Masu Financial Management Pty Limited v Financial Industry Complaints... [2005] NSWSC 596 | Case summary

JUDGMENT 1 HIS HONOUR: This is a dispute about costs. It is necessary to recite some background to explain how it now comes before the Court. The plaintiff (MASU) is a licensed financial adviser and it is a condition of its licence that it be a member of an alternative dispute resolution scheme. The first defendant (FICS) provides a service of that type to its members of which MASU was one. The second defendant (Miss Wong) obtained some investment advice from MASU. Miss Wong had a complaint about this advice and it was adjudicated upon by FICS, which issued a decision which, without elaborating detail for present purposes, may be taken to have been in her favour. The adjudication in a practical sense, is made by a "panel" of persons to whom the task is assigned. 2 MASU commenced proceedings in the Court seeking administrative law remedy in respect of the decision. Miss Wong filed a submitting appearance. FICS actively resisted MASU's claim. One aspect of MASU's claim for relief involved raising a question as to whether (having regard to a statutory framework requiring the dispute resolution scheme offered by it) FICS was exercising the judicial power of the Commonwealth, an exercise restricted by Chapter III of the Constitution. I will refer to this as the constitutional question. 3 The proceedings were heard by Shaw J. Counsel appeared for the Attorney General to intervene on the constitutional question. On 15 September 2004 his Honour delivered two judgments. In MASU v FICS (No 1) he rejected the challenge raised by MASU on the constitutional question. In MASU v FICS (No 2) he held that a declaration that FICS' decision was of no force and effect was warranted and that, insofar as there could be a reasonable apprehension of bias, it could be accommodated by the remitter being ordered to a panel exercising FICS' function regarding the complaint of Miss Wong, constituted differently from the one which determined the matter in the first instance. 4 Referring to costs, his Honour said: "Subject to any further argument, having regard to the non active role played by the second defendant and the nature of the first defendant, I propose that no order for costs be made in relation to these proceedings, including the argument as to the constitutionality of FICS." 5 The matter is before the Court to advance further argument about costs as contemplated by his Honour may become the case. It is noted that neither MASU nor FICS seeks any order for costs against Miss Wong. I am informed by counsel that the Attorney General does not seek costs of his intervention and thus the contest lies entirely between MASU and FICS. 6 MASU seeks that FICS be ordered to pay the costs of the proceedings. FICS supports the proposal by Shaw J that there be no order for costs. 7 His Honour did not elaborate upon his proposal. It might be speculated that, as each of the contesting parties was successful in one of the two matters dealt with in separate judgments, costs could be regarded as reciprocally cancelling each other out. However, whatever led to his Honour's view, the matter has been argued before me as an issue de novo. I should observe that I am unable to detect any reason for the delivery of two judgments except that his Honour may have thought it would provide a convenient reference to the isolated constitutional question, but there was no apparent inhibition against both issues being dealt with in a single judgment. Had the latter been the case, it would ordinarily be expected that costs would follow the event. That expectation might be qualified if the successful party had nevertheless failed upon litigated issues which had absorbed such a significant quantity of time in the hearing that adjustment to the quantum of recovery should be made, or the status of FICS was germane to whether costs should be ordered to be paid by it. 8 The latter alternative represents the core of submissions by FICS that it should not be ordered to pay costs because of its "nature" and the nature of the issues raised in the proceedings. Shaw J did not expand upon his reference to the "nature" of FICS but I take it to be a reference to his conclusion that it was a body exercising a dispute resolution jurisdiction characterized as administrative or arbitral. 9 Considerable argument revolved around what counsel referred to as "the Hardiman principle". In The Queen v Australian Broadcasting Tribunal; ex parte Hardiman 1980 144 CLR 13 the High Court in a joint judgment of five Justices stated @ 35: "In cases of this kind the usual course is for a tribunal to submit to such an order as the court may make. The course which was adopted by the Tribunal in this Court is not one which we would wish to encourage. If a tribunal becomes a protagonist in this Court there is the risk that by so doing it endangers the impartiality which it is expected to maintain in subsequent proceedings which take place if and when relief is granted. The presentation of a case in this Court by a tribunal should be regarded as exceptional and, where it occurs should, in general, be limited to submissions going to the powers and procedures of the Tribunal." 10 Reference was also made to a gloss on that statement by Brennan J in Fagan v Crimes Compensation Tribunal 1982 150 CLR 666 @ 681: "Where curial proceedings arise out of a matter which is contested between parties appearing before a tribunal, it is not ordinarily appropriate for the tribunal to appear to contest the curial proceedings brought by one of the parties before it ( Reg v Australian Broadcasting Tribunal; Ex parte Hardiman 1980 144 CLR 13 @ pp 35-36). But where the proceedings before the tribunal are not inter partes, and where the Attorney-General cannot or does not intervene to represent the public interest (cf Corporate Affairs Commission v Bradley [1974] 1 NSWLR 391) and neither a law officer nor a public official is heard by the court (cf Reg v Cook; Ex parte Twigg 1980 147 CLR 15), it may be desirable that the tribunal should appear by counsel to make such submissions as it thinks calculated to assist the court and, in an appropriate case, to argue against the applicant's case. That is what was done in this case. Here, the Tribunal's function was to determine whether and to what extent a claimant was entitled under statute to a payment out of public moneys. Though the Tribunal was bound to act impartially, it was in a sense the guardian of the moneys appropriated by Parliament to answer the proper claims for compensation under the Act. In proceedings to review its decision, the Tribunal properly represents the public purse, and it was right that the Tribunal should appear by counsel as a party to respond substantially to the application. It follows that the Tribunal should then be treated as an ordinary party in the matter of costs." 11 It is plain that in these proceedings FICS actively participated as a contradictor and resisted the claim by MASU for relief. The initial question is whether the circumstances should be regarded as exceptional by analogy with the situation which the High Court contemplated in the extract of judgment from Hardiman above set out. I do not consider that to be the case. 12 It was submitted by FICS that there was a discernible range of bodies from those like the Australian Broadcasting Tribunal which "typically involved people who can look after themselves" to clubs or associations involving a member or members seeking redress against perceived injustice. In this range, FICS was said to fall in the middle somewhere. 13 I do not consider that a test for sanctioning the participation of a tribunal as exceptional and extending beyond the general limitation expressed in Hardiman, is to be found by measuring the asserted or determined means of the initiator of initiators of proceedings before the Tribunal. There was some evidence concerning the financial means of Miss Wong. I do not find it necessary to opine whether she could or could not afford to litigate in Court against MASU's claim. The fact is that she chose to file a submitting appearance. It did not necessarily follow that the Court would grant MASU relief whether or not FICS or anyone else appeared as contradictor. Relief of the kind sought by MASU can be obtained upon demonstration of entitlement, a requirement that is not removed by the absence of a contradictor. 14 A number of propositions were advanced by FICS which were argued to be germane to the inappropriateness of its being required to pay costs. It was put that FICS was not the decision maker but that this description should be given to the persons constituting the panel which dealt with Miss Wong's complaint. The suggestion that FICS was, for the purposes of the relief sought by MASU to be distinguished from the panel appointed to discharge its function with respect to Miss Wong's complaint was not raised before Shaw J and should not be permitted now to be raised on the question of costs. In so ruling, I would not wish to be taken to be inferring that I find substance in this proposition. 15 I see no analogy between the position of FICS and that of an intervener in litigation between others, whether that intervention be by right or by leave, by a public officer or by another. FICS was the decision maker and sought to uphold its own decision. It did not seek out of public interest, to uphold the decision. 16 To the extent that it sought to advance the interests of Miss Wong, it did so as a result of its own choice. The only other perceptible interest it sought to uphold was its own. It was also Miss Wong's own choice to file a submitting appearance. That taking this step may have been motivated by a desire not to expose herself to potential liability for costs is understandable, and arguably prudent in the context of amounts at stake, but that does not create a gap into which FICS could step without exposing itself to similar potential liability. As Brennan J remarked, a tribunal which actively participates should be treated as an ordinary party in the matter of costs. 17 Attention was directed to a remark of Burchett J in Australian Conservation Foundation v Forestry Commission 1988 81 ALR 166 @ 169: "A respondent with a real interest in the issue an applicant chooses to contest is not disentitled from incurring the expense of appearing to defend the matter because someone else also appears." 18 That observation does not include the qualification asserted in a written submission of FICS "without penalty as to costs". As counsel for MASU pointed out, the relevant party in that case was seeking costs and not asserting that it was immune from the risk of a costs order being made against it. 19 Next, with reference to the limitation concerning submission about powers and procedures of the Tribunal mentioned in the passage cited from Hardiman, it was submitted that it was impossible to divorce such from submissions on the merits. Whilst MASU has presented a detailed analysis of the content of trial submissions it seems to me that the short point is that FICS chose to go beyond the limits contemplated by Hardiman and became an active contradictor and it cannot therefore claim a shield as to costs which might be available if it had kept its submissions within the limitation. 20 Contrary to the submission that no costs order has been made in any case cited by MASU against a decision maker "on the basis of the Hardiman principle" (whatever that qualification may be intended to comprehend), in Fagan a costs order was in fact made against the Tribunal. Of course, it was held in that case to have been appropriate for the Tribunal to have taken the more active stance and FICS should stand in a similar situation. It could hardly be in a better situation if it was inappropriate for it to adopt that stance. 21 Counsel for FICS referred to Rule 34 of its service rules in the general context of these. Provision for costs in relation to determination by it (per medium of its panels) has no bearing on the costs of litigation in the Court. 22 Some submission was made about immunity of FICS and it was acknowledged by counsel that "in appropriate cases it may be susceptible to a costs order". Having regard to what was said in Fagan (supra), I would consider that a tribunal which elected to participate in proceedings as a contradictor would be susceptible to a costs order unless, in a particular case, it was inappropriate. 23 In my view, as FICS chose the role of contradictor, it is not immune from costs and these, subject to the matters to which I next turn, ought follow the event. And see SCR Pt 52 r 11. 24 In the event of obtaining an order for costs MASU seeks potential enhancement of party/party costs by reason of an offer made before hearing which was said to be "akin to a Calderbank letter"; Calderbank v Calderbank 1973 3 All ER 333. As is clear from the judgment of Cairns LJ @ 343, a fundamental concept underlying what was said in that case is that a party "ought to" have accepted the offer with the necessary implication that the litigation would not extend beyond the point at which that acceptance should have taken place. FICS was not in a position to accept the offer by MASU and thus terminate the proceedings because that result could not be achieved without Miss Wong joining in. The evidence of Mr Griffith that the only proposal to which she responded involved a payment by her of MASU's costs in a sum of over $19,000 which she declined to make was not challenged. 25 I reject the submission by MASU that it should have indemnity costs (in whole or in part) to mark disapproval of FICS conduct. Insofar as FICS went beyond what was contemplated by Hardiman, the consequence was to expose it to the risk of being ordered to pay costs as an "ordinary party" (Fagan, supra) and not to be punished for what MASU submitted was "flagrant breach of the Hardiman principle". 26 The final question is whether there should be some amelioration of the amount payable by FICS by reason of the "mixed success" of the respective parties on the issues fought, as distinct from the overall favourable outcome achieved by MASU and dealt with in the second judgment. In this regard I have been invited to examine the material before Shaw J including written submissions and the transcript of hearing as well as, of course, the two judgments. Counsel for MASU has sought to epitomize the issues at trial into fourteen items which he "scored" as ten "wins" for MASU, two "failures" by MASU and two issues "not resolved" by Shaw J. There is also an attempt to give a "volumetric" perception by reference to written and oral submissions. 27 No point would be served by my recitation of these matters. I record that I do not overlook the skirmish between the parties concerning the ultimate posture by FICS on the constitutional question by adopting the submission advanced on behalf of the Attorney General. However, it was MASU which put the constitutional question into issue and it required consideration and response by FICS whether or not the intervener had elected to take part. 28 I conclude that, although costs should follow the substantial success of MASU's claim for relief, the circumstances require a special order reducing to an extent the recoverable cots, in particular having regard to the raising of the discrete but untenable, constitutional question. The order will apply to the whole proceedings including this separate hearing on costs in respect of which MASU failed in its not insignificant proposal that it should have enhanced costs by reason of the quasi-Calderbank letter and/or a disapproval of the action by FICS in its role as tribunal resisting its claim. 29 I repeat my notation of the agreed exclusion of Miss Wong and the intervener from the dispute as to costs. 30 I order the first defendant (FICS) to pay five-sixths of the costs of the plaintiff (MASU) of the proceedings.

Masu Financial Management Pty Limited v Financial Industry Complaints Service Limited & anor

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Judgment (10 paragraphs)

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