Australian Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Limited (No 2)

[2022] NSWSC 94

Supreme Court

New South Wales

Medium Neutral Citation:

Australian Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Limited (No 2) [2022] NSWSC 94

Hearing dates:

On the papers

Decision date:

11 February 2022

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

(1)   The Court declares that, by determining that the plaintiff should pay the second and third defendants the amount of $88,194 in compensation for legal costs, the First Defendant exceeded the limit for compensation for indirect financial loss under Rule D.4 of the Australian Financial Complaints Authority Complaint Resolution Scheme Rules dated 1 November 2018;

(2)   The matter be remitted back to the first defendant to make a determination according to law;

(3)   The agreement by the first defendant recorded in paragraph 2 of the orders made on 8 April 2021, being that the first defendant would not without first providing 21 days’ notice to the plaintiff:

(a)   take any steps to enforce the Determination made on 17 February 2021, other than any steps taken in connection with this proceeding (including by way of cross-claim or other similar process);

(b)   publish the Determination made on 17 February 2021; or

(c)   determine to expel the Plaintiff from membership of AFCA,

is discharged;

(4)   The plaintiff to pay 90 percent of the second and third defendants’ costs of the proceeding on the ordinary basis.

Catchwords:

COSTS — Whether the matter should be referred back to AFCA to re-determine the issue of legal costs — Whether the plaintiff should pay the defendants’ costs of the proceedings in this Court where the defendants were mostly successful

Cases Cited:

Australian Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Limited [2021] NSWSC 1577

Category:

Costs

Parties:

Australia Capital Financial Management Pty Ltd (Plaintiff)
Australian Financial Complaints Authority Limited (First Defendant)
Benyu Bai (Second Defendant)
Wenhua Yang (Third Defendant)

Representation:

Counsel:

E Cox SC with S Lees (Plaintiff)
S Thomas (Second and Third Defendants)

Solicitors:

Mills Oakley (Plaintiff)
Becketts Lawyers (First Defendant)
DSS Law (Second and Third Defendants)

File Number(s):

2021/90220

Publication restriction:

None

Judgment

1. On 7 December 2021, I delivered reasons for judgment in this matter in which I concluded that, with one qualification, a determination of the first defendant, the Australian Financial Complaints Authority Limited (AFCA), setting aside guarantees given by the second defendant, Mr Bai, and the third defendant, Ms Yang, to the plaintiff, Australian Capital Financial Management Pty Ltd (ACFM), was valid and binding: Australian Capital Financial Management Pty Ltd v Australian Financial Complaints Authority Limited [2021] NSWSC 1577 (Principal Judgment). The qualification related to a conclusion of ACFM relating to legal costs. AFCA had awarded Mr Bai and Ms Yang $88,194 in respect of legal costs they had incurred in connection with proceedings in the District Court. I concluded that AFCA’s jurisdiction to award legal costs was limited to $5,000 for each of Mr Bai and Ms Yang: Principal Judgment [64]ff. There are two outstanding questions. One concerns the form of orders the Court should make. The other concerns costs.

Form of orders

2. ACFM contends that the Court should make the following orders:

1.   The Court declares that, by determining that the Plaintiff should pay the Second and Third Defendants the amount of $88,194 in compensation for legal costs, the First Defendant exceeded the limit for compensation for indirect financial loss under Rule D.4 of the Australian Financial Complaints Authority Complaint Resolution Scheme Rules dated 1 November 2018.

2.   The matter be remitted back to the First Defendant to make a determination according to law.

3. Mr Bai and Ms Yang seek the following orders:

1.   The application filed on 31 March 2021 is dismissed.

2.   Within 14 days, the Plaintiff is to:

a.    provide the Second Defendant with an executed discharge mortgage form in relation to #### Point Cook in the State of Victoria; and

b.   remove any registered caveat on the title of #### Point Cook in the State of Victoria.

3.   Within 14 days, the Plaintiff is to pay the Second Defendant the sum of $254,646.00 with interest at 2.05% per annum, compound calculated monthly from 1 October 2014 to the date of payment.

4.   Within 14 days, the Plaintiff is to pay to each of the Second Defendant and Third Defendant:

a.   the sum of $5,000.00 as compensation for reasonable costs they incurred; and

b.   the sum of $5,000.00 for non-financial loss.

4. In my opinion, the appropriate orders are those sought by ACFM.

5. The Court should seek to give effect to the parties’ agreement, which provides for a determination of their dispute by AFCA in accordance with its rules. It is not for the Court to substitute its own orders for AFCA’s decision. On the findings I have made, AFCA exceeded its jurisdiction in one respect. Its conclusion in that respect is clearly severable from the rest of its decision. On the other hand, as AFCA points out in its submissions, under the AFCA Rules, the determination does not become binding on Mr Bai and Ms Yang unless they accept it within 30 days after the determination is made. The determination that was accepted by Mr Bai and Ms Yang has been held to be invalid in part. Consequently, it is not binding on them.

6. Consistently with these principles, it is appropriate to refer the matter back to AFCA to re-determine the question of legal costs. Once the question of legal costs is determined, it is a matter for Mr Bai and Ms Yang to decide whether they accept the whole determination (including the re‑determination of legal costs). Assuming that they do, the determination becomes binding on the parties in accordance with the AFCA Rules. The orders sought by ACFM best achieves that outcome.

7. By its summons filed on 31 March 2021, ACFM also sought interlocutory relief. The terms of that interlocutory relief were agreed between the parties and granted on 8 April 2021. It is common ground that that relief should be discharged. The final orders set out below do that.

Costs

8. AFCA submits that no order for costs should be made for or against it. None of the other parties takes issue with that submission.

9. Mr Bai and Ms Yang seek their costs of the proceedings on the basis that they were largely successful. ACFM submits that there should be no order as to costs, with the intention that the parties bear their own costs.

10. In my opinion, it is appropriate to order that ACFM pay 90 percent of Mr Bai’s and Ms Yang’s costs. ACFM sought to set aside the whole of the determination of AFCA on a number of grounds. Mr Bai and Ms Yang were largely successful in resisting the orders sought by ACFM. They only failed in one limited respect. In my opinion, the order I propose properly reflects the degree of success they enjoyed.

Orders

11. Accordingly, the orders of the Court are:

1. The Court declares that, by determining that the plaintiff should pay the second and third defendants the amount of $88,194 in compensation for legal costs, the first defendant exceeded the limit for compensation for indirect financial loss under Rule D.4 of the Australian Financial Complaints Authority Complaint Resolution Scheme Rules dated 1 November 2018;

2. The matter be remitted back to the first defendant to make a determination according to law;

3. The agreement by the first defendant recorded in paragraph 2 of the orders made on 8 April 2021, being that the first defendant would not without first providing 21 days’ notice to the plaintiff:

1. take any steps to enforce the Determination made on 17 February 2021, other than any steps taken in connection with this proceeding (including by way of cross-claim or other similar process);

2. publish the Determination made on 17 February 2021; or

3. determine to expel the Plaintiff from membership of AFCA,

is discharged;

4. The plaintiff to pay 90 percent of the second and third defendants’ costs of the proceeding on the ordinary basis.

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Decision last updated: 11 February 2022