A v Minister for Immigration & Multicultural Affairs

[2002] FCAFC 238

FEDERAL COURT OF AUSTRALIA

Throvena Pty Ltd v Pitman [2002] FCAFC 238

BANKRUPTCY – appeal against interlocutory order – whether primary judge erred in ordering that the appellants pay the first respondent’s costs up to and until he was effectively released – whether primary judge should have ordered the first respondent to pay the appellants’ costs – whether the appellants were “almost certain to have succeeded” if the matter had been fully tried – extension of time within which to seek leave to appeal granted – leave to appeal refused with costs as decision appealed from was not attended with sufficient doubt and substantial injustice would not be caused to the appellants if the decision were wrong and leave were refused –  proposed appeal lacks a chance of success

Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397, applied
Carr v Finance Corporation of Australia Ltd (No. 1) (1981) 147 CLR 246, applied

THROVENA PTY LTD ACN 001 738 763, HAPDAY HOLDINGS PTY LTD ACN 001 185 253 and MACQUARIE HEALTH CORPORATION ACN 003 531 860 v ALAN PITMAN and WARREN PANTZER as Trustee for the estate of Thomas Richard Wenkart

No N 205 of 2002

SPENDER, MOORE, KIEFEL JJ
SYDNEY
16 AUGUST 2002

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 205 OF 2002

BETWEEN:

THROVENA PTY LTD ACN 001 738 763
HAPDAY HOLDINGS PTY LTD ACN 001 185 253  MACQUARIE HEALTH CORPORATION ACN 003 531 860
APPELLANTS

AND:

ALAN PITMAN
FIRST RESPONDENT

WARREN PANTZER as Trustee for the estate of Thomas Richard Wenkart
SECOND RESPONDENT

JUDGES:

SPENDER, MOORE, KIEFEL JJ

DATE OF ORDER:

16 AUGUST 2002

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The time within which to seek leave to appeal be extended to 12 August 2002.

2.Leave to appeal be refused.

3.The appellants pay the first respondent’s costs of the application, including the costs ordered to be paid by Justice Hely on 6 June 2002 in respect of a notice of motion seeking a stay of the costs order the subject of the present appeal, to be taxed if not agreed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 205 OF 2002

BETWEEN:

THROVENA PTY LTD ACN 001 738 763
HAPDAY HOLDINGS PTY LTD ACN 001 185 253  MACQUARIE HEALTH CORPORATION ACN 003 531 860
APPELLANTS

AND:

ALAN PITMAN
FIRST RESPONDENT

WARREN PANTZER as Trustee for the estate of Thomas Richard Wenkart
SECOND RESPONDENT

JUDGES:	SPENDER, MOORE, KIEFEL JJ
DATE:	16 AUGUST 2002
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT:

1. Throvena Pty Ltd, Hapday Holdings Pty Ltd and Macquarie Health Corporation (hereafter referred to as “the appellants”) seek to appeal from the orders made by Beaumont J on 21 February 2002 at Sydney.  The orders and declaration made on that day are part of extensive litigation associated with the bankruptcy of Thomas Richard Wenkart.  Notwithstanding that there have been more than thirty cases directly concerned with, or related in some way to, the estate of Dr Wenkart involving complex and diverse issues, this appeal really comes down to an appeal against the order by Beaumont J that the appellants pay the costs of Mr Pitman up to and including 12 October 2001, in the proceedings N7752 of 2000.

2. The order that is challenged in these proceedings was interlocutory and therefore it is necessary to seek an extension of time within which to apply for leave, and then to seek leave to appeal from that order.  It was candidly acknowledged by counsel for the appellants that the need for leave to appeal was appreciated only on receipt of the submissions on behalf of Mr Pitman, which objected to the competency of the appeal because of the failure to seek leave to appeal from the interlocutory order of the primary judge.  In those circumstances the Court heard argument as to why leave to appeal should be granted and why, if leave were granted, the appeal should be allowed.

3. In short summary of the events leading to the making of the declaration and orders of Beaumont J on 21 February 2002,  Justice Hunter on 25 September 1997, in proceedings 50057/95 Sandtara Pty Limited v Abigroup Limited in the Supreme Court of New South Wales, found that Dr Wenkart was liable to indemnify Mr Pitman who was liable to indemnify Mr Abignano and Genallco Pty Limited (“Abignano and Genallco”).  By deed dated 10 December 1997, Mr Pitman assigned his rights against Dr Wenkart to Abignano and Genallco, who then filed a creditor’s petition and obtained a sequestration order against Dr Wenkart.  Mr Pitman sought to prove in Wenkart’s bankrupt estate pursuant to the indemnity liability of Dr Wenkart, and Abignano and Genallco sought to prove for the same amount plus some further items.  Some parts of Mr Pitman’s proof of debt were rejected by the Trustee.  The Trustee never dealt finally with the proof of debt lodged by Abignano and Genallco.

4. On 7 February 2001, Mr Pitman sought a reversal of the decision by the Trustee of the estate of Dr Wenkart to reject certain items in Mr Pitman’s proof of debt.  On 21 December 2001, Beaumont J pronounced reasons for judgment on that application and on a cross-claim by the present appellants against Mr Pitman and the Trustee.  Beaumont J, in the reasons of 21 December 2001, referred to reasons which his Honour had given on 4 May 2001, 13 July 2001 and 27 November 2001:

   “where the background and context of the dispute between these parties is explained.”

5. A deed dated 22 December 2000 (“the Throvena Deed”) is relevant to the orders made by Beaumont J on 21 February 2002.  Pursuant to that deed, the appellants acquired the rights of Abignano and Genallco against Wenkart, and Abignano and Genallco gave up their right to recover from Mr Pitman.  The contention by the appellants is that, as a consequence of the Throvena Deed, Mr Pitman faced no liability in respect of which he could prove in the estate of Dr Wenkart.  This contention is to be contrasted with the findings by Beaumont J of 21 December 2001, where, relevantly for the purposes of the present appeal, his Honour said at [56]:

   “It will be recalled that under the Throvena Deed, Abignano and Genallco agreed that on the Completion Date (i.e. upon completion by payment of the Price in full (cl 1.12), which payment has now been made), they must release Mr Pitman from all claims and liabilities that they or either of them has or may have against him (cl 1.4).  By their letter to Mr Pitman dated 5 October 2001, they thereby released Mr Pitman.”

   And later, at [61]:

   “In my opinion, the inference should be drawn, from both the terms of the deeds and the conduct of the promisors and promisee, that their joint intention was that, upon completion for the purchase of the Acquired Debts, the third party, Mr Pitman, should himself be entitled to insist upon performance of the promise to release him.  This was clearly Throvena’s intention, in order that, upon the acquisition of the debts being completed, Mr Pitman would stand released from his liabilities to Abignano and Genallco, so that the s 73 proposal could proceed.  It must be presumed, in the circumstances, that Abignano and Genallco were aware of this and intended it to happen.

   It follows, in my view, that Mr Pitman was able to enforce, specifically if need be, Abignano and Genallco’s promise to release him.  Accordingly, the release given on 5 October 2001 was effective.”

6. His Honour dealt with further matters in reasons for judgment of 1 February 2002, and indicated then that he would hear the parties on the orders to be made, in accordance with his reasons, including orders for costs. 

7. The orders and declaration made on 21 February 2002 were:

   “1.Application stood over generally with liberty to restore on seven days’ notice.

   2.Reserve liberty to the bankrupt to apply to the Court on such notice as a Judge of the Court may allow for an order that the First Respondent (the Second Cross-Respondent) call a meeting of creditors pursuant to section 73(2) of the Bankruptcy Act 1966.

   3.The Second Respondents (the Cross-Applicants) pay the costs of the proceedings for the Applicant (the First Cross-Respondent) up to and including 12 October 2001.

   4.The Second Respondents (the Cross-Applicants) pay the costs of the proceedings of the First Respondent (the Second Cross-Respondent) on a submitting basis only.

   5.Reserve liberty to the First Respondent (the Second Cross-Respondent) to apply, on such notice as a Judge of the Court may allow for any further order for his costs.

   THE COURT DECLARES THAT:

   The Applicant (the First Cross-Respondent) has been effectively released from any liability to the Third Cross-Respondents.”

8. In the appellant’s submissions the Court was informed:

   “On 15 March 2002 Wenkart’s bankruptcy was annulled by reason of Section 74(5) of the Bankruptcy Act 1966, a meeting of creditors held on that day having approved a Section 73 proposal.”

   Those submissions continued:

   “In those circumstances, the only ongoing practical consequence of His Honour’s orders insofar as the appellants are concerned arises from the order that they pay Pitman’s costs of the proceedings up to and including 12 October 2001.  The appellants submit that His Honour’s discretion as to costs miscarried and that the order should have been that Pitman pay the appellant’s costs.”

9. The appellants acknowledge:

   “Whilst a Court will not try an action between the parties simply in order to determine costs, in some cases a Judge may feel confident that one party was almost certain to have succeeded if the matter had been fully tried (Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625).”

10. In that case, McHugh J said at 624-625:

    “In most jurisdictions today, the power to order costs is a discretionary power.  Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs [Latoudis v Casey (1990) 170 CLR 534]. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order [Latoudis v Casey (1990) 170 CLR 534 at 543, 566-568]. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

    In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action.  The court cannot try a hypothetical action between the parties [Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201]. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action [Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201]. …

    Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.”

11. The short submission central to this appeal by the appellants is:

    “In the present context, the established facts and the determinations which had already been made in the matter by Justice Beaumont justified a confidence that the appellants were almost certain to succeed in their submission that Pitman’s Proof had become of nil value by reason of the Throvena Deed.  Such a conclusion would have justified an order dismissing the Further Amended Application.

    In those circumstances, the appropriate exercise of discretion as to costs was for costs to follow the event by an order that Pitman pay the appellants’ costs.”

12. This submission cannot be accepted.  As the orders indicate, there was no relevant “event”.  The submission ignores the fact that the costs order gave Mr Pitman his costs only up to and including 12 October 2001; the temporal limitation on that order is a consequence of the finding that the release of Mr Pitman by Abignano and Genallco was effected by their letter to Mr Pitman dated 5 October 2001, and the further finding by Beaumont J in his judgment of 21 December 2001:

    “Accordingly, the release given on 5 October 2001 was effective.”

    Unless and until the release became effective, “Pitman’s Proof” was not “of nil value”.  In particular, that Proof did not become “of nil value” by reason of the execution of the Throvena Deed, as the appellants assert.

13. A consideration of the reasons given by his Honour on 21 February 2002 on the question of costs justifies this conclusion.  His Honour expressed the opinion that the question of costs ought to be approached, on a “by and large basis”, by considering the application and cross-application together.  He noted that, whilst the character of the contest was one arising in the complex administration of an estate, it was not merely a private a dispute, as the general body of creditors was interested in the outcome.  His Honour said:

    “It appears that, until the Settlement Deed became operative on 8 October 2001, Mr Pitman had not been effectively discharged from liability.  This, in my view, justified his claim for interim relief enjoining the original s 73 meeting.  Although that injunction was later discharged, this occurred because there was then no live threat to proceed with the original proposal.  Until 12 October 2001, Mr Pitman was not aware that he had been effectively released.  Up to that point (i.e. the Settlement Deed), Throvena had failed to establish that Mr Pitman had been effectively released.  Broadly speaking then, Mr Pitman had been successful in the litigation as a whole.  This, in my view, justifies an order in terms of par 5.  He should not, however, receive costs beyond that time.  Nor, in my view, should Throvena, given its failure to seek leave to substitute its proof until very late in the proceedings.”

14. No error has been shown in the exercise of the primary judge’s discretion in allowing Mr Pitman his costs up until the time he had been effectively released, but not beyond that time.  Contrary to the submissions of the appellants, this is not a case where it can be confidently entertained that one party was almost certain to have succeeded if the matter had been fully tried.  A finding that Throvena was almost certain to have succeeded flies in the teeth of the finding by the primary judge that, up to the point of the Settlement Deed, “Throvena had failed to establish that Mr Pitman had been effectively released”.

15. Further, the exercise of the discretionary power of the primary judge not to award to Throvena its costs subsequent to 12 October 2001 has not been demonstrated to be tainted by any appellable error.  While the appellants were successful on some issues litigated between them and Mr Pitman subsequent to that date, Throvena chose to seek leave to substitute its proof only on 11 December 2001, and there were other issues on which Mr Pitman was successful, including the fact that the appellants had rejected on 7 September 2001 an offer by Mr Pitman to agree that the quantum of disputed items was $1.3 million, being the amount that the appellants eventually agreed on 29 November 2001 was the quantum of those items.

16. The Court has paid no heed to a submission made in writing to the Court by the appellants subsequent to the hearing of the application for leave to appeal, except to the extent that they gave an answer to a question from the Bench about a matter of fact, because no leave had been sought let alone granted to make submissions after the conclusion of the hearing of the application, and the submission in any event appears to be based on a premise inconsistent with the conduct of Throvena in seeking leave to substitute its proof.   The hearing is the time and place for the presentation of arguments.  The observations by Mason J, as he then was, in Carr v Finance Corporation of Australia Ltd (No. 1) (1981) 147 CLR 246 at 257-258 are apposite:

    “I should express my dissatisfaction with the way in which the appellants’ case has thus far been presented.  I have already referred to the absence of any reference to s. 57(5) before the matter reached this Court.  After argument had concluded in this Court lengthy written submissions dealing with issues not hitherto raised and a further affidavit were filed.  The affidavit asserts that the mortgages were extended but no attempt is made to specify the extended expiry dates or the facts giving rise to the alleged extension.  The material was submitted without leave having been given by the Court.  The impression, unfortunately abroad, that parties may file supplementary written material after the conclusion of oral argument, without leave having been given beforehand, is quite misconceived.  We have to say once again, firmly and clearly, that the hearing is the time and place to present argument, whether it be wholly oral or oral argument supplemented by written submissions.”

17. For the reasons set out earlier, the Court grants an extension of time within which to seek leave to appeal until Monday 12 August 2002, but refuses leave to appeal.  Leave to appeal from an interlocutory order will be granted only where sufficient doubt attends the decision from which the appeal is sought and substantial injustice would be caused to the party seeking leave if the decision were wrong and leave were refused: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397. Since, in our opinion, the proposed appeal has no prospects of success, leave to appeal is refused, with costs.

18. The Court notes that those costs will include the costs ordered to be paid by Justice Hely on 6 June 2002 in respect of a notice of motion seeking a stay of the costs order the subject of the present application.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Spender, Moore and Kiefel.

Associate:

Dated:             16 August 2002

Counsel for the Appellants:	Mr M. Cashion, SC, with Mr J. Chippindall
Solicitor for the Appellants:	Hunt & Hunt Lawyers
Counsel for the First Respondent:	Mr A. Ogborne
Solicitor for the First Respondent:	Bruce & Stewart
Date of Hearing:	12 August 2002
Date of Judgment:	16 August 2002