There may be some other expenses such as travel and accommodation costs as well as Court filing and hearing fees, service costs and the like. They will be charged at cost.
103 As can be seen, the total estimated legal costs (sans travel costs) in securing the assets ranged from between $58,600 to $74,600.
104 Somewhat curiously, the step then taken by the Secretary to the Lodha Committee was to contact the High Commissioner for Australia located in New Delhi by letter dated 30 May 2016. The letter explained the role of the Lodha Committee and then said as follows:
The Committee has received various communications informing them that PACL Ltd., its Chairman Mr. Nirmal Bhangoo and its Promoters and Directors including Mr. Tarlochan Singh, Mr. Sukhdev Singh, Mr. Gurmeet Singh and Mr. Subrata Bhattacharya have interests in various assets including immovable properties in Australia. An overview of Corporate PAGL interests in Australia and details of properties/assets purchased in Australia that have been received by the Committee including letters dated 12/04/2016, 16/05/2016 & 30/05/2016 received from Piper Alderman are annexed hereto and marked as Exhibit - E(Colly).
The Committee constituted under orders of the Supreme Court of India, therefore seeks your assistance in tracing out all assets including immovable properties in Australia, wherein PACL and/or its Promoters and Directors including Mr. Tarlochan Singh, Mr. Sukhdev Singh, Mr. Gurmeet Singh and Mr. Subrata Bhattacharya and its Chairman Mr. Nirmal Singh Bhangoo have an interest and freeze assets in Australia on behalf of Indian investors who have been the subject of fraud in India under the various PACL illegal collective investment schemes.
The aforesaid Committee could be contacted through the undersigned at the address/e-mail id given herein below.
105 It is not entirely clear what it was that the Lodha Committee thought the High Commissioner could do to trace trust assets in Australia. What then occurred is that this, or some similar, communication appeared to provoke a response from Piper Alderman noting that they had become aware that enquiries had been made by the Lodha Committee with what the solicitors described as 'Australian governmental bodies' "using the information provided by us along with correspondence from us to you". Piper Alderman then went on to ask:
Given the confidential basis on which we provided the information to you, may we take that as acceptance of our retainer? We can provide a formal letter of engagement promptly.
In relation to matters:-
(a) Investigations by Mr Coburn have revealed that it is likely that from the proceeds of sales of assets (which are being conducted by interests associated with that of PACL / Pearls / Mr Banghoo), some substantial funds are being retained in Australia - ie they will not be repatriated to India; and
(b) We are also informed that another firm is interested in conducting a class action in Australia for a number of investors - around 60,000 - and some additional investor associations are wishing to join in such an action. Obviously, if that occurs, those associations and investors would be looking to gain a priority to the Lodha Committee and protect their own interests.
Given the looming sales of assets and the matters in this email, kindly respond as a matter of some priority.
106 Pausing for a moment, what is set out at (b) above by the solicitors acting, as I understand it, on Mr Coburn's instructions, is again somewhat odd. This appears to be a reference to the prospect of the class action being commenced by Shine Lawyers (organised by Mr Coburn), as being an alternative course of action to that which had been proposed to SEBI (also arranged by Mr Coburn). I have not received any evidence as to this representation made to SEBI, but it seems it was made to try to jolt the Indian authorities into retaining Piper Alderman and suggesting that unless this occurred, some investors might gain some form of 'first mover' advantage. In any event, the form of the communication is unexplained on the evidence.
107 In response to this letter from Piper Alderman, the Secretary of the Lodha Committee indicated that the Lodha Committee did not regard itself as being in receipt of any confidential communications, and that it did not intend to instruct Piper Alderman.
108 This was not the first time that SEBI or the Lodha Committee had become aware of the persons who would ultimately become the class action applicants and the group members, being the members of the community action group JPS. It appears that on 4 April 2016, Mr Nayak, the lawyer for JPS in India, had written to the Lodha Committee requesting that the Committee undertake a special investigation into PACL's overseas investments including that it "enquire into the investments of PACL and PGF and their subsidiary and Sister concerns and their overseas investments particularly in Australia". The response from SEBI was, however, negative. In a letter dated 19 April 2016, the Lodha Committee advised that the issues raised by the lawyer for JPS "does not fall within the purview of [the] committee" and further advised that in accordance with orders of the Supreme Court of India, the "main function of [the Lodha] committee is to dispose of the land purchased by the Company".
109 Against all of this background, it is hardly surprising that by June 2016, Mr Coburn had formed the view that neither SEBI nor the Lodha Committee were going to take any urgent steps in Australia directed towards recovering, for the benefit of the investors, the assets located in Australia despite the risk that those assets may be soon dissipated. On 12 June 2016, Mr Coburn attended a meeting of JPS held at Mr Nayak's office in Pune, India. It was at that meeting, it appears, that committee members of JPS considered whether legal action in Australia should be commenced, without the involvement of SEBI or the Lodha Committee. Mr Coburn gave evidence, which was not challenged in cross-examination, that in his view, the only hope of securing the Australian assets, including the Mirage, was for the class action applicants and the group members to commence proceedings and that there was "sufficient evidence for them to commence this action urgently". It was at this meeting that JPS resolved to instruct Shine Lawyers to take legal action.
110 The only conclusion to be drawn from the above, is that without the efforts of Mrs Kadam's lawyers in taking steps to secure the proceeds of sale of the Mirage and to prevent dealings with the Sanctuary Cove Properties, that the amount represented by these assets would most likely have been put beyond the reach of the investors. It was Mrs Kadam who succeeded, following the hearing of a contested application, in obtaining MiiResorts' agreement to temporary undertakings that neither the Mirage nor the proceeds of sale would be dissipated. Additionally, the Sanctuary Cove Properties were, and are, protected by a caveat lodged by those acting for Mrs Kadam.
111 Importantly, despite SEBI being made aware of the asset in Australia (the Mirage) and despite being told that MiiResorts was looking to sell the property, SEBI refused, until well after Mrs Kadam had obtained the protective undertakings, to take any action. This lack of endeavour seems, in the absence of explanation, to be difficult to understand. If SEBI thought that there was a deficiency in the amplitude of its powers or that of the Lodha Committee, the evidence in this proceeding demonstrates that this understanding was incorrect, and it is strange that steps were not taken to clarify the position with alacrity.
112 A problem with this inertia by SEBI was that MiiResorts did not then concede that Mrs Kadam or the group members had any interest in the Fund in question and did not concede that the undertakings should remain in place until an initial trial. It was only months later, after I began case managing the class action, that an indefinite restraint was put in place until an initial trial. In the intervening period, MiiResorts had brought applications seeking orders permitting some of the proceeds to be used to pay MiiResorts' legal costs and some substantial creditors, and also asserted that unless security for costs was provided, then any restraints should be lifted. Additional applications were made seeking to have the class action proceeding dismissed for want of jurisdiction (an application I dismissed peremptorily: see Kadam v MiiResorts Group 1 Pty Ltd (No 3) [2017] FCA 1138), or that it be struck out as an abuse of process.
113 Although it was necessary for Mrs Kadam to secure the Fund and the Sanctuary Cove Properties and oppose all of these applications made by MiiResorts until the SEBI Proceeding was commenced, for reasons I will explain, the steps taken to secure the trust funds were not performed efficiently and the confusing way in which the class action claims were advanced, at least initially, is a source of legitimate criticism. Despite this, the initial actions of Mrs Kadam were necessary and in these circumstances, it is only fair and reasonable that appropriate allowance be made for those costs incurred by Mrs Kadam that were referable to getting in and securing the assets which will, in due course, be distributed.
114 Put in blunt terms, the issue to be resolved by the referee, with guidance from the Court, is to identify costs incurred in achieving this result for the benefit of the beneficiaries and distinguishing them from those other costs and expenses incurred by misdirected activity or activity solely related to advancing her individual case.
115 On the basis of the material adduced at hearing and striving to avoid the benefit of hindsight (that is, the present understanding of how straightforward the tracing process and the claim has proven to be), it seems to me that the appropriate categories of costs and expenses that were incurred by Mrs Kadam on behalf of the beneficiaries and contributed to securing the Fund and the Sanctuary Cove Properties were as follows:
(a) Mr Coburn taking initial instructions from JPS as to the basis upon which funds were invested in India and securing access to examples of the documentation which purported to regulate the dealings between the investors and the Scheme, including the costs of one trip to India to confer with the JPS and the Indian lawyer for JPS;
(b) communicating with solicitors in Australia to secure representation on a conditional fee basis;
(c) the costs associated with contacting SEBI or communications concerning SEBI securing the funds in Australia including preliminary research into SEBI's entitlement to maintain a claim on behalf of investors generally; this would include the costs of Piper Alderman in sending the communications to which I have referred (in the event those fees were paid or there was, and is, a subsisting legal obligation to pay those fees);
(d) briefing junior and senior counsel in relation to providing initial advice as to causes of action that may be available and fees of counsel in providing such advice;
(e) drawing and settling an originating application, any interlocutory application and accompanying affidavit evidence seeking interlocutory relief of an equitable nature in relation to preserving the proceeds of sale of the Mirage and also costs in lodging a caveat in relation to dealing with the Sanctuary Cove Properties;
(f) arranging for service of process on MiiResorts and any dealings with MiiResorts or its legal representatives in relation to procuring undertakings or in relation to the initial interlocutory progress of the litigation;
(g) resisting the applications made by MiiResorts to obtain access to part of the Fund, for security for costs and dismissing the class action on the basis of a want of jurisdiction (until the SEBI Proceeding was commenced);
(h) retaining and instructing counsel to appear at the return of the originating application and case management hearings, to the extent that the costs and expenses incurred were directed to advancing an entitlement of group members to the Fund and the Sanctuary Cove Properties until SEBI's application for intervention, but not as to other extraneous matters;
(i) the costs of the reference process of Mr Callinan QC paid on behalf of Mrs Kadam, but excluding all expert fees incurred in relation to the retention of expert evidence in India by Mrs Kadam or the costs incurred in relation to the intervention of SEBI or in relation to the SEBI Proceeding;
(j) costs of dealing with the Commissioner and his intervention, but only as to one half of those costs after SEBI's application for intervention.
116 Paragraph 10 of the affidavit of Mr Coburn sworn on 12 February 2018, categorises the work done on behalf of Mrs Kadam and the group members into three phases being: first, pre-injunction work; secondly, post undertaking work until SEBI intervened and thirdly, evidence gathering for the initial trial. As to the first of these phases, much of the work claimed (see [15] of the affidavit) is plainly not recoverable from the Fund (such as appearing on the 7:30 Report, obtaining 15 affidavits, setting up a website or Mr Coburn's appearances as a spectator in Court). As to the second of these phases, the same is true (see [16] of the affidavit), and why more than one trip to India was necessary to obtain sufficient evidence to maintain the undertakings is wholly unclear to me. As to the third phase, subject to one matter I raise below, it is difficult to understand why any of these costs would be recoverable against the Fund, although some of the costs were no doubt properly incurred to advance individual claims.
117 There was a good deal of debate in the written submissions concerning the ability to recover costs in respect of any work undertaken by Mr Coburn's corporate vehicle. The question arose because there had been a number of changes of position by Mrs Kadam with respect to the work of Mr Coburn and/or his corporate entity and Mr Coburn's or Shine's obligations to comply with requirements of the Legal Profession Act 2007 (QLD) (LPA) in relation to the work performed. Although this issue may be relevant on any taxation, I do not believe it is necessary to resolve the issue as to what was required to be done in order for Shine to authorise the incurring of disbursements incurred by Mr Coburn and what costs are properly recoverable pursuant to the terms of the LPA and the retainer agreement between Mrs Kadam and Shine.
118 My present role is different, that is, to work out what amounts were incurred for the benefit of the beneficiaries generally in getting in and preserving the assets. At least on one view of the evidence, although it is not pellucid, the actual amount charged by Mr Coburn's entity is apparently $819,060.44 and, as I understand it, it is the total of this 'disbursement' amount, together with the other costs incurred by Shine, which is sought to be deducted from the Fund prior to distribution. In the light of the admittedly incomplete evidence as to costs presently filed, the amount of costs properly recoverable out of the Fund appears to be a relatively small subset of the overall costs incurred on behalf of the class action applicants. I mention this, not to come to some definitive view relating to quantum (which I propose to leave to the referee), but because there appears to be significant disconformity between the quantum that Shine apparently seeks to have paid from the Fund and the amount that is properly payable on equitable principles, or pursuant to an appropriate order under s 33ZF of the FCAA.
119 Before passing from this general topic, I should make a further point. At Issue 8 below, I deal with issues relating to the appropriate regime that should be put in place to provide for the assets to be distributed to the investors. In relation to making submissions on this specific topic at and after the initial trial, Mrs Kadam has acted as a contradictor and, in this sense, has acted to advance the interests of all investors in ensuring that the amounts are paid in such a way as to maximise returns. My preliminary view is that these costs are also recoverable. Again, it will be important to distinguish these 'third phase' costs from other costs incurred at or after the initial trial (including the advancement of Mrs Kadam's individual claim, or those of group members, or the repetition of the contention that the investors needed to prove 'loss' or costs incurred in resisting SEBI's 'standing').
120 Using the topics I have identified above, the metes and bounds of recoverable amounts should be set out by reference to topics in the terms of a reference order, following the parties having the opportunity of reviewing these reasons and the completion of the further hearing on the making of orders.
121 In settling upon the terms of the order for reference, it may also be useful to give some further guidance or assumptions to the referee. For example, reference was made above to an estimate of costs made on 16 May 2016 by Piper Alderman in its letter to the Lodha Committee and the Chairman of SEBI. By this stage, the solicitors considered sufficient work had been done to reach the conclusion that there was a strong, prima facie case. The position as to the balance of convenience was plain. Although, as noted above, some recoverable costs had been incurred to put the solicitors in the position of having a settled view of the soundness of the claim, the estimate of fees identified in that quotation seems to me a reasonable estimation of the further work necessary to obtain interlocutory relief to secure the assets.
122 Subject to refinement following any further submissions, the topics identified above appear to adequately capture those amounts that are properly recoverable and excludes those costs (which I anticipate are very significant) which were incurred either unnecessarily or have not been established to have been reasonably incurred to the benefit of the investors in getting in and preserving the Fund. In particular, it is necessary to exclude all costs incurred by the complex and prolix pleadings containing unnecessary causes of action, all costs associated with the resistance to the intervention of SEBI and incurred in opposing the relief sought by SEBI, all costs associated with seeking to establish the class action applicant and group member individual claims on a final basis at the initial trial, the costs associated with resisting the reference and all costs associated with the ill-conceived opinion evidence filed as to Indian law. These costs were not incurred for the benefit of the beneficiaries and many were incurred in a manner inimical to the case management imperatives in Part VB of the FCAA which require a focus on narrowing this essentially legally simple (but factually complex) case to the real issues.
123 As to the balance of the costs incurred which will not be identified in the orders for reference, they fall into different categories. Some, such as the costs of seeking properly directed equitable relief on behalf of Mrs Kadam individually, are obviously proper costs, but were not incurred for the benefit of securing and preserving the Fund generally. Others were unreasonably incurred, such as those incurred in resisting the Indian law referee. I presently express no view on what proportion of the costs not recoverable from the Fund, fall into each category, and will hear from the parties as to whether and what proportion of those costs should be the subject of a costs order made against MiiResorts or other respondents. There is clearly a distinction between costs which might be recoverable pursuant to a costs order inter partes (according to usual principles involving the exercise of discretion under s 43 of the FCAA and upon any taxation), and the separate analysis called for in determining what reasonable amounts have been proved to have been incurred on behalf of the beneficiaries which will be the subject of payment out of the Fund.
124 Having expressed my views in relation to the case generally, I propose at a further hearing (which I will order to take place on 23 July 2018) to hear any further submissions about the adequacy or accuracy of my description of the topics above and as to what information should be given to the referee to conduct the reference. Given the necessity to make what might be fine judgments as to those costs which were incurred on behalf of beneficiaries and those that were not, my present view, again subject to hearing from the parties, is to appoint a referee who is a barrister but who has legal costing experience.