Rural Funds Management Limited as Responsible Entity for the Rural Funds Trust and RF Active v Bonitas Research LLC

Damages

1. RFM claims that it suffered loss and damage totalling $625,985 comprised of: 1. $385,000 paid to EY to produce the EY report; 2. $134,784 paid to its lawyers for services rendered in connection with producing the EY report (legal fees); and 3. $106,201 representing internal costs associated with responding to the first report.
2. The amounts of these three heads of damages are established by three affidavits of Bryant affirmed respectively on 4 December 2019, 11 December 2019, and 4 March 2020.
3. Under s 601FC, RFM had, and has, the obligation to act in the best interests of members. In my opinion, it was reasonable and appropriate for it, in discharging this obligation in the circumstances which were brought about by the conduct complained of, for RFM to engage EY and lawyers in the way that it did to respond. I am satisfied that the amounts incurred in so doing were reasonable. I am satisfied that these amounts were loss and damages suffered by the conduct of Bonitas and Wiechert.
4. However, I am not satisfied that the amount claimed for internal costs are recoverable from Bonitas and Wiechert. It represents an apportionment of salaries carried out by allocating time spent by employees incurred by RFM and charged to RFF. The difficulty is that the salaries of the employees of RFM are fixed costs and would have been incurred anyway irrespective of the conduct complained of and time spent on particular tasks in dealing with it. In addition, RFM has charged these costs to RFF, which has no legal personality of its own. RFM, which has legal personality, has allocated these costs to RFF so that, economically, it is the ultimate unit holders who suffer this loss. They may be able to sue Bonitas and Wiechert for this, but RFM cannot.
5. RFM is entitled to recover damages of $519,784.
6. RFM is entitled to pre-judgment interest under s 100 of the Civil Procedure Act 2005 (NSW) from 30 October 2019 to date of judgment. [1]

Costs

1. Sections 98(1), (2), (3) and (4) of the Civil Procedure Act 2005 (NSW) provides: 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount.
2. Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1 provides: Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
3. It does not appear to me that some order other than that Bonitas and Wiechert should pay RFM's costs should be made. Moreover, I consider that this is an appropriate case in which to order a specified gross sum instead of assessed costs given that this can be done easily and speedily so as to bring the entirety of these proceedings to speedy conclusion in this jurisdiction.
4. UCPR r 20.14(1) provides: 20.14 Orders of referral (1) At any stage of the proceedings, the court may make orders for reference to a referee appointed by the court for inquiry and report by the referee on the whole of the proceedings or on any question arising in the proceedings.
5. UCPR r 20.23 provides: 20.23 Report (1) Unless the court orders otherwise, the referee must make a written report to the court on the matter referred to the referee, annexing the statements given under rule 20.20(5) and stating - (a) the referee's opinion on the matter, and (b) the referee's reasons for that opinion. (2) On receipt of the report, the court must send it to the parties.
6. UCPR r 20.24(1)(a) provides: 20.24 Proceedings on the report (1) If a report is made under rule 20.23, the court may on a matter of fact or law, or both, do any of the following - (a) it may adopt, vary or reject the report in whole or in part, … and must, in any event, give such judgment or make such order as the court thinks fit.
7. On 6 March 2020, I referred to Alyson Ashe, a legal costs consultant, for inquiry and report the following question, "What is the reasonable quantum of the legal costs incurred by the plaintiff in these proceedings?" Ms Ashe provided her report on 25 March 2020.
8. In her opinion, the reasonable party/party costs incurred by RFM are $325,929. GST [2] of 10% is payable but RFM will get the benefit of an input credit. The costs amount for which Bonitas and Wiechert are liable will be exclusive of GST.
9. I see no reason not to adopt the report. I adopt it.
10. Ms Ashe's professional costs for conducting the inquiry and producing the report are $43,573. RFM is liable to Ms Ashe in respect of these costs and is entitled to be indemnified for this liability by Bonitas and Wiechert and have judgment against them but not in respect of the GST component because RFM will in due course get an input credit.
11. In addition, and in connection with the Referee's report and the determination of the costs issues, RFM has incurred further costs. First, it has received an itemised invoice from its solicitors for $3,420 (excluding GST). The items include $199 detailed as "Various tasks re costs". I do not propose to allow this unspecified charge. I propose to allow 75% of the balance as party/party costs, making a total of $2,415. Second, it has incurred counsel fees of $1,358 which I proposed to allow 75%, making $1,018.
12. The result is that RFM is entitled to a gross lump sum costs order in the amount of $368,974.

Conclusion

1. The Court declares that the publication of the first Bonitas report on or around 6 August 2019 on the Bonitas website (www.bonitasresearch.com) contravened ss 1041E, 1041F, and 1041H of the Corporations Act 2001 (Cth) and s 12DA(1) of the Australian Securities and Investments Act 2001 (Cth).
2. The Court enters judgment for the plaintiff against the first defendant and the second defendant for $530,201. [3]
3. The first defendant and the second defendant are ordered to pay the plaintiff's costs assessed in the amount of $368,974.

Endnotes

1. In its most recent submission, RFM suggested that the date should be 13 September 2019. This is inconsistent with its earlier written argument that selected 30 October 2019 as the date at which all of its damages had been suffered. I propose to adopt this date.
2. General Sales Tax.
3. Comprised of $519,784 plus interest at 4.75% calculated in accordance with s 100 of the Civil Procedure Act 2005 (NSW) from 30 October 2019 to today's date.

Amendments 01 April 2020 - Endnote 1 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 April 2020