, and those claims therefore did not impinge upon class members’ interests.

10    At the hearing on 6 October 2017 counsel for the applicants submitted that for the purposes of their ‘personal’ claims the applicants should have their own legal representation for the adjourned hearing. I accepted that submission and set a timetable for the applicants to put on any further evidence and submissions in relation to those claims. On 18 October 2017 I made orders:

(a)    giving leave to the applicants to be separately represented for the purposes of their personal claims;

(b)    requiring that by 3 November 2017:

(i)    the applicants file and serve any evidence and submissions in support of any Variation Letter Costs Claim, additional to their Representative Costs claims;

(ii)    Caason file and serve any evidence and submissions in support of any claim to retain any part of the GST refunds it had received from the ATO; and

(iii)    the applicants file and serve any evidence and submissions in respect of the contractual or other relationship between them and the Funder under the Variation Letters and its bearing if any on the case;

(c)    requiring that by 8 November 2017 the Funder file and serve any evidence and submissions in response; and

(d)    listing the applicants’ personal claims for hearing on 16 November 2017.

11    The applicants did not comply with the orders to file further evidence and submissions in support of their Variation Letter Costs Claims, and they were not ready to proceed with those claims on 16 November 2017. In those circumstances, on 16 November 2017 I heard the balance of the settlement approval application, and adjourned the applicants’ Variation Letter Costs Claims to 19 February 2018.

12    On 6 December 2017 I made orders (the 6 December 2017 Orders) to, amongst other things:

(a)    approve the settlement of $19.25 million, inclusive of costs, and the Settlement Distribution Scheme (the Scheme);

(b)    appoint Ms Amanda Banton of Squire Patton Boggs as the Scheme Administrator;

(c)    approve the applicants’ legal costs of the proceeding and the estimate of the Scheme administration costs, and their deduction from the Scheme fund;

(d)    approve a common fund order and the deduction of a reasonable funding commission from the settlement fund; and

(e)    approve an allowance of $150,000 to cover the costs of the Scheme Administrator if it decided to challenge any decision in the ATO review to the effect that Caason was not entitled to claim and/or retain the relevant GST refunds.

13    The 6 December 2017 orders dealt with the applicants’ personal claims in the following ways.

14    First, in relation to the applicants’ Representative Costs Claims, orders 10(c) and (d) approved Caason’s and Wise Plan’s Representative Costs Claims in the reduced amounts of $26,730 and $22,513 respectively, as well as allowing an amount to be agreed or later determined by the Court for the reasonable “costs of and incidental to” their application for approval of the Representative Costs: see Caason No 2 at [175] to [212].

15    Second, in relation to the applicants’ Variation Letter Costs Claims, the applicants were not ready to proceed with those claims. In any event they contended that the Court did not have jurisdiction to decide the claims as they were merely contractual claims between them and the Funder. In the alternative, they submitted that the Court should allow Caason an equitable set off of its obligation to remit GST refunds to the Funder against its Variation Letter Costs Claims. I also submitted that the Court should not decide the Variation Letter Costs Claims because that dispute would be more appropriately resolved by way of a pleaded claim commenced by one of them in another court.

16    I held that the Court possessed jurisdiction to decide the Variation Letter Costs Claims because they arose from the same substratum of facts and legal issues as the underlying justiciable controversy in the settlement approval application and that there were good reasons for the Court to hear and decide them: see Caason (No 2) at [237]-[258]. Because the applicants were again not ready to proceed with their Variation Letter Costs Claims, I adjourned those claims for hearing on 19 February 2018.

17    Third, I rejected Caason’s application for an equitable set-off of its obligation to remit to the Funder the relevant GST refunds it had received against its Variation Letter Costs Claim. I ordered Caason to pay the $397,251.51 in GST refunds it had received to the Scheme Administrator, to be held on trust pending the result of the ATO review. Depending upon the result of the ATO review the orders provided for any relevant GST refunds Caason received to be: (a) returned to Caason; (b) paid directly to the ATO; or (c) paid into the settlement fund to form part of the monies for distribution to the class members: see Caason (No 2) at [259]-[272].

18    On 20 December 2017 Caason sought leave to appeal from the 6 December 2017 Orders. The proposed appeal was limited to certain findings in relation to its personal claims and raised two central questions:

(a)    whether the Court erred in deciding that it had jurisdiction to determine questions about the respective rights and obligations of Caason and the Funder in respect of Caason’s Variation Letter Costs Claim and the GST Refund Issue; and

(b)    if the Court did have jurisdiction to determine those questions, whether it erred in its exercise of discretion in making the relevant orders, including to refuse the equitable set off.

19    As a result of the appeal the 19 February 2018 hearing date for the Variation Letter Costs Claims was required to be adjourned sine die.

20    In an affidavit made 21 December 2017 in relation to the appeal, Mr Astill deposed that while Caason had net assets well in excess of $397,251.51, it had insufficient liquid assets or cash on hand to satisfy the order for it to pay that amount to the Scheme Administrator, either in whole or any substantive part, and that external financing was necessary if the order was to be satisfied.

21    Subsequently the Funder sought security for its costs of the appeal. It obtained security by way of an undertaking from Caason which was recorded in the chapeau to orders made in the appeal on 27 April 2018, as follows:

Upon the Court noting an undertaking given by Caason Investments Pty Ltd (Caason) to the Court to take all necessary steps to permit [the Funder] to call on the Scheme Administrator to pay any adverse costs order made in the application for leave to appeal (or in the appeal proper) in favour of [the Funder] out of the distribution to be made by the Scheme Administrator to Caason, up to the sum of $36,730, which distribution is to take priority over Caason’s damages entitlement and reimbursement costs.

22    On 18 June 2018 the Full Court allowed the application for leave to appeal but dismissed the appeal. On 18 October 2018 the Full Court published its reasons for judgment: see Caason Investments Pty Ltd v International Litigation Partners No.3 Ltd [2018] FCAFC 176; (2018) 265 FCR 487 (Caason Appeal).

23    On 19 June 2018, the ATO wrote to Caason and set out its proposed decision in the ATO review. In the proposed decision the ATO concluded that Caason was not entitled to claim GST refunds in relation to legal costs paid by the Funder in the proceeding, but invited Caason to make further submissions in that regard.

24    On 16 July 2018 Caason lodged a further submission with the ATO in which it reiterated various matters which it said supported its entitlement to claim relevant input tax credits. There was then further correspondence between the ATO, Caason and the Scheme Administrator in relation to the GST Refunds Issue through the balance of 2018.

25    On 18 October 2018, following delivery of reasons for judgment in the Caason Appeal, there was an exchange of emails between Mr Andrew Sutherland, a Principal of Russells, the solicitor for the Funder, and Mr Andrew Brown, a partner of Mills Oakley, the solicitor for Caason:

(a)    at 4.06 pm Mr Sutherland said:

I refer to the reasons published this morning. We need to resolve the outstanding differences between our respective clients. Can you let me know what steps your client now intends to take? I assume you agree that the matter should be relisted and dealt with.

(b)    at 4:30 pm Mr Brown responded by stating that Caason wished to pursue its claim for Variation Letter Costs, which costs he said were still being run up including because Caason had engaged accounting firm PriceWaterhouseCoopers (PwC) to assist it to deal with the ATO. He said that once the GST issue had been resolved those costs could be quantified and the Variation Letter Costs Claims could be listed for hearing;

(c)    at 5:17 pm Mr Sutherland responded and said:

Dear Andrew

So there is no misunderstanding, our client does not accept that it is in any way liable for PWC’s fees (or any other costs). Our client has had no knowledge of their involvement, nor any understanding of their scope of works, estimated charge hourly rates and the like. Our client’s approval was not sought nor even the courtesy of being told.

It will not be meeting those fees.

(d)    at 5:34 pm Mr Brown said:

Andrew

Your client’s default position seems to be that it is not liable for any costs that my client has incurred. I don’t recall that the side letter contained an obligation to seek approval before any costs were incurred. The engagement of PwC was done with a view to maximising the return to group members.

I suspect that the question of the PwC fees will be a question for Murphy J in due course.

26    Although the Caason Appeal was dismissed in June 2018 and reasons for judgment handed down in October 2018, by December 2018 the applicants had still not applied to list the Variation Letter Costs Claim for hearing. In light of this I listed the proceeding for a case management hearing on 10 December 2018.

27    The applicants did not appear at that hearing and they provided no explanation for their non-appearance. Counsel for the Scheme Administrator informed the Court that the applicants now sought to claim various substantial further amounts from the settlement fund, including legal and accounting costs incurred by Caason through the ATO review. That was a new ‘personal’ claim against the settlement fund which had not previously been advanced.

28    The Scheme Administrator sought orders for this new personal claim to be heard and decided as soon as possible so that settlement distribution could proceed. On 10 December 2018 I made timetabling orders pursuant to which the applicants were required to file and serve any interlocutory application they wished to make and any evidence upon which they wished to rely in relation to any further amounts they claimed from the settlement fund by 8 February 2019 (the 10 December 2018 Orders). I listed the application for hearing on 26 February 2019.

29    On 15 January 2019, the ATO issued a final decision to Caason, in which it affirmed its earlier position that Caason was not entitled to claim the relevant GST refunds. The ATO issued a Notice of Amended Assessments to Caason to reflect that decision.

30    Following on from this, Caason advised the Scheme Administrator by email on 21 January 2019 that:

Unless you intend to pursue an appeal my instructions are that Caason cannot take this further having spent a lot of money and done everything possible to try and get the ATO to accept that the GST on the SPB invoices should be refunded…

31    Neither Caason nor Wise Plan complied with the 10 December 2018 Orders by filing an interlocutory application and evidence in support of their new personal claim by 8 February 2019.

32    On 19 February 2019 I made orders by consent to vary the 10 December 2018 Orders, including a ‘guillotine’ order requiring the applicants to file and serve any application and supporting evidence in respect of any further amounts they claimed from the settlement fund by 1 March 2019, after which date they could not do so without leave. I listed the application for hearing on 21 March 2019.

33    On 1 March 2019 the applicants filed an interlocutory application in relation to their claims for further payments from the Scheme fund (the 1 March 2019 Application). I heard that application on 21 March 2019. During the course of and after the hearing the parties attempted to settle the dispute, as part of which Caason agreed to provide further material to the Scheme Administrator. On 26 March 2019 Squire Patton Boggs (SPB) for the Scheme Administrator sent an email to chambers setting out the arrangements agreed between the parties.

34    On 27 March 2019 Mr Richard Flory, Caason’s General Counsel, emailed the Scheme Administrator seeking an extension of time to provide further material and the Scheme Administrator declined to provide an extension. On 29 March 2019 the Scheme Administrator emailed Chambers stating that Caason had not complied with the agreed arrangements for the provision of further material and sought that the Court determine the 1 March 2019 Application.

35    However, given the substantial overlap between the applicants’ claims in the 1 March 2019 Application and their Variation Letter Costs Claims, I decided it would be more efficient to delay deciding the 1 March 2019 Application until the Variation Letter Costs Claims had also been heard and the two matters could be decided at the same time.

36    Accordingly I directed the parties to confer and endeavour to agree on a timetable for evidence in the Variation Letter Costs Claims, which I proposed to list in late July. Mr Flory informed the Court that Caason was “quite happy to [pursue its Variation Letter Costs Claim] within the timetable” proposed. I made it clear to the applicants that this was their last chance to agitate their Variation Letter Costs Claims and that a failure to comply with the timetable would have consequences.

37    The parties provided similar draft orders to chambers on 25 March 2019 and on 3 April 2019 I made orders timetabling the Variation Letter Costs Claims, including guillotine orders in Orders 3 and 4 (the 3 April 2019 Orders). Those orders relevantly provided:

1    International Litigation Partners No. 3 Pte Ltd (ILP) has leave to intervene in these proceedings, until further order of the Court.

2    By 3 May 2019, the first plaintiff (Caason) and second plaintiff (Wise Plan) are each to:

(a)    file and serve any Interlocutory Application it wishes to make, along with any further affidavits in support of such application, in relation to costs claimed under its “variation letter” agreement with ILP; and

(b)    if it files and serves such Interlocutory Application, identify in writing to ILP’s solicitor (by email to asutherland@russellssydneypartners.com.au) any affidavits or exhibits previously filed or served in the proceedings upon which it also intends to rely at the hearing of the application.

3    In the event that Caason or Wise Plan does not file and serve, by 3 May 2019, and the Interlocutory Application in accordance with Order 2 above, it may not, after that date file or serve any such application (of the kind contemplated in Order 2) without first obtaining leave of the Court.

4    In the event that Caason or Wise Plan files and serves an Interlocutory Application in accordance with Order 2 above, it may not rely, at the hearing of that application, on any affidavits or exhibits not filed and served, or identified in writing to ILP’s solicitor, in accordance with Order 2 without first obtaining, in advance of the application hearing, leave of the Court.

…

I listed the Variation Letter Costs Claims for hearing on 25 and 26 July 2019, and Chambers sent the orders to the parties under cover of an email which stated that the Court was not prepared to further relax the timetable.

38    On 3 May 2019 Wise Plan filed an interlocutory application and affidavit in support of its Variation Letter Costs Claim.

39    Caason did not file an interlocutory application by the 3 May 2019 deadline for compliance. On 16 May 2019 it purported to file and serve an interlocutory application but, by operation of the guillotine orders, it required leave before it could file the application. Caason subsequently sought leave to file the application and I listed that application for hearing on 22 May 2019. For the reasons I explain, I refused to grant Caason leave to file the application.

40    At that stage Wise Plan’s Variation Letter Costs Claim remained on foot, but subsequently chambers were notified that the claim had been settled. On 22 July 2019 I made orders, by consent, to dismiss Wise Plan’s interlocutory application with no order as to costs.

THE 1 MARCH 2019 INTERLOCUTORY APPLICATION

41    The 1 March 2019 Interlocutory Application was drawn by Mr Flory, but it concerned claims by both applicants. The application sought the following orders (without correction):

1.    That the Applicants have leave to appear in this matter from time to time without being represented by an Australian Legal Practitioner.

2.    That clause 11(a) and (b) of the Orders made on the 6 December 2017 (“the Orders”) in respect of Caason, be struck out or stayed until further Order.

3.    That pursuant to clause 13(iii) of the Orders Caason’s Representative costs be paid forthwith.

4.    That Caason’s entitlements under the Settlement Distribution Scheme (SDS) be paid forthwith.

5.    That clause 10(c) of the Orders be varied or amended to include or to add Caason’s costs directly or indirectly in relation to it’s [sic] dealings with the ATO in relation to the “GST refund” such costs to include its legal accounting and any other related costs of recovery from the ATO including its costs of dealing with the Scheme Administrator. These costs to be in addition to or be included as part of the Separate Representation Costs incurred by the applicants.

    3A. That the legal costs of and incidental to Caason’s application for approval of the Caason Representative Costs included in that clause 10(c) together with the legal costs of and incidental to Wise Plan’s application for approval of the Wise Plan Representative Costs included in that clause 10(d) as invoiced by Mills Oakley less an amount for the legal services relating to the Applicants’ preparing, filing and serving further evidence in their Application for Variation Letter Costs in December 2017 & January 2018 as agreed with the Scheme Administrator and in the absence of agreement to be taxed on a gross sum basis by a mutually agreed Costs Referee whose findings and certificate to be binding on the Applicants and the Scheme Administrator.

6.    That the other non-legal service costs of an incidental to Caason’s application for approval of the Caason Representative Costs included in that clause 10(c) be as agreed with the Scheme Administrator and in the absence of agreement to be taxed on a gross sum basis by a mutually agreed Costs Referee whose findings and certificate to be binding on the Applicants and the Scheme Administrator.

7.    That the costs of and incidental to Wise Plan’s application for approval of the Wise Plan Representative Costs included in that clause 10(d) be as agreed with the Scheme Administrator and in the absence of agreement to be taxed on a gross sum basis by a mutually agreed Costs Referee whose findings and certificate to be binding on the Applicants and the Scheme Administrator.

8.    That the other non legal service or and incidental to approval of Wiseplan’s application of approval of the Caason Representative costs as well as Caason’s costs included in that clause 10(d) be as agreed with the Scheme Administrator and in the absence of agreement to be taxed on a gross sum basis by a mutually agreed Costs Referee whose findings and certificate to be binding on the Applicants and the Scheme Administrator.

9.    That the until further Order the sum of $312,896.74 being the costs invoiced to the Applicants by its lawyers be held in the trust account of SPB to be drawn and paid as approved by the Court pending the hearing of these matters and to be added to the “Costs Reserve” as defined in clause 10 of the Orders.

    That until further Order the sum of $96,650.50 being the PWC invoiced costs for the GST matter be held in the trust account of SPB to be drawn and paid as approved by the Court pending the hearing of these matters and be added to the “Costs Reserve” as defined in clause 10 of the Orders.

    That until further Order the sum of $100,000 being the estimate of the Applicants non legal costs be held in the trust account of SPB to be drawn and paid as approved by the Court pending the hearing of these matters and be added to the “Costs Reserve” as defined in clause 10 of the Orders.

10.    Such further or other Orders as this Honourable Court sees fit.

42    The applicants did not press proposed orders 6, 7, 8 and 9, which left proposed orders 1, 2, 3, 3A, 4 and 5 to be decided.

The evidence

43    The applicants relied upon the following evidence:

(a)    Caason relied on the following affidavits of Craig Anthony Astill, Managing Director of Caason, sworn:

(i)    11 September 2017 together with Confidential Exhibit CAA-3 (Third Astill Affidavit);

(ii)    5 October 2017 (Fourth Astill Affidavit);

(iii)    3 November 2017 together with Confidential Exhibit CAA-4 (Fifth Astill Affidavit);

(iv)    1 March 2019 together with exhibits CAA-5, CAA-6 and CAA-7 (Sixth Astill affidavit);

(b)    Wise Plan relied on an affidavit by Mr Timothy Burke, Company Director, sworn 1 March 2019;

(c)    the Scheme Administrator relied on affidavits of Amanda Kim Banton, sworn on 15 March 2019, and 21 March 2019, together with a Confidential Report about the GST claim dated 14 March 2019 as required by order 33(a) of the 6 December 2017 Orders; and

(d)    the Funder relied on the affidavit of Mr Sutherland, the Funder’s solicitor, sworn on 19 March 2019.

Consideration

Proposed Order 1

44    The applicants sought leave to appear without being represented by an Australian Legal Practitioner. In relation to Caason, such an order was unnecessary because Mr Flory, who sought leave to appear for it informed the Court he was legally qualified and held a current practising certificate. Mr Timothy Burke appeared for Wise Plan and had previously provided the Court with evidence that he is legally qualified and held a practising certificate. In the event that Mr Burke does not hold a current practising certificate, I grant leave nunc pro tunc for him to appear to represent Wise Plan in the proceeding.

Proposed Order 2

45    The applicants sought that Orders 11(a) and (b) of the 6 December 2017 Orders be struck out or stayed until further order.

46    Order 11(a) of those orders required Caason to pay to the Scheme Administrator $397,251.51 it had received by way of GST refunds, within seven days. Order 11(b) of those orders required Caason to pay to the Scheme Administrator any further GST refunds it received after the date of the orders, within seven days of receipt or credit.

47    As I explained in Caason (No 2) (at [225)-[231]), under the funding agreements the Funder entered into with the applicants and class members, any GST it paid was recoverable from any Court approved settlement or favourable judgment in the proceeding. While the Funder paid GST as a component of the invoices for legal costs it paid on behalf of the applicants, Caason’s funding agreement provided for it to claim input tax credits from the ATO in respect of the GST paid. Those GST refunds were not though received by Caason for its own benefit. Under clause 15 of the funding agreement it was required to remit to the Funder the GST refunds it received within seven days of receipt or crediting. To the extent that Caason received GST refunds and remitted them to the Funder, the amount of any settlement or judgment monies available for distribution to class members would be greater.

48    The Caason Variation Letter varied the Caason funding agreement by providing a lower funding commission rate payable by Caason, and for the Funder to reimburse Caason’s reasonable legal, accounting and administrative work in relation of the proceeding including the time spent by Mr Astill and Mr Flory at specified hourly rates. The benefit to Caason of a reduced funding commission rate and payment of its reasonable legal, accounting and administrative costs was conditional on: (i) Caason continuing to act as representative applicant; and (ii) Caason lodging Business Activity Statements (BAS) to recover the GST component of the invoices for legal costs paid by the Funder and paying an amount equal to the amount received or credited to the Funder.

49    Caason received $397,143 for the period up to 30 June 2017 in relevant GST refunds, and it lodged claims for further GST refunds of $221,883. Subject to the outcome of the ATO review, it proposed to lodge claims for further GST refunds of approximately $80,072.66 once the review was complete.

50    On 19 June 2018 the ATO provided Caason with an audit position paper setting out a proposed decision to reject Caason’s entitlement to claim and retain the GST refunds it had received. After considering further submissions made by Caason on 16 July 2018, the ATO issued a final decision on 15 January 2019. The ATO rejected Caason’s claim for GST credits for the period 1 April 2014 to 31 March 2018 (the Audit Period) and reduced Caason’s GST credits by $669,768. The amendments to Caason’s GST entitlements included $221,883 under Caason’s June 2017 BAS and $79,527 under Caason’s BAS for 1 July 2017 to 31 March 2018 which amounts had not been refunded to Caason by the ATO.

51    In the 19 June 2018 proposed decision the ATO said:

It should be noted that $34,189 GST credits previously claimed by you in BAS periods prior to March 2014 (and included in total GST credits claimed as per your detailed spreadsheet emailed to the Tax Office on 07/06/2018), have not been amended, as they have timed out due to the four year time limit.

A footnote to the letter said that the reduction in Caason’s GST credits for the period 1 April 2014 to 30 June 2017 were, as a result, less by $34,189.

52    On 5 July 2018 Caason’s solicitor, Mr Brown, wrote to the Scheme Administrator and to the Funder’s solicitor, Mr Sutherland. He summarised the ATO’s audit position paper in the following terms:

You will note that the findings of the ATO audit are that:

(a)    our client, in its corporate capacity, did not acquire any of the legal services invoiced by Piper Alderman and Squire Patton Boggs for the legal costs of the Arasor class action;

(b)    not having acquired the legal services provided, our client is not entitled to any input tax credits because it did not make any creditable acquisitions, and therefore the requirements of section 11-5 of the GST Act of not been met; and

(c)    our client in its own capacity has no entitlement to input tax credits pursuant to section 11-20 of the GST Act.

As a result, the ATO will amend our client’s BASs for the total amount of GST credits claimed including an adjustment for the $397,143 previously refunded to Caason (GST Refund). On this basis, as the ATO is effectively recovering the GST Refund, our client cannot comply with paragraph 11 of the Orders [of 6 December 2017].

He did not specifically refer to the ATO’s advice that Caason’s GST credits had not been reduced by $34,189 for amounts it had claimed for periods prior to March 2014.

53    In his Sixth Affidavit Mr Astill described the outcome of the ATO review in the following terms:

…the ATO has now set off the previous GST refund of $397,251.51 and has stopped all other GST refunds to Caason from its other businesses and made demands on Caason for GST now owing to the ATO.

He exhibited correspondence from the ATO which showed that it had reduced Caason’s GST credits by $669,768, and had made a demand for an overdue tax debt of $391,378.99. He did not refer to the ATO’s advice that Caason’s GST credits had not been reduced by $34,189 for amounts claimed for periods prior to March 2014.

54    Caason submitted that in circumstances where it was not entitled to claim or retain the relevant GST refunds it had received Orders 11(a) and (b) of the 6 December 2017 Orders had no utility and should be struck out or stayed.

55    I accept that Order 11(b) no longer has utility. In circumstances where the ATO has decided that Caason was not entitled to claim the relevant GST refunds and it will not receive any future relevant GST refunds, there is no utility in an order requiring any future refunds to be remitted to the Scheme Administrator.

56    I take a different view however in relation to Order 11(a) because Order 13(b)(iii) of the 6 December 2017 Orders makes Caason’s entitlement to payment of $26,730 for its Representative Costs subject to its compliance with Order 11(a).

57    The Scheme Administrator deposed that although the ATO amended Caason’s GST assessments to deny $669,768 in relevant GST refunds for the Audit Period of 1 April 2014 to 31 March 2018, Caason retained $34,189 it had claimed prior to the Audit Period, as the ATO was out of time to amend GST assessments made prior to 1 April 2014. On that basis the Scheme Administrator said that $34,189 remained due to the Scheme Administrator under Order 11(a). The Scheme Administrator argued that if Caason wished to receive its Representative Costs it must first pay to the Scheme Administrator $34,189 of the GST refunds paid to it, which it had wrongly retained.

58    Caason was on notice of the Scheme Administrator’s claim. The ATO letter of 19 June 2018 expressly stated that $34,189 in GST refunds claimed by Caason for periods prior to March 2014 had not been amended through the ATO review, because they had timed out due to the four year time limit. Caason denied that it had retained $34,189 in relevant GST refunds but, although it should have been straightforward for it to adduce evidence that it did not retain the benefit of any such payment or credit, it did not adduce any cogent evidence in that regard. It did not adduce evidence to rebut the Scheme Administrator’s contention or to show that the ATO’s position paper was incorrect. Caason had the onus of establishing that it is appropriate to strike out or stay Order 11(a) and it did not do so.

Proposed Order 3

59    The applicants sought an order that Caason’s Representative Costs be paid forthwith. The result of such an order would require a strike out or stay of Order 13(b)(iii) of the 6 December 2017 Orders which, as I have noted above, provided that Caason’s entitlement to payment of the Representative Costs was subject to its compliance with Order 11(a).

60    Consideration as to whether it is appropriate to strike out or stay Order 13(b)(iii) turns upon the same matters as I have set out in relation to proposed order 2. For essentially the same reasons I am not satisfied that it is appropriate to make proposed order 3.

Proposed Order 4

61    The applicants sought orders that Caason’s entitlements to compensation under the Scheme be paid forthwith.

62    The Scheme Administrator has made an interim distribution of the settlement to class members but did not pay Caason its entitlement. The Scheme Administrator submitted that Caason is bound by the undertaking it gave to the Court on 27 April 2018 to take all necessary steps to permit the Funder to call on the Scheme Administrator to pay any adverse costs order made in favour of the Funder in the application for leave to appeal, out of any distribution under the Scheme to which Caason is entitled, and in priority to any such entitlement, up to the sum of $36,730.

63    The Scheme Administrator deposed that the amount calculated as Caason’s interim distribution under the Scheme is $33,708.37. She deposed that she had been informed by the Funder’s solicitor that the costs of the appeal had been assessed at $114,300 and had not been paid. The Scheme Administrator submitted that, being on notice of the Funder’s priority claim, she should not be directed to pay Caason’s entitlement to compensation forthwith.

64    I accept that submission. Caason has in effect charged its entitlement to a distribution under the Scheme in favour of the Funder and, if a distribution were to be made to Caason of its entitlement under the Scheme, at this stage that entitlement would be payable to the Funder. I decline to make proposed order 4.

Proposed Order 3A

65    By Orders 10(c) and (d) of the 6 December 2017 Orders I approved Caason’s and Wise Plan’s Representative Costs claims in the reduced amounts of $26,730 and $22,513 respectively. The orders also provided for the applicants to be paid their reasonable “costs of and incidental to” their application for approval of the Representative Costs, in an amount to be agreed or determined by the Court: see Caason No 2 at [175] to [212].

66    Under proposed order 3A the applicants sought the following relief:

That the legal costs of and incidental to Caason’s application for approval of the Caason Representative Costs included in that clause 10(c) together with the legal costs of and incidental to Wise Plan’s application for approval of the Wise Plan Representative Costs included in that clause 10(d) as invoiced by Mills Oakley less an amount for the legal services relating to the Applicants’ preparing, filing and serving further evidence in their Application for Variation Letter Costs in December 2017 & January 2018 as agreed with the Scheme Administrator and in the absence of agreement to be taxed on a gross sum basis by a mutually agreed Costs Referee whose findings and certificate to be binding on the Applicants and the Scheme Administrator.

67    The proposed order is poorly drafted but it was plain from the materials that the applicants seek the “legal costs of and incidental to” their earlier application for approval of their respective Representative Costs, and that the claim relates to costs invoiced by Mills Oakley.

68    The applicants did not however seek that the Court fix those amounts and instead sought that the legal costs of and incidental to the application for Representative Costs be “taxed” [sic] by a Costs Referee. I did not consider it appropriate to refer the question of costs to a taxation, or to appoint a referee pursuant to s 54A of the Act. I took the view that it would be quicker and more efficient if I decided the question myself. In reaching that view I assumed that the applicants would put forward a properly substantiated claim for their costs. As it eventuated, that assumption was incorrect.

69    The applicants particularised their claim for costs of and incidental to the application in an email dated 22 February 2018 from Ivana Griggs of Mills Oakley to SPB, the solicitors for the Scheme Administrator. The email stated:

Pursuant to paragraphs 10(c) and 10(d) of the orders made on 6 December 2017 by his Honour Justice Murphy, our client’s claim a total of $61,603.85 (incl GST) for their costs of proving their Representative Costs. These are costs incurred by both Caason and Wise Plan in the period from the commencement of our retainer until the hearing of the proceedings on 16 November 2017.

70    Ms Griggs provided the Scheme Administrator with a copy of Mills Oakley’s “WIP Ledger (excluding reversals)” in relation to a file titled “Advice in relation to Funding Agreement” (WIP Ledger). The WIP Ledger set out a series of time entries for work undertaken by Mills Oakley staff over the period from 12 October 2017 to 16 November 2017 inclusive and claimed a total of $44,457.60. She also provided the Scheme Administrator a tax invoice of Mr Barnett of counsel for $17,146.25, which included a charge of $4,300 for preparation for and appearing at the 16 November 2017 hearing. The time charges and counsel’s fees total $61,603.85, which was the amount Ms Griggs claimed.

71    A Mills Oakley “Statement of Account” to Caason is exhibit “CAA-6” to the Sixth Astill Affidavit. It shows that between 28 February 2018 and 31 October 2018 Mills Oakley rendered six invoices to Caason in a total of $311,534.74 (including Tax Invoice No. 283467 in the sum of $108,088.20) on the file titled “Advice in relation to Funding Agreement”. It also rendered one invoice in the sum of $1,353 on a file titled “Applicant to set aside statutory demand”. Overall Mills Oakley invoiced Caason a total of $312,896.74.

72    Caason tendered Tax Invoice No. 283467 into evidence. It relates to the work performed in the period 12 October 2017 to 26 February 2018, which is shortly before the orders for separate representation were made on 18 October 2017 and well after the 16 November 2017 hearing. It is thus clear that not all of that invoice could be costs “of and incidental to” the application for Representative Costs.

73    Caason did not however break down that invoice into the amounts which related only to that application. Instead it relied on entries in the WIP Ledger to show that it incurred charges of $61,603.85. The WIP Ledger is, however, expressly stated to be “before reversals” and it does not show what costs were actually invoiced to Caason for the application for Representative Costs.

74    The applicants had the onus to establish that their reasonable costs of and incidental to the application for Representative Costs total $61,603.85 (incl of GST) and they did not do so. I say this because, amongst other thing:

(a)    the entries in Tax Invoice No. 283467 indicate that the work undertaken by Mills Oakley extended well beyond the application for approval of Representative Costs. Caason made no attempt to break down that invoice into the amounts which related only to the relevant application. It is not clear from the invoice whether the entries in the relevant time period relate to the application for approval of Representative Costs or whether they also include amounts for work in relation to the Variation Letter Costs Claims;

(b)    SPB, not Mills Oakley, prepared the bulk of the affidavits in support of the application for approval of Representative Costs, including the Third Astill Affidavit sworn 11 September 2007, the Fourth Astill Affidavit sworn 5 October 2017, the Third Burke Affidavit sworn 20 September 2017 and the Fourth Burke Affidavit sworn 5 October 2017. Those affidavits were the primary evidence upon which the applicants relied in seeking approval of the Representative Costs: see Caason (No 2) at [178] and [185];

(c)    the WIP Ledger includes entries which do not appear on their face to be costs “of and incidental to” the application for approval of Representative Costs. For example, the entries include work reviewing, drafting and settling affidavits in late October and early November 2017. That work can only have been undertaken in relation to the Fifth Astill Affidavit, the Fifth Burke Affidavit and an affidavit of Mr Flory which were sworn on 3 November 2017. The latter two mentioned affidavits were not relied upon by the applicants in the application for Representative Costs and they essentially concerned the applicants’ Variation Letter Costs Claims. While some of the costs of drafting or settling them may be appropriate to include, not all of it should be allowed under the rubric of reasonable costs “of and incidental to” the application for Representative Costs; and

(d)    Mr Barnett’s fees slip include amounts for considering issues regarding Caason’s GST position and does not relate wholly to the application for approval of Representative Costs. Nor do I consider that the $4,300 fee for the 16 November 2017 hearing should be entirely attributed to the application for Representative Costs because the hearing on that date concerned more than just that issue.

75    I also keep in mind that Caason and Wise Plan claimed $80,073.88 and $76,708.27 respectively for their Representative Costs, and I allowed them only $26,730 and $22,513. In the circumstances of the present case it would not be reasonable or proportionate to allow costs of $61,603.85 for seeking approval of Representative Costs which totalled $49,243. While it may be appropriate to allow an applicant to be reimbursed from the settlement fund for the time, inconvenience and expense involved in prosecuting the proceeding for the benefit of class members (Darwalla Milling Co Pty Ltd & Ors v F Hoffman–La Roche Ltd & Ors (No 2) [2006] FCA 1388; (2006) 236 ALR 322 at [76]), that is not a blanket license for an applicant to incur tens of thousands of dollars in legal costs in an (unsuccessful) attempt to maximise the reimbursement they seek.

76    I accept the Scheme Administrator’s submission that the evidence does not support a claim for $61,603.95 or anything like that amount for reasonable costs of and incidental to the application for Representative Costs. It was necessary for the applicants to particularise and substantiate the reasonable costs they incurred in pursuing their Representative Costs and they failed to do so.

77    In the course of the 21 March 2019 hearing, the Scheme Administrator made an open offer to the applicants to pay $13,774.15 in respect of the costs of and incidental for Representative Costs. In a further affidavit by Ms Banton made 29 March 2019 she attached correspondence which shows that Caason did not accept that offer, and that the Scheme Administrator subsequently increased its offer to $19,224.69. The Scheme Administrator informed Chambers by email on 29 March 2019 that Wise Plan had accepted the offer but that the Scheme Administrator had not received a response from Caason.

78    In my view there are reasons to order costs in an amount less than the amount offered, and the Scheme Administrator’s offer was more than fair. In circumstances where one of the applicants has accepted the offer of $19,224.69 I am prepared to make an order in that amount. Had the offer not been made and accepted I would have allowed a slightly lesser amount.

Proposed Order 5

79    The applicants sought the following order:

That clause 10(c) of the Orders be varied or amended to include or to add Caason’s costs directly or indirectly in relation to it’s [sic] dealings with the ATO in relation to the “GST refund” such costs to include its legal accounting and any other related costs of recovery from the ATO including its costs of dealing with the Scheme Administrator. These costs to be in addition to or be included as part of the Separate Representation Costs incurred by the applicants.

The proposed order seeks that Caason be reimbursed all of the third-party legal and accounting costs it has incurred together with its internal costs in relation to the GST Refunds Issue. Although the proposed order refers only to such costs having been incurred by Caason, the applicants informed the Court that Wise Plan also has an interest in the order because it agreed with Caason to pay a share of the costs which Caason had incurred.

The applicants’ submissions regarding proposed order 5

80    In the Sixth Astill Affidavit, Mr Astill contended that Caason should be reimbursed all the costs it had incurred directly or indirectly in relation to the ATO review of its claims for relevant GST refunds, including its costs of dealing with the Scheme Administrator in regard to that issue. He said that the reimbursement should be made from the settlement fund, rather than by the Funder in satisfaction of its obligation under the Caason Variation Letter.

81    Mr Astill deposed (at [6] and [7]) as follows:

Caason has incurred substantial costs of dealing with the ATO in its endeavours on behalf of the scheme members and pursuant to the Orders made in this matter to seek a positive outcome from the ATO in relation to the GST refunds which would have been returned to the common fund.

Such costs incurred include the costs of instructing Price Waterhouse Coopers (PWC) to advise it in relation to its dealings with the ATO, dealings with Mills Oakley its former lawyers, communications with the Scheme Administrator to keep her informed of the progress, and costs incurred by Caason’s Managing Director, its General Counsel, Chief Financial Officer (CFO) and other administration costs in support of seeking a positive outcome from the ATO.

Caason incurred these costs in the belief that it was ordered to do so pursuant to paragraphs 32 to 34 of the December Orders and that those costs including legal, accounting and administration would be reimbursed to it as Caason was acting pursuant to the Orders and for the benefit of the scheme members and not for its own benefit. It did not believe the intent of the Orders was that Caason would have to bear the costs of seeking the GST resolution from the ATO without any reimbursement of its GST recovery costs. Alternatively these costs and disbursements ought to be met out of the Scheme Fund and or ILP pursuant to the cost agreement with Caason and Wiseplan. Caason’s estimate of those additional costs including the costs of Wiseplan is approximately $100,000 excluding GST, as at the date of swearing this my affidavit.

82    Mr Astill deposed that Caason was being sued by Mills Oakley for $312,896.74 for costs incurred as a result of it being separately represented. Caason’s written submissions of 20 March 2019 stated:

The Applicants did not seek to be separately represented nor did they request separate representation when the [6 December 2017] Orders were made. They assumed when Orders were made it was made on the principle that they would not be out of pocket for any costs and disbursements incurred as a result of the Orders that were made on the basis that the costs agreement with ILP covered them and that their costs would be covered from the Common Fund.

83    The applicants further argued that they did not have the benefit of advice from SPB, their solicitors as representative applicants, in relation to: the terms of the funding agreement; the terms of the Variation Letters; the GST Refund Issue; or in relation to the steps the applicants took in respect of these issues. They contended they were left in a perilous position which was not of their own making, had expended considerable resources and faced the prospect of recovering none of or only a small portion of that outlay.

84    Mr Astill summarised the losses Caason had suffered (at [12] of the Sixth Astill Affidavit) as follows, although he did not particularise Caason’s claim for reimbursement by reference to all of those items:

Caason’s current negative financial position in relation to this matter can be summarised as follows:

(i)    It is being sued by Mills Oakley for $312,896.74 under the separate representation Orders;

(ii)    It has received a demand from the ATO for the refund of the GST in the sum of $397,251.51;

(iii)    It has not received any distribution from the Scheme Fund for either its entitlements under the Settlement Scheme which are approximately $36,730.00 or its Representative costs which were $26,730 pursuant to clause 10(c) of the orders. As the ATO has determined that Caason was not entitled to a GST refund, clause 11(a) of the December Orders should be deemed to have been complied with and accordingly Caason seeks a release to it of its representative costs pursuant to clause 13(iii) of the December Orders;

(iv)    It is being pursued for ILP's Appeal Costs estimated by the Federal Court in the sum of $114,300.00;

(v)    It has incurred costs to PWC for the GST matter with the ATO in the sum of $95,650.50;

(vi)    It continues to incur its own legal, administration and accounting costs to assist the Scheme Administrator in preparing an appeal against the ATO position and estimates that its costs including the costs of Wiseplan is approximately $100,000.00 excluding GST , at the date of this affidavit;

(vii)    It’s claim against ILP under the Variation Letter variation agreement in the sum of $690,608.26 is still to be determined and it continues to incur costs to enforce that agreement. It seeks a set off against any estimate of costs that ILP may have against on the Appeal matter, despite its view that the Appeal costs should be borne by the Scheme Administrator or ILP. Even if it were to succeed in all or part of that matter there is uncertainty as to its ability to collect any judgement made against ILP, the Defendant being a Singapore Company with no known assets in the jurisdiction and no arrangements having been made by ILP to provide security for the amount of $690,608.26 claimed by Caason.

85    Mr Astill contended that it was unjust and unfair for the applicants to bear the brunt of those costs and the substantial financial impairment that resulted, and he sought the following relief (at [15]):

The Applicants seek relief from these costs incurred as they continue to expend time and effort and additional costs now with the Scheme Administrator and with ILP pursuant to clause 33(a) and (b) of the December Orders whilst the Scheme Administrator determines whether to Appeal the ATO decision or not.

For the several reasons above the Applicants request that this Honourable Court make the Orders or similar Orders sought in their Interlocutory Application to provide them with the relief for their costs incurred over and above the Representative Costs. They have incurred these costs on behalf of the scheme members and ought to be reimbursed out of the Scheme Fund.

The Applicants seek an Order that in all fairness their costs and disbursements incurred by their retention of any third-party provider such as PWC and Mills Oakley be paid in full.

The Applicants own costs incurred in continuing to assist the Scheme Administrator and attend to their role as lead Applicants in this matter, as described above, be determined by a mutually agreed referee in the absence of agreement with the Scheme Administrator and they agreed to be bound by a decision of the referee.

The Applicants have expended and continue to expend considerable time and costs including any opportunity costs they have incurred in being the Lead Applicants in this matter. The running of this case on its ongoing issues with the ATO and ILP given the time it is taken and the substantial increase in the quantity of the material and parties involved has meant that the original estimates of costs were hugely deficient, and it seeks reimbursement in full for its disbursements and consideration for its own costs. Additionally, the Applicant should not be placed at risk of being sued by any third-party providers who supported them in their efforts to seek a positive result from the ATO pursuant to the December Orders.

(Emphasis added.)

86    The thrust of the applicants’ contentions was that Caason had expended significant time and resources, including by incurring substantial third-party costs, in pursuit of class members’ interests. They submitted that proposed order 5 was necessary as a matter of fairness to ensure that they were not left out of pocket in acting as representative applicants in the proceeding, and because the costs were authorised in substance by orders 32 to 34 of the 6 December 2017 Orders and by the orders allowing them to have separate legal representation.

87    Although the applicants did not properly particularise the amount of costs they claimed, I proceed on the basis that the outer boundaries of the claims are those set out at [12] of the Sixth Astill Affidavit (as set out above at [83]). The applicants claim $508,547.24, comprising:

(a)    $312,896.74 invoiced by Mills Oakley as at July 2018;

(b)    $95,650.50 invoiced by PwC in relation to the GST Refund Issue; and

(c)    approximately $100,000 in further legal, accounting and administrative costs since the applicants’ Representative Costs were approved.

Consideration regarding proposed order 5

88    For the reasons I explain below I am not persuaded that it is appropriate to order anything like the amount sought by the applicants, but I am prepared to order the reimbursement of a small amount. Caason may though seek to recover any reasonable legal, accounting and administrative costs from the Funder pursuant to the Caason Variation Letter.

89    First, proposed order 5 is not in any real sense an application for a variation of Order 10(c) of the 6 December 2017 Orders. It is an application for a different order upon a largely different basis. Order 10(c) approved Caason’s Representative Costs together with reasonable “costs of and incidental to” that application. Under proposed order 5 the applicants seek different relief, namely reimbursement of substantial charges and costs which are quite different to the legal costs Caason incurred in seeking approval of its claim for Representative Costs.

90    Second, the applicants’ contention that they should be reimbursed the substantial expenses and charges Caason has incurred is partly based upon the contention that they did not seek orders for separate legal representation and reasonably assumed that they would not be out-of-pocket for the costs they incurred. It is not however correct for the applicants to state that they did not request leave to be separately represented. At the 6 October 2017 hearing counsel for the applicants submitted that for the purposes of their personal claims the applicants should be separately represented when those claims were relisted for hearing. I accepted that submission.

91    I did so because the applicants’ personal interests in seeking substantial Representative Costs from the settlement fund were likely to be in conflict with their fiduciary obligations to the class members. It was relevant too that they required separate representation in relation to their related Variation Letter Costs Claims against the Funder which were to be heard at the same time. In circumstances where the separate representation orders were made because of a possible conflict of interest I can see little basis for the contention that it was reasonable for the applicants to assume that the costs they incurred would be recoverable from the settlement fund.

92    That is particularly so when the applicants’ claims were plainly overstated. That overstatement can be seen in the fact that:

(a)    Caason and Wise Plan claimed $80,073.88 and $76,708.27 respectively for their Representative Costs and I allowed only $26,730 and $22,513. Then the applicants sought $61,603.85 for the costs of and incidental to that claim which I have allowed only in the sum of $19,224.69; and

(b)    the applicants sought reimbursement of $508,547.24, from the settlement fund, most of which Caason incurred after settlement was reached, and without seeking or obtaining authorisation from the Court or the Scheme Administrator to do so. It was not reasonable for the applicants to assume that they would be reimbursed such substantial costs.

93    Further, in my view the assertion that the applicants assumed that they would be reimbursed those substantial costs from the settlement fund is a recent invention. It is plain on the evidence that the applicants understood that such costs were recoverable from the Funder as part of their Variation Letter Costs Claims; not from the settlement fund.

94    For example, in the Fifth Astill Affidavit sworn 3 November 2017, Mr Astill said:

Caason has now quantified the costs which it considers it may reasonably seek pursuant to the terms of the Caason Variation Letter (Caason’s Variation Letter Costs). I have calculated those costs as totalling $690,608.26 as set out in the schedule contained at page 11 of the Exhibit…The claim includes my time and also the legal costs of Caason and Richard Flory who is the General Counsel of the Caason Group of Companies…

He also said that Caason undertook to credit any amount allowed for Representative Costs against the amount owed to it by the Funder for Variation Letter Costs.

95    After the hearing of the application for approval of the Representative Costs Claims on 16 November 2017 the applicants continued to treat their Variation Letter Costs as separate costs which were to be paid by the Funder, rather than from the settlement fund. For example, on 15 February 2018 Ms Lisa Gallate of SPB sent an email to Mills Oakley to enquire whether the applicants wished to claim any “incidental costs” under Orders 10(c) and (d) of the 6 December 2017 Orders. Ms Griggs responded by email on 18 February 2018 and said “Our clients will be making a claim for these costs as they certainly expended costs dealing with those costs as well as side letter costs” (emphasis added). The reference to the “side letter costs” is plainly a reference to Variation Letter Costs which shows that Ms Griggs recognised the difference.

96    I note also that on 5 July 2018, Mr Brown wrote to the Scheme Administrator and to Mr Sutherland and said:

As you would appreciate, our client has been fully cooperative with the ATO in the course of the audit (which has been protracted) and engaged the services of an external adviser, PWC, to assist it with the process. In doing so, our client has incurred significant costs, including both for Mr Astill and Mr Flory's time and the costs charged by PWC, for work which the Scheme members ultimately stood to benefit from (Audit Costs). Further, in the event that the Scheme Administrator or ILP decide to appeal the ATO's decision as contemplated by the Orders (either by way of internal review or objection to the amended assessments), our client anticipates that it may incur further costs in assisting or enabling this appeal to proceed (Tax Appeal Costs).

Our client considers that the Audit Costs and any Tax Appeal Costs fall squarely within the scope of the Variation Letter Costs payable by ILP. Accordingly, we hereby put ILP on notice that our client intends to include in its Variation Letter Costs claim, the Audit Costs and Tax Appeal Costs (if any) incurred by it.

(Emphasis in original.)

97    On 18 October 2018 Mr Brown emailed Mr Sutherland and said:

Your client’s default position seems to be that it is not liable for any costs that my client has incurred. I don’t recall that the side letter contained an obligation to seek approval before any costs were incurred. The engagement of PwC was done with a view to maximising the return to group members.

I suspect that the question of the PwC fees will be a question for Murphy J in due course.

(Emphasis added.)

98    Again, the reference to the “side letter” is a reference to the Caason Variation Letter, and Caason’s entitlement to reasonable legal, accounting and administrative costs under that letter. It is plain that Mr Brown understood that the costs Caason incurred in relation to the GST Refunds Issue formed part of its Variation Letter Costs Claim, not its Representative Costs Claim (which at that point had already been decided).

99    That evidence is inconsistent with the applicants’ claim that they proceeded on the basis that any out-of-pocket expenses they incurred would be reimbursed from the settlement fund.

100    Third, there is no force in Caason’s contention that it was authorised or compelled by Orders 32 to 34 of the 6 December 2017 Orders to incur substantial costs in a dispute with the ATO about the GST refunds it had received. Those orders provide:

32.     Caason shall, within three (3) business days of receipt of any correspondence from or on behalf of the Commissioner of Taxation in respect of Caason’s right to claim or retain in respect of the GST refunds (GST Claim), forward the same to the Scheme Administrator and ILP.

33.     If the Commissioner of Taxation decides the GST Claim (or any part of it) adversely to Caason and:

(a)    neither ILP nor Caason nor the Scheme Administrator wishes to challenge the decision, the Scheme Administrator shall as soon as practicable deliver to the Associate to his Honour Justice Murphy, as a confidential report, an explanation for the decision not to challenge the Commissioner’s decision and the reasonable costs of the said report (including any taxation advice obtained for the purposes of the report) shall be GST Recovery Costs, to the extent approved by the Court;

(b)    if ILP or the Scheme Administrator wish to challenge the decision, the Scheme Administrator shall as soon as practicable deliver to the Associate to his Honour Justice Murphy, as a confidential report, an explanation for the decision to challenge the Commissioner’s decision and the reasonable costs of the said report (including any taxation advice obtained for the purposes of the report) and of the challenge to the Commissioner’s decision shall be GST Recovery Costs, to the extent approved by the Court and Caason must permit the Scheme Administrator to make and have conduct of any such challenge.

34.     Upon final resolution of the GST Claim:

(a)    the Scheme Administrator shall within 14 days apply to his Honour Justice Murphy for approval of the Administration Costs and GST Recovery Costs; and

(b)    if the final resolution is that Caason was not entitled to claim the GST refunds and Caason is required to remit monies referable to the GST refunds and/or amounts referable to the GST refunds are otherwise deducted from amounts that Caason would be entitled to claim in its GST returns, the Scheme Administrator shall –

(i)    deliver the GST Reserve, or such part of it as may be required by the final resolution of the GST Claim, to Caason or to the ATO as appropriate or as required pursuant to other order of the Court; and

(ii)    deduct any further approved Administration Costs and any approved GST Recovery Costs from the Costs Reserve; but

(c)    if the final resolution of the GST Claim confirms Caason’s right to claim or retain the GST refunds the Scheme Administrator shall –

(i)    deduct any further approved Administration Costs and approved GST Recovery Costs from the Costs Reserve and the GST Reserve, as the Court may direct; and

(ii)     after deduction of the amounts in (i), distribute the balance of the GST Reserve (including interest accrued on the balance) to the Applicants and participating group members as a second distribution of the Settlement Fund in accordance with the SDS.

101    In relation to the orders:

(a)    under Order 32, Caason was required to forward to the Scheme Administrator and the Funder any correspondence it received from the ATO in respect of Caason’s right to claim or retain GST refunds, within three business days of receipt. I am satisfied on the evidence that Caason did not do so;

(b)    under Order 33, if the ATO ultimately determined that Caason was not entitled to claim or retain the relevant GST refunds, and neither the Scheme Administrator, Caason nor the Funder proposed to challenge that determination, the Scheme Administrator was required to provide the Court with a report explaining that decision. The Scheme Administrator did so by filing a confidential report on 14 March 2019 setting out the reasons for its decision not to challenge the ATO determination. It is appropriate that those reasons remain confidential but it is worth noting that nothing in the confidential report supports the proposition that it was fair and reasonable in the interests of class members for Caason to expend such substantial monies in an attempt to maintain its entitlement to the relevant GST refunds; and

(c)    Order 34 merely set out what was to occur, in the alternative, depending upon whether or not the ATO determined Caason was entitled to claim and retain GST refunds.

There is nothing in the orders which authorised or compelled the applicants to take the course that Caason did.

102    In my view the applicants’ contention that Caason was authorised or compelled to take the course that it did by Orders 32 to 34 is another recent invention. I say that because:

(a)    it appears that Caason’s dispute with the ATO commenced before the 6 December 2017 Orders were made and it is difficult to see how it can be said to have been acting in reliance of those orders in taking the course that it did;

(b)    if Caason expected to be reimbursed from the settlement fund for the costs it incurred in relation to the GST Refunds Issue it would have sought such reimbursement as part of its application for Representative Costs in the 16 November 2017 hearing; and

(c)    the letter Mr Brown of Mills Oakley to the solicitors for the Scheme Administrator and the Funder on 5 July 2018 states:

Our client considers that the Audit Costs and any Tax Appeal Costs fall squarely within the scope of the Variation Letter Costs payable by ILP. Accordingly, we hereby put ILP on notice that our client intends to include in its Variation Letter Costs claim, the Audit Costs and Tax Appeal Costs (if any) incurred by it.

That is inconsistent with an intention to claim reimbursement of such costs from the settlement fund.

103    I accept the possibility that Caason may have misunderstood the 6 December 2017 Orders as authorising it to incur the costs that it did, that does not take things very far. If Caason had that understanding, it was completely wrong and it does not mean class members should be lumped with the substantial costs of Caason’s erroneous approach.

104    Fourth, I do not accept Caason’s contention that it ran up substantial costs in relation to the GST Refunds Issue in the interests of class members. The Caason Variation Letter provided:

We refer to the funding agreement entered into between Caason Investments Pty Ltd (Caason) and International Litigation Partners No 3 Ltd (ILP) on 7 December 2012 (Caason Funding Agreement).

Provided that Caason acts as the Representative (as defined in the Caason Funding Agreement), ILP is prepared to vary the terms of the Caason Funding Agreement as between itself and Caason as follows:

Caason will not be required to pay to ILP the amount referred to in clause 11.1(b); and the percentage used to calculate the amount Caason is required to pay to ILP under clause 11.1(c) will be the half [sic] of the relevant percentage identified in the table contained in that clause.

Caason will be entitled to be paid its reasonable costs for its own legal, accounting and administrative work including Craig Astill’s time when and if necessary, such costs will be calculated on a reasonable hourly rate which will not be more than 60% of the hourly charge out rate of the senior lawyers in the funding agreement.

In order to obtain the benefit of the above variation, Caason must also file BAS statements that recover the full GST component of the Legal Costs (as defined in the Caason Funding Agreement) paid by ILP, and must make the amount equal to the GST component of the Legal Costs available to ILP.

(Emphasis added.)

105    It expressly provided that for Caason to obtain the benefit of a reduced funding commission and to be reimbursed its reasonable legal, accounting and administrative costs it was required to claim GST refunds and remit them to the Funder. Caason is a large and diverse investment firm and, I infer, a sophisticated company. Standing back and considering the evidence overall it is more likely than not that it entered into the Caason Variation Letter for its own benefit.

106    I doubt Caason’s contention that it incurred approximately $508,547 in third-party charges and internal costs in pursuing the GST Refunds Issues in a high-minded effort to ensure that class members had a “positive outcome”. It is significant that, notwithstanding that it did not pay any of the GST and that it was required to speedily remit to the Funder any GST refunds it received, it kept $397,251.51 in GST refunds which it received and did not remit it to the Funder. It rebuffed the Funder’s requests for the money. Then, when the Court ordered it to pay those monies to the Scheme Administrator it said it was financially unable to do so. I infer that Caason put the $397,251.51 it received to its own commercial use. Caason retaining the GST refunds was not in the interests of class members, it was in its own interests and to its own commercial advantage.

107    Fifth, it was not reasonable or proportionate for Caason to incur $508,547 in a dispute about GST refunds in an amount of approximately $697,709. Caason had an obligation to act in the interests of the class members and, if it intended to seek reimbursement from the settlement fund, it did not have carte blanche to incur such substantial costs without seeking authorisation from the Scheme Administrator and/or the Court. There is no force in Caason’s contention that the Scheme Administrator and SPB failed to advise Caason not to incur such costs. That puts matters the wrong way around. Once settlement approval orders were made on 6 December 2017, the costs to be incurred in pursuit of the class members’ interests and reimbursed from the settlement fund were a matter for the Scheme Administrator and/or the Court.

108    Sixth, in relation to the Mills Oakley charges totalling $312,896.74 Caason did not particularise which parts of their invoices concerned the GST Refunds Issue, and the only two matters to which the invoices appear to relate are “Advice in relation to Funding Agreement” and “Applicant to set aside statutory demand”. Caason did not establish how it was entitled to reimbursement from the settlement fund for such work. Nor, apart from Mr Astill’s broad assertion that Caason had incurred approximately $100,000 for further legal, accounting and administrative work did the applicants particularise or substantiate that claim by evidence.

109    In my view there are some good reasons not to order that Caason be reimbursed any of the charges incurred. However, I accept that some small part of the work undertaken by PwC may have been to the benefit of class members’ interests, even if that was not the reason that PwC was engaged by Caason. In the course of the hearing on 22 May 2019 the Scheme Administrator made an open offer to pay 30% of the PwC invoice in relation to the dispute regarding GST refunds. Caason agreed to accept that offer although it objected to the condition that the money should be paid directly to PwC. I consider that offer to have been fair and reasonable. In circumstances where the offer was made and conditionally accepted I am satisfied it is appropriate to order that Caason be reimbursed $28,995.15 from the settlement fund.

110    I reiterate that Caason may seek reimbursement of its reasonable legal, accounting and administrative costs from the Funder pursuant to the Caason Variation Letter.

CAASON’S VARIATION LETTER COSTS CLAIM

111    On 16 May 2019 Caason filed an interlocutory application in relation to its Variation Letter Costs Claim. It sought orders:

(a)    to change references to the Funder in earlier orders in the proceeding, in what were variously described as ‘slip rule application orders’ and ‘order variation orders’;

(b)    to extend the time for compliance with Order 3 of the 3 April 2019 Orders to 17 May 2019, such that the application was within time;

(c)    for payment of $1,014,644.37 in respect of its Variation Letter Costs Claim;

(d)    to split the hearing on the issues of liability and quantum, with the issue of liability being to be heard first; and

(e)    for the hearing to be listed on 25 and 26 July 2019.

112    Caason however required leave to file that application because of the operation of the guillotine provisions in Orders 3 and 4 of the 3 April 2019 Orders which set a deadline of 3 May 2019 for the filing of an application and any further affidavit in support. I heard the application for leave on 22 May 2019 and refused it. I now provide reasons for doing so.

113    Caason’s failure to comply with the timetable in the 3 April 2019 Orders occurred against a backdrop of repeated failures to comply with interlocutory orders and repeated delays in advancing the Variation Letter Costs Claims. The salient points of that history are as follows:

(a)    on 18 October 2017 I made orders requiring the applicants to file evidence and submissions in support of their Variation Letter Costs Claim by 3 November 2017, and listed those claims for hearing on 16 November 2017. Caason did not comply with the orders, and it was not ready to proceed with its Variation Letter Costs Claim on 16 November 2017;

(b)    on 6 December 2017 I made orders listing the Variation Letter Costs Claims for hearing on 19 February 2018. Because of Caason’s application for leave to appeal against those orders, that hearing was adjourned sine die;

(c)    on 18 June 2018 the Full Court granted leave to appeal but dismissed the appeal, and published its reasons for judgment on 18 October 2018. Following publication of reasons Caason did not take steps to list the Variation Letter Costs Claims for hearing;

(d)    in light of the lack of progress in advancing the Variation Letter Costs Claims I listed the proceeding for a case management hearing on 10 December 2018. The applicants did not appear and provided no explanation for their non-appearance. The Scheme Administrator informed the Court that the applicants were now claiming amounts from the settlement fund that substantially overlapped with their Variation Letter Costs Claims. I made orders requiring the applicants to file and serve any interlocutory application and evidence seeking further amounts from the settlement fund by 8 February 2019 and listed that application for hearing on 26 February 2019;

(e)    the applicants did not comply with the 8 February 2019 deadline and sought an extension of time within which to file its interlocutory application. I allowed an extension and moved the hearing date to 21 March 2019. The applicants filed an interlocutory application by the extended deadline;

(f)    at the hearing on 21 March 2019 I proposed a timetable for the hearing of the Variation Letter Costs Claims and directed the parties to confer in regards to listing it in late July 2019. Mr Flory informed the Court that Caason was “quite happy [to pursue its Variation Letter Costs Claim] within the timetable” proposed. I told Mr Flory that Caason was “out of chances time-wise that is, meet the time limit or take the consequences”;

(g)    the parties provided similar draft timetabling orders to chambers on 25 March 2019 and on 3 April 2019 I made orders requiring each applicant to file any interlocutory application and any further evidence in relation to their Variation Letter Costs Claim by 3 May 2019. I listed those claims for hearing on 25 and 26 July 2019. Orders 3 and 4 of those orders provided that any applicant that did not file an application and any further evidence by 3 May 2019 was not permitted to later do so without first obtaining leave of the Court. Chambers sent the orders to the parties under cover of an email which advised: “Please note that his Honour is not prepared to further relax the timetable”;

(h)    Wise Plan complied with the orders and filed an interlocutory application and affidavit in relation to its Variation Letter Costs Claim on 3 May 2019. Caason did not; and

(i)    on 16 May 2019 Caason filed an interlocutory application. I listed Caason’s application for leave to file the application outside the time limit set on 22 May 2019.

114    Guillotine orders should not be made lightly but they are a valuable case management tool: Baffico v YMCA of Great Lakes Inc [2014] NSWCA 61 at [83] (Bergin CJ in Eq, with whom Ward JA and Tobias AJA agreed). I considered a guillotine order was appropriate in the circumstances of the present case because of the failure of the applicants to comply with earlier orders and the substantial delay bringing the Variation Letter Costs Claims to a hearing. The applicants were not ready to proceed with those claims when first before the Court on 6 October 2017, they were not ready at the resumed hearing on 16 November 2017, they were late with their application material in February 2019, and their material for the 21 March 2019 hearing was inadequate. I took the view that a guillotine order was appropriate in order to ensure there was no further delay in bringing the Variation Letter Costs Claims on for hearing.

Relevant principles

115    Caason, by seeking leave to file the application outside of the time limit set, in effect seeks leave to vary the guillotine order. In Goodwill Group Pty Ltd v Pongrass Associates Pty Ltd [2002] FCA 1203 (Goodwill Group) at [106] French J (as he then was) identified the following factors as relevant to consideration of an application to vary a guillotine order:

(a)    the seriousness of the non-compliance;

(b)    the reason for the non-compliance;

(c)    the history of delay or breach of orders in the past on the part of the applicant;

(d)    any prejudice to the applicant arising from the dismissal of the proceedings;

(e)    any prejudice to the respondents from permitting the proceedings to continue; and

(f)    the authority of the Court.

The Court must also give sufficient weight to the need for a complete determination of all arguable issues between the parties on the evidence before the Court: Goodwill Group Pty Ltd v Pongrass Associates Pty Ltd [2003] FCAFC 51 at [25], [33]. The discretion must also be exercised having regard to the overarching purpose set out in s 37M of the Act to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.

The asserted “slips”

116    Caason relied on affidavits of Mr Astill (Eighth Astill Affidavit) and Mr Flory both sworn 10 May 2019. Mr Astill deposed that, prior to the deadline for compliance with the 3 April 2019 Orders, he had been informed by Mr Flory that:

(a)    there were several “problems and omissions” in the three April 2019 Orders which were the result of errors in the 6 December 2017 Orders;

(b)    that Caason was “unable” to or it was “unsafe” for it to comply with the 3 April 2019 Orders until those errors were rectified; and

(c)    it was necessary to obtain leave of the Court under the liberty to apply allowed in the 3 April 2019 Orders in order to “regularise the variation letter costs proceedings”.

117    Exhibit “CAA-8” to Mr Astill’s affidavit is a document titled “Memo of Explanation by First Plaintiff and Chronology for Orders” which sets out the asserted “problems and omissions”. It states that the 6 December 2017 Orders, which identified the Funder as “International Litigation Partners Pte” and “International Litigation Partners No 3 Pte Ltd”, are incorrect because the correct entity is “International Litigation Partners No 3 Ltd”. It states that International Litigation Partners No 3 Ltd purported to assign its interests and obligations under the funding agreements to International Litigation Partners No 3 Pte Ltd in January 2015, but that assignment had been ineffective because, while Caason had agreed to the assignment, Wise Plan had not. The document concluded by stating:

In summary.

1    Through no fault of any of the parties the December Orders need to be regularised and amended as above to insert the words “International Litigation Partners No 3 Pte Ltd” in clause 1(h)(iii)(C) to give certainty and comfort to the Plaintiffs particularly to the first Plaintiff whose claim against ILP is likely to be in excess of $800,000.00 when the [interlocutory application] is able to be filed.

Other small amendments need to be made to the December Orders in the Annexures as well as per the above.

2    Once this is done the April 2019 Orders need to be amended to include the additional intervener [International Litigation Partners No 3 Ltd] and in accordance with the other suggested Orders and variation to the April 2019 Orders.

The suggested Orders by consent include the parties by consent having leave to amend the December 2017 Orders and can be done on the papers.

118    This is the primary ground of the application for leave and in my view it has little merit.

119    First, any question as to whether a different ILP entity should have been named in the 6 December 2017 Orders and later orders was always a matter for Caason, it being the applicant for Variation Letter Costs. It fell to Caason to identify the scope of the application including the relevant parties, and none of the asserted difficulties outlined by Caason are new. The highest Caason’s submissions rose was to assert that Mr Astill and Mr Flory were not conscious of the asserted difficulties.

120    Second, there is no merit in Caason’s contention that it was “unable” to or it was “unsafe” for it to comply with the 3 April 2019 Orders until the asserted errors or omissions were rectified. None of the asserted slips had the significance that Caason belatedly sought to give them. The insignificance of the asserted slips can be seen in the fact that the Funder consented to each order Caason proposed to address them.

121    Third, I do not accept that it was necessary for Caason to correct the asserted slips before it could file its application for Variation Letter Costs. That was recognised by Wise Plan which filed and served its application and the supporting affidavit of Mr Burke in compliance with the timetable. Caason offered no cogent explanation as to why it did not comply with the timetable set by the 3 April 2019 Orders, and in the same application raise the asserted slips.

122    In my view there was no real difficulty of the type Caason sought to suggest and no merit in this ground.

Not all the delay was caused by Caason

123    Caason further submitted that much of the delay in bringing its Variation Letter Costs Claim before the Court was due to circumstances outside of its control, including the time it took the Full Court to hand down reasons in the appeal, and the time it took for the GST Refund Issue to be resolved with the ATO. I broadly accept that submission. Caason is not responsible for the delay between 6 December 2017 and 18 October 2018 when the Full Court published its reasons in the Caason Appeal.

124    Even so, in my view the delay that had arisen through the appeal and through the dispute with the ATO underlined the importance of compliance with the timetable. The proceeding was settled in principle in July 2017 and yet the applicants’ application for their reasonable legal, accounting and administrative costs incurred in relation to the proceeding had still not been brought before the Court. Given that delay it was telling that:

(a)    notwithstanding the numerous opportunities it been given to advance its Variation Letter Costs Claim Caason failed to file its interlocutory application by the deadline;

(b)    Caason did not provide a cogent explanation as to why it was not able to comply with the 3 April 2019 Orders and at the same time raise its concerns in relation to the proper identification of the Funder; and

(c)    when Caason purported to file its interlocutory application it sought to again extend the deadline for filing and serving any further evidence in support of its application. In oral submissions counsel for Caason conceded that Caason had still not filed appropriate evidence to substantiate its Variation Letter Costs Claim, and it sought even further time to do so. Counsel informed the Court that Caason would not be able to file evidence properly quantifying its claims until 31 May 2019 and I had little faith that it would happen by then; and

(d)    Caason sought a split hearing so that the liability issue was heard before quantum, which was likely to further delay a final decision.

125    In my view Caason was provided with numerous opportunities to bring its Variation Letter Costs Claim in a timely way and it failed to do so.

External legal advice regarding new matters

126    Counsel for Caason also submitted that Caason had recently sought external legal advice on certain issues, which issues ought properly be canvassed and determined in the hearing of the Variation Letter Costs Claim. Counsel submitted that it had only recently become clear that the Funder denied all liability for the Variation Letter Costs and that the two day hearing listed for 25 and 26 July was therefore likely to be insufficient to finally decide the matter. Counsel said that concern also inspired the application to split the hearing of the issues of liability and quantum. Counsel further contended that there were questions as to the Court’s power to itself decide the quantum of the costs.

127    Those submissions also carry little weight. There was nothing new about the Funder’s denial of liability and the parties had previously agreed that a two day listing was appropriate. I also found it difficult to see how Caason’s recently announced concerns about the structure of the hearing provided a valid basis for granting leave to file its interlocutory application outside the timetable set. Nor was I persuaded that in the circumstances of the present case it would be consistent with s 37M to have separate hearings of liability and quantum.

Other relevant considerations

128    I now turn to the relevant considerations set out by French J at [106] of Goodwill Group. Putting to one side the reasons Caason advanced for its non-compliance, with which I have already dealt, I note the following.

Seriousness of non-compliance

129    In my opinion Caason’s non-compliance was serious. At the time the application for leave was heard:

(a)    almost a year and a half had passed since the 6 December 2017 Orders required Caason to file and serve its evidence for its Variation Letter Costs Claim;

(b)    almost a year had passed since the appeal against the 6 December 2017 Orders was dismissed in June 2018, and approximately seven months had passed since the Full Court handed down reasons for judgment;

(c)    more than five months had passed since the 10 December 2018 Orders were made, which required Caason to file and serve its interlocutory application and supporting materials claiming further monies from the settlement fund, which to a large extent overlapped with the Variation Letter Costs Claims; and

(d)    almost two months had passed since the relevant timetabling orders were made.

130    Yet by 22 May 2019, Caason had still not filed sufficient affidavit material to substantiate the quantum of its claims and it sought a further extension to do so. Caason’s failure to comply with the deadline is made more serious by the fact that it was specifically told that it was “out of chances time-wise” and would need to “take the consequences” if it did not meet the timetable.

Prejudice to Caason

131    The question arose as to whether, if leave is refused, Caason would be estopped from bringing a separate proceeding seeking its Variation Letter Costs. Generally, a party must bring forward their whole case and the Funder might have argued in a later proceeding that the Variation Letter Costs Claim should have been litigated in the present proceeding: see Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 at 597 (Gibbs CJ, Mason and Aickin JJ); Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 256 CLR 507, [22] (French CJ, Bell, Gageler and Keane JJ). The Funder however undertook to “not, in any proceeding later brought by the First Plaintiff in respect of entitlements under the Variation Letter dated 7 December 2012, raise Anshun estoppel on the basis of the extant proceeding by way of defence to any such claim”. That concern therefore fell away.

132    The Funder also accepted that Caason will not be barred by operation of res judicata from bringing another proceeding. Res judicata describes the principle that where a final decision has been pronounced by a judicial or other tribunal with competent jurisdiction over the parties to and the subject-matter of the litigation, any party or privy to such litigation as against any other party or privy is estopped in any subsequent litigation from disputing or questioning such decision on the merits: Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446 at 466; Handley, Spencer Bower and Handley: Res Judicata (LexisNexis, 4th ed, 2009), p 1. Here, the only judicial decision in respect of the Variation Letter Costs Claim is an interlocutory decision to refuse to grant leave to make the application and estoppel by res judicata is intended to be limited to a decision of issues on their merits: Pople v Evans [1969] 2 Ch 255 as cited in Thirteenth Corp Pty Ltd v State [2006] FCA 979; (2006) 232 ALR 491 at [33] (Jessup J).

133    The prejudice to Caason caused by a refusal to grant leave to bring its interlocutory application late is a loss of opportunity to pursue the Variation Letter Costs Claim before this Court, on the hearing dates fixed. I accept that Caason will suffer some prejudice as a result of the decision to refuse to grant leave, but nevertheless consider it appropriate that leave be refused. Caason can bring a new proceeding seeking its Variation Letter Costs in a competent court, when it is ready to do so.

COSTS

134    The question of costs arises in relation to two separate but related interlocutory applications.

135    In relation to the 1 March 2019 interlocutory application:

(a)    notwithstanding the applicants’ success in obtaining an order for $19,224.69 in costs “of and incidental to” their application for Representative Costs, there is a real question as to whether it is appropriate to allow them further costs when they advanced an overstated and disproportionate claim, based on inadequate material, for $61,603.85; and

(b)    notwithstanding the applicants’ success in obtaining an order for payment from the settlement fund of $28,995.15, there is a real question as to whether it is appropriate to allow the applicants their legal costs in the application when they advanced an overstated and disproportionate claim, again based on inadequate material, for more than $508,000.

136    In relation to Caason’s Variation Letter Costs Claim, my preliminary view is that the Funder should have its costs thrown away. The quantum of the costs thrown away is likely to depend upon whether Caason commences a fresh Variation Letter Costs Claim within a reasonable time.

137    I direct the parties to confer within 14 days and endeavour to agree in relation to costs. If they cannot reach agreement each party must file short submissions (no more than three pages) within seven days thereafter.

THE ADMINISTRATOR’S FURTHER COSTS

138    One unfortunate result of the continued disputation is that further costs have been incurred by the Scheme Administrator. It has filed material seeking payment of a further $115,651.97, made up of:

(a)    $56,950.74 (being the sum of $55,306.24 and $1,644.50) being costs of dealing with the 1 March 2019 Interlocutory Application;

(b)    $58,701.23 in relation to work undertaken in respect of GST; and

(c)    $34,650.00 as a disbursement to pay the Scheme accountants for preparing another year of tax returns.

139    In my view those costs should be paid by deduction from the settlement fund. I also expect that there may be further costs since then.

Associate:

Dated:    10 February 2020

SCHEDULE OF PARTIES