Rural Funds Management Limited as Responsible Entity for the Rural Funds Trust and RF Active v Bonitas Research LLC [No 2]

HIS HONOUR: On 12 February 2020, I ordered that there be a verdict for damages for the plaintiff, damages to be assessed: ­­­­Rural Funds Management Limited as Responsible Entity for the Rural Funds Trust and RF Active v Bonitas Research LLC [2020] NSWSC 61. Definitions used there are used here.

There remains for determination:

RFM claims that it suffered loss and damage totalling $625,985 comprised of:

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.

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.

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.

RFM is entitled to recover damages of $519,784.

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]

Sections 98(1), (2), (3) and (4) of the Civil Procedure Act 2005 (NSW) provides:

Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1 provides:

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.

UCPR r 20.14(1) provides:

UCPR r 20.23 provides:

UCPR r 20.24(1)(a) provides:

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.

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.

I see no reason not to adopt the report. I adopt it.

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.

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.

The result is that RFM is entitled to a gross lump sum costs order in the amount of $368,974.

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).

The Court enters judgment for the plaintiff against the first defendant and the second defendant for $530,201. [3]

The first defendant and the second defendant are ordered to pay the plaintiff’s costs assessed in the amount of $368,974.