Application of Official Trustee in Bankruptcy in the Matter of Bankrupt Estate of David Austin Kelly (No. 6)

[2016] FCCA 1968

FEDERAL CIRCUIT COURT OF AUSTRALIA

APPLICATION OF OFFICIAL TRUSTEE IN BANKRUPTCY IN THE MATTER OF BANKRUPT ESTATE OF DAVID AUSTIN KELLY (No. 6) [2016] FCCA 1968

Catchwords:
BANKRUPTCY – Costs – application for costs thrown away by reason of intervention in proceeding – whether intervener had reasonable grounds for intervening – whether intervener acted unreasonably in the manner in which she conducted her case – order made that intervener pay some but not all of the costs occasioned by intervention.

Legislation:

Bankruptcy Act 1966 (Cth), s.146
Duties Act 1997 (NSW), ss.211, 304

Cases cited:

Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6;

(1997) 186 CLR 622

Applicant: APPLICATION OF OFFICIAL TRUSTEE IN BANKRUPTCY IN THE MATTER OF BANKRUPT ESTATE OF DAVID AUSTIN KELLY

File Number: SYG 1925 of 2014

Judgment of: Judge Manousaridis

Hearing date: 26 July 2016

Delivered at: Sydney

Delivered on: 2 August 2016

REPRESENTATION

Counsel for the Applicant: Mr P Godwin

Counsel for the Respondent: Mr T Cleary

Solicitors for the Respondent: TressCox Lawyers

ORDERS

1. Ms Lydia Williams pay the applicant’s costs, as agreed or taxed, of and incidental to all directions and other hearings in this matter other than:

   (a)the hearings that took place before 24 October 2014; and

   (b)the hearing on 26 July 2016.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1925 of 2014

APPLICATION OF OFFICIAL TRUSTEE IN BANKRUPTCY IN THE MATTER OF BANKRUPT ESTATE OF DAVID AUSTIN KELLY

Applicant

REASONS FOR JUDGMENT

Introduction

1. On 26 July 2016 there came before me for hearing the question which I had reserved for determination in my judgment of 15 November 2015.[1]

   [1] Application Of Official Trustee In Bankruptcy In The Matter Of Bankrupt Estate Of David Austin Kelly (No.2) [2015] FCCA 3036

2. In the course of argument on an objection based on s.211 and s.304 of the Duties Act 1997 (NSW) to the admissibility of a document, counsel for Ms Williams twice requested I adjourn the matter to enable him to obtain instructions. When the hearing resumed, counsel informed me that Ms Williams would consent to the Court making the following orders:

   1. Pursuant to s.146 of the Bankruptcy Act 1966 (Cth) (Act), the distribution of dividends amongst the creditors of the bankrupt estate of the late David Austin Kelly (Bankrupt) who have proved their debts in accordance with Part VI Div 5 of the Act shall proceed as if the Bankrupt had filed a statement of his affairs and those creditors had been stated to be creditors in it.

   2. The application in a case filed by Lydia Williams on 23 December 2014 is dismissed.

   3. The costs of and incidental to this application are payable out of the Bankrupt’s estate.

3. Counsel for the applicant (Trustee) also sought an order that “costs thrown away by reason of Ms Williams’ intervention in these proceedings are payable by Ms Williams”. Counsel for Ms Williams opposed the making of that order, but he indicated that Ms Williams’ consenting to the first three orders was not conditional on my not making the order for costs the Trustee seeks. In the course of argument, it became apparent that the order the Trustee was seeking was that Ms Williams indemnify the bankrupt estate of David Austin Kelly (bankrupt’s estate) for the costs it incurred as a consequence of Ms Williams’ intervention.

4. Counsel for the Trustee submitted that Ms Williams should pay the Trustee’s costs because her participation in the proceeding caused delay and unnecessary expense. Counsel for Ms Williams, on the other hand, submitted Ms Williams is a pensioner, holds no assets, she genuinely believed she had case, and she laboured under various psychological impairments. Counsel for the Trustee submitted in response that these were not reasons for the Court not awarding costs.

5. I made orders in terms of the orders to which Ms Williams consented, and I reserved judgment on the question of whether I should make an order requiring Ms Williams to indemnify the bankrupt’s estate for the costs it has incurred as a result of Ms Williams’ intervention.

Principles

1. The Trustee applies for costs in circumstances where the Court has not determined the merits of Ms Williams’ claims because Ms Williams decided not to pursue those claims. The principles that should guide the Court’s discretion in deciding whether to order costs in these circumstances, therefore, are those that were discussed by McHugh J in Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin.[2] What his Honour there said may be summarised as follows:

   a)The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or “extra-curial action” they have avoided.

   b)In some cases, however, the court may be able to conclude that one of the parties had acted so unreasonably that the other party should obtain the costs of the action.

   c)In some cases, the court 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.

   [2] [1997] HCA 6; (1997) 186 CLR 622

2. The issue, therefore, which will determine whether the Trustee should obtain an order for costs against Ms Williams is whether Ms Williams acted unreasonably by intervening in the proceedings or otherwise acted unreasonably in the manner in which she participated in the proceedings.

Was Ms Williams’ intervention unreasonable?

1. In my opinion, Ms Williams’ decision to intervene in the proceedings was not unreasonable. I have already found that Ms Williams had a reasonably arguable case that she held a security interest in the remaining asset of the bankrupt’s estate.  That, however, does not mean Ms William acted reasonably in the manner in which she participated in the proceedings. On the contrary, Ms Williams acted unreasonably.

2. The grounds on which Ms Williams relied for claiming she had an interest in the bankrupt’s estate were relatively straightforward, and the resolution of her claim should have occupied no more than two directions hearings, and one day of hearing. That, however, did not occur. The matter came before the Court on a number of occasions in circumstances where Ms Williams had not complied with directions for the filing of evidence. Over objection from the Trustee, I made orders allowing Ms Williams further time to file her evidence. Further, Ms Williams’ claims had been set down for hearing on at least two occasions, but the hearing dates were vacated because Ms Williams was not in a position to pursue her claims.

3. Until the hearing of 26 July 2016 Ms Williams was unrepresented in the proceedings. Further, there is no reason to suppose Ms Williams has the means of paying any costs that may be ordered against her; and it appears that Ms Williams suffers from a disability which may in part explain her inability to reasonably pursue her claims. None of these matters, however, overcome the unreasonableness of her conduct.

Conclusion and disposition

1. In my opinion, I should order that Ms Williams pay the costs of the Trustee, but only such costs as the Trustee incurred as a consequence of Ms Williams’ unreasonable conduct. Those costs will be sufficiently identified as the costs the Trustee incurred in relation to all directions and other hearings before the Court other than the hearings that took place before 24 October 2014, and the hearing that took place on 26 July 2016.

I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis

Date: 8 August 2016