Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited [2024] FCA 1097 | Case summary

The applicants in proceeding VID 1085 of 2017 (the Zonia proceeding) and NSD 1158 of 2018 (the Baron proceeding) (together, the proceedings) be jointly and severally liable to pay the respondent's costs of and incidental to the proceedings on an ordinary basis, except for the costs for which the respondent is liable pursuant to Order 6 made in the Zonia proceeding, and Order 5 made in the Baron proceeding, on 10 July 2019, such costs to be assessed on a lump sum basis.
The question of the amount of the costs referred to in Order 1 be referred to a Registrar of the Court, acting as a referee pursuant to s 54A of the Federal Court of Australia Act 1976 (Cth), for inquiry and report.
Order 2 be stayed pending the determination of the appeals in VID 572 of 2024 and NSD 815 of 2024. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

YATES J: 1 On 10 May 2024, I delivered reasons for judgment in which I found that the Zonia proceeding and the Baron proceeding should be dismissed: Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited (No 5) [2024] FCA 477 (Reasons 5). 2 On 28 May 2024, I made orders which (amongst other things) provided a timetable for the parties to file evidence and submissions on the question of costs. On 27 June 2024, at the request of the parties, the time limits in the orders of 28 May 2024 were extended. 3 The parties agree that, on the basis of my findings in Reasons 5, an order should be made that the applicants in the Zonia proceeding and the Baron proceeding be jointly and severally liable to pay the Bank's costs of and incidental to both proceedings on an ordinary basis other than for certain costs which, on 10 July 2019, the Bank was ordered to pay. The parties also agree that the costs should be assessed on a lump sum basis. There are, however, three matters in dispute. 4 The first matter in dispute concerns the costs associated with a notice to admit dated 22 July 2022, which was served by the applicants on the Bank. The Bank served a notice of dispute dated 4 August 2022 disputing all the facts in the applicants' notice. 5 Rule 22.03 of the Federal Court Rules 2011 (Cth) (the Rules) provides: 22.03 Disputing party to pay costs if document is proved etc If a party serves a notice of dispute under rule 22.02 and the truth of any fact or the authenticity of any document disputed in the notice is proved, the party that served the notice of dispute must pay the costs of proving the truth of the fact or the authenticity of the document. 6 In reliance on r 22.03, the applicants contend that the Bank should pay their costs of proving the truth of the facts stated in paragraphs 1 - 3, 4 - 6, 7 and 8, 9 and 10, 15 and 16, and 20 and 22 of their notice. 7 The Bank resists an order that provides for those costs. It contends that the facts to which the applicants refer were not "proved" and that, in some cases, the facts were not expressed in a form that was appropriate to be admitted. 8 The Bank also relies on correspondence with the applicants in respect of their notice to admit - specifically, a detailed letter dated 12 August 2022 from its solicitors to the applicants' solicitors, in which the Bank addressed its concerns about the form of the applicants' notice and expressed its acceptance of a number of "facts" as the Bank chose to express them. 9 The Bank contends that, notwithstanding r 22.03, the Court retains an overarching discretion on costs and that, having regard to the detailed responses and concessions made in the letter of 12 August 2022, no order should be made that provides for the costs of proving alleged facts stated in the notice to admit. 10 It also submits that, as a practical matter, it would be impossible to isolate from the work undertaken in the case, and the extensive evidence that was adduced, any particular matter that would have resulted in a real saving in terms of time and expense at the trial if the particular disputed facts had been admitted. 11 For my part, I doubt that the costs involved in agitating this particular matter are, themselves, justified, bearing in mind the significance of paragraphs 1 - 3, 4 - 6, 7 and 8, 9 and 10, 15 and 16, and 20 and 22 of the notice to admit to the overall case which the applicants lost. 12 There is some doubt that the facts stated in paragraphs 1 and 4 of the notice to admit (and hence the dependent facts stated in paragraphs 2 and 3, and 5 and 6, respectively) were "proved". These facts relate to the failure to lodge certain threshold transaction reports (TTRs) for stated periods. The Bank contends that it was entitled to dispute these facts because, as framed, paragraphs 1 and 4 erroneously referred to the number of reports that were not lodged in the stated periods. The error, according to the Bank, is that these stated facts equated the TTRs with the transactions covered by the TTRs. While it might be true to say that a given number of transactions, for which TTRs should have been lodged, occurred in the stated periods, it does not follow that the TTRs themselves were required to be lodged in the same periods. 13 The difference can be illustrated by comparing the fact stated in paragraph 1 of the notice to admit with (what the Bank says) is the true state of affairs. Paragraph 1 of the notice to admit stated: Between November 2012 and 16 June 2014 the respondent (CBA) failed to give threshold transactions reports (TTRs) for approximately 12,374 cash transactions of $10,000 of more processed through CBA's Intelligent Deposit Machines (IDMs) (June 2014 Late TTRs). 14 The Bank contends that the true position (as stated in their letter of 12 August 2022) was: CBA failed to give TTRs on time for approximately 12,374 cash transactions of $10,000 or more, which transactions occurred between November 2012 and 16 June 2014, processed through IDMs. … 15 In Reasons 5, I did not make a direct finding to the effect of the facts stated in paragraph 1 or paragraph 4 (dealing with a different period) of the notice to admit. Rather, I accepted that these were facts that the applicants had ascertained from an electronic spreadsheet referred to in [438] of Reasons 5, which was created by the Bank on 22 September 2015 (the electronic spreadsheet). That acceptance was in the context of considering the applicants' submission that the Bank was "aware" of the information contained in paragraphs 1 and 4 of the notice to admit at relevant times. 16 I was not satisfied that the Bank was "aware" of that information. Dealing with the information contained in paragraph 1 of the notice to admit, I found: 441 On the evidence before me, all these facts, for the purposes of "awareness", have been ascertained from investigations undertaken well after 16 June 2014, with knowledge of the late TTR issue. As at 16 June 2014, no relevant person (being an officer or someone with a duty to report to an officer) knew that, in the relevant period: (a) the Bank had failed to give TTRs for 12,374 cash transactions of $10,000 or more that had been processed through the Bank's IDMs; (b) that those transactions represented between approximately 80% and 95% of threshold transaction that occurred through the Bank's IDMs; or (c) that the total value of the June 2014 Late TTRs was approximately $143.7 million. Nor on the facts known as at 16 June 2014, could any relevant person deduce the content of the June 2014 Late TTR Information in this regard. 17 At [457] of Reasons 5, I reached the same conclusion with respect to the information contained in paragraph 4 of the notice to admit. 18 I am not persuaded that the applicants proved the truth of the facts stated in paragraphs 1 and 4 of the notice to admit. Strictly speaking, my findings concerned what the applicants had ascertained from a spreadsheet and what officers of the Bank knew at relevant times. I stopped short of determining that, had they been known, the ascertained facts were true. It was not necessary for me to make that finding having regard to my other findings on the question of "awareness". The same conclusion follows in respect of the dependent facts stated in paragraphs 2 and 3, and 5 and 6, of the notice to admit. The truth of the facts stated in paragraph 2 of the notice to admit were not proved in any event for the reason stated in [439] of Reasons 5. 19 I am satisfied that the truth of the facts stated in paragraphs 7 - 10 and 15 of the notice to admit were proved at trial. These facts are reflected, if not expressly then implicitly, in the findings I made in Reasons 5. 20 The facts in paragraphs 7 and 8 of the notice to admit are found in a letter dated 8 September 2015 to AUSTRAC that was written by Mr Toevs: see [458] of Reasons 5. The facts in paragraphs 9 and 10 and 15 are found in a letter dated 26 October 2015 to AUSTRAC that was also written by Mr Toevs: see [462] and [517] of Reasons 5. 21 The two letters were important documents forming part of the narrative of the Bank's discovery of the late TTR issue and the steps it took to rectify its failure to lodge TTRs on time. 22 Given their importance to the case overall, the likelihood is that the applicants would have tendered these documents regardless of the Bank's response to paragraphs 7 and 8, 9 and 10, and 15, of the notice to admit. Indeed, as I understand it, these documents were included in the applicants' list of documents to be tendered well before the notice to admit was served. There is no evidence that the applicants were put to any additional cost (i.e., beyond the tender of these documents) in proving these facts. 23 I am not satisfied that r 22.03 should apply to the proof of these facts. I am satisfied that this is an appropriate case in which to make an order that is inconsistent with the Rules: see r 1.35. 24 For completeness, I should record that, had I been satisfied that the truth of the facts stated in paragraphs 1 - 3, and 4 - 6, of the notice to admit had been proved, I would also have been satisfied that an order inconsistent with r 22.03 should be made in respect of those facts. Like the two letters, the electronic spreadsheet was an important part of the narrative of the Bank's discovery of the late TTR issue and the steps it took to rectify its failure to lodge TTRs on time. The Bank provided the electronic spreadsheet to AUSTRAC on 24 September 2015 when informing ASIC that the late TTRs had been lodged. This document was also included in the applicants' tender list. 25 I am not satisfied that the facts stated in paragraph 16 of the notice to admit were proved. The facts stated in paragraph 20 of the notice to admit are dependent on the facts stated in paragraph 19 thereof, which were not proved: see [492] of Reasons 5. The facts stated in paragraph 22 of the notice to admit are dependent on the facts stated in paragraph 21, which were not proved: see [160] of Reasons 5. It follows that r 22.03 does not apply to these paragraphs of the notice to admit. 26 The second matter in dispute is whether: (a) the lump sum costs should be assessed by a Registrar exercising delegated power under s 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth) (the Act) (see rule 3.01 and item 220 in Sch 2 to the Rules with respect r 40.02 and the power to make an order about the amount of costs) or (b) whether the amount of those costs should be referred to a Registrar acting as a referee for inquiry and report under s 54A of the Act. In other words, all parties seek to have a Registrar determine the amount of the lump sum costs. The disputed question is the capacity in which the Registrar should make that determination. 27 The Bank initially sought a costs reference, although its position mellowed somewhat in oral submissions. The applicants seek the exercise of delegated power. The applicants submit that: (a) the costs reference that the Bank seeks is "not the normal course"; (b) the Bank has not justified the taking of that course; and (c) taking that course will involve "a duplication of process between the Registrar and the presiding Judge". 28 In its written submissions, the Bank advanced the appropriateness of a costs reference by reference to various cases in which that course has been adopted. However, notably, these were cases in which I had made such an order: Invast Financial Services Pty Ltd v Pseven International DWC LLC [2022] FCA 861; Hakea Holdings Pty Ltd v McGrath (No 3) [2023] FCA 39; Cantarella Bros Pty Ltd v Lavazza Australia Pty Ltd (No 4) [2024] FCA 419; Deputy Commissioner of Taxation v Defined Properties Investment Pty Ltd (in liq) [2024] FCA 562. I do not regard the appointment of a referee to deal with the assessment of lump sum costs to be an idiosyncratic view held by me. I refer, for example, to the recent decision of R&B Investments Pty Ltd (Trustee) v Blue Sky Alternative Investments Limited (in liq) (Adoption of Referee's Report) [2024] FCA 1083 which concerned the adoption of a referee's report in a costs reference dealing with lump sum costs in representative proceedings. 29 The applicants' submission about the "duplication of process" involved in a costs reference is correct in one sense. Unless, in the present case, there is agreement between the parties as to the referee's findings that is sufficient to enable the Court to make a lump sum costs order, an adoption hearing will be necessary. 30 It should be appreciated, however, that a "duplication of process" may also be involved if the procedure advocated by the applicants is adopted. Any party disagreeing with a Registrar's exercise of delegated power can apply to the Court under s 35A(5) of the Act to review the exercise of that power. Should that happen here, the question of the amount of the lump sum costs will be before a Judge of the Court for a hearing de novo in which findings of fact will need to be made afresh: see the principles discussed in Callegher v Australian Securities and Investments Commission [2007] FCA 482; 239 ALR 749 at [46]. 31 The assumption underlying the applicants' submission is that there is likely to be disagreement with the Registrar's assessment of lump sum costs when the Registrar is acting as a referee, but no disagreement when the same referee carries out the same assessment exercising delegated power. That assumption cannot be correct. 32 If one takes as a starting point the assumption that there might be disagreement with a Registrar's assessment of lump sum costs then, in relation to the present case, I do not consider that carrying out a review under s 35A(5) of the Act of that assessment, on the basis of a de novo hearing, would be an efficient use of the Court's resources, and consistent with the overarching purpose in s 37M of the Act, when a more efficient procedure for dealing with costs is available. In the present case, a more efficient procedure is available - the appointment of a referee. 33 As Katzmann J observed in Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liquidation) (No 6) [2023] FCA 1116 at [11], the principles in relation to the adoption of referee's reports are collected in two judgments of the Supreme Court of New South Wales in Seven Sydney Pty Ltd v Fuji Xerox Australia Pty Ltd [2004] NSWSC 902 and Chocolate Factory Apartments Pty Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784. These principles have been applied in this Court: see, for example, Sheehan v Lloyds Names Munich Re Syndicate [2017] FCA 1340 at [9] - [12]; Gulf Conveyor Systems Pty Ltd v Gulf Integrated Systems Solutions Pty Ltd [2020] FCA 1245 at [12] - [21]; and Mununggurr v Chanel Seven Sydney Pty Ltd (No 2) [2022] FCA 999 at [22]. 34 An inquiry and report by a referee is an alternative form of dispute resolution. An adoption hearing is not a hearing de novo. In general, where there is factual material that entitles the referee to reach the conclusions he or she did, the Court will not entertain a re-agitation of the referee's factual findings. It is not enough, for example, for an aggrieved party to point to an error of fact of a kind that would be amenable to correction by an appellate court. The discretion to reconsider a referee's factual findings will generally only be exercised if the findings are such that no reasonable finder of fact could have made that finding. 35 These considerations indicate that there are procedural advantages in having a referee determine the amount of lump sum costs, particularly in a complex case such as the present one. Further, having a Registrar of the Court act as a referee in such a case is an efficient use of the Court's existing resources. 36 I am satisfied, therefore, that there should be a costs reference. 37 The third disputed matter is whether the assessment of costs should be stayed pending the outcome of the respective appeals that the applicants have brought from my judgment. The appeals have been listed for hearing on 18 to 21 November 2024. 38 The applicants submit that the assessment of costs on a lump sum basis will involve a lengthy, time-consuming, and resource-intensive process for all parties. Based on information provided by an expert costs assessor, the applicants contend that this process is likely to take approximately 26 weeks from the date of its commencement. They submit that their appeals, which are to be heard in the near future, are at least arguable (the Bank not having taken any point that the appeals lack substance). They submit that there is no risk that they will not be in a position to meet a costs order if their appeals are unsuccessful. They submit that, in these circumstances, any prejudice suffered by the Bank resulting from the stay they seek is likely to be minimal. 39 The Bank resists the application for a stay. It submits that the general principles applicable to the grant of a stay are settled and that there is a prima facie assumption that the judgment under appeal is correct. The Court should not deprive a litigant of the benefit of a judgment in its favour: see, in that regard, Minister for Home Affairs v AFX17 [2020] FCA 903 at [2]; Viagogo AG v Australian Competition and Consumer Commission [2021] FCA 175 at [8] - [13]; Ritson v Commissioner of Police, New South Wales Police Force [2021] FCA 5 at [31] - [34]. 40 The Bank observes that the notices of appeal raise 24 numbered grounds of appeal (63 grounds if alternatives are counted). The determination of all these grounds is likely to result in some time elapsing before judgment is given by the Full Court. This means that, if a stay is granted, there is likely to be considerable delay before it obtains a costs judgment in its favour on which judgment interest will run. In this context, the Bank argues that the prospect of an outcome in the appeals that would change its entitlement to costs "must be regarded as less, rather than more, likely". In advancing these submissions, the Bank has not indicated the likely quantum of the trial costs it will seek. 41 While I recognise the cogency of the Bank's submissions, I consider that the stay that the applicants seek should be granted. 42 The determination of the appeals will result in one of three broad outcomes: (a) the appeals will succeed on all grounds; (b) the appeals will succeed on some but not all grounds; or (c) the appeals will fail on all grounds. I will not speculate on the likelihood of any one of those outcomes. It is clear, however, that outcome (a) will lead to a different trial costs order. Outcome (b) may also lead to a different trial costs order even if the appeals are not, overall, successful. It is possible that the findings of the Full Court might mean that the trial costs should be apportioned by reference to the issues decided at trial. 43 I accept that the assessment of costs on a lump sum basis might well be lengthy, time-consuming, and resource-intensive. If that burden is assumed now, outcome (a) will mean that work will have been undertaken and costs incurred unnecessarily. Outcome (b) may lead to the same result. It might also result in the need to undertake additional or different work at an overall increased cost to the parties. 44 In these circumstances, the better course is to await the outcome of the appeals so that there is no wastage in undertaking the lump sum assessment, including wastage of the Court's resources. 45 Orders will be made accordingly. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.

Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited

At a glance

Court

Decision date

Before

Source

Judgment (19 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (16)