Asraf v Auswide Car Rentals Pty Ltd (No.3)
[2008] FMCA 1315
•9 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ASRAF v AUSWIDE CAR RENTALS PTY LTD (No.3) | [2008] FMCA 1315 |
| BANKRUPTCY – Dismissal of petition by consent – debtor contesting existence of debt and service of documents – whether appropriate to award costs against debtor – registrar’s order awarding costs set aside on review. |
| Bankruptcy Act 1966 (Cth) Federal Magistrates Court Rules 2001 (Cth), r.16.05(2)(a) |
| Asraf v Auswide Car Rentals Pty Ltd (No.2) [2008] FMCA 973 Asraf v Auswide Car Rentals Pty Ltd [2008] FMCA 717 World Best Holdings Ltd v Sarker [2006] FMCA 1876 Wren v Mahony (1972) 126 CLR 212 |
| Applicant: | NAZMIN ASRAF |
| Respondent: | AUSWIDE CAR RENTALS PTY LTD ACN 098 009 566 |
| File Number: | SYG 3781 of 2007 |
| Judgment of: | Smith FM |
| Hearing date: | 9 September 2008 |
| Delivered at: | Sydney |
| Delivered on: | 9 September 2008 |
REPRESENTATION
| Counsel for the Applicant: | Applicant in person |
| Counsel for the Respondent: | Mr C Mobellan |
| Solicitors for the Respondent: | Blaxell Watson Lawyers |
ORDERS
The orders made on 8 July 2008 are set aside under r.16.05(2)(a).
The application for review of order 2 made by the Registrar on 4 March 2008 is allowed, and that order is set aside.
The applicant must pay the respondent’s cost incurred by reason of the adjournment on 28 May 2008, fixed in the sum of $500.
Otherwise, there is no order for costs of the petition or application for review.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3781 of 2007
| NAZMIN ASRAF |
Applicant
And
| AUSWIDE CAR RENTALS PTY LTD ACN 098 009 566 |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This is an application for review of an order of Registrar Hedge made on 4 March 2008 in which, by consent, a petition for sequestration of Ms Asraf’s estate under the Bankruptcy Act 1966 (Cth) was dismissed, but the Registrar ordered Ms Asraf to pay the petitioner’s costs in the sum of $2967.
The Registrar made that order after hearing counsel for the petitioner, and after hearing Ms Asraf and considering evidence given by Ms Asraf in an affidavit and under cross‑examination in the witness box. The evidence given in the witness box is not before me now, since no record of it was taken, nor am I assisted by a statement of reasons from the Registrar so as to understand why the costs order was made against a successful respondent.
The application for review subsequently had a most unfortunate history. I have given two previous judgments, explaining how a hearing listed for 28 May 2008 was adjourned due to the absence of Ms Asraf, who was required to attend for cross‑examination. She again did not attend on 8 July 2008, but submitted an inadequate medical certificate. On that occasion I dismissed the application for review with costs (see Asraf v Auswide Car Rentals Pty Ltd [2008] FMCA 717 and Asraf v Auswide Car Rentals Pty Ltd (No.2) [2008] FMCA 973).
Ms Asraf, however, on 19 August 2008, applied to set aside that order under r.16.05(2)(a) of the Federal Magistrates Court Rules 2001 (Cth), in accordance with suggestions in my second judgment. Her application is supported by a second medical certificate from the doctor. This properly addresses Ms Asraf’s fitness to attend on 8 July 2008, and that unfitness has not been contested before me today.
I, therefore, am satisfied that there was sufficient reason to set aside the order dismissing the application for review, on the basis that an acceptable explanation has now been shown. As I shall indicate, I also consider that there is sufficient merit in the substantive application for review, to justify setting aside my default order.
Turning to the question of costs of the petition, the petition was lodged on 7 December 2007 based on a debt owing under a default judgment of the Local Court in the sum of $5869.07, which had also been the subject of a bankruptcy notice which had not been complied with.
On 21 January 2008, which is reasonably promptly after the lodgment of the petition and its service or purported service, Ms Asraf lodged a notice of opposition and an affidavit raising a number of matters of objection. She contended that she had not been living at her house at 6 Pedder Close, Woodcroft at around the time when documents were sent by post or left at that address, including the bankruptcy notice and documents concerning the Local Court proceeding. She claimed that due to personal upsets she was living with her mother much of the time. She thus attempted to explain her delay in disputing the debt.
She also asserted that she did not owe the debt, and in particular disputed the petitioner’s claim that she was a principal to a hire car rental agreement, under which the debt was said to have arisen. She has presented to the Court some evidence which was in the possession of the hire company and its solicitors, it would seem at the time of the Local Court proceedings and certainly before the petition was brought, which did indeed, in my opinion, raise some uncertainty as to who the principal or principals to the hire car agreement were.
The form of agreement itself identifies the hirer as AAMI Insurance and carries a signature which appears more likely to be that of Ms Asraf’s husband than hers. It does, however, identify Ms Asraf as the proposed driver of the vehicle. There is other evidence before me showing that Ms Asraf was involved in negotiating the hire agreement, and also in its performance. All this evidence is not clear in its presentation to this Court, and I consider that it would be inappropriate for me to make any findings at all as to the parties to the hire contract in the course of deciding the issue of costs. These issues are currently before the Local Court, as a result of the setting aside of its default judgment.
What does appear from the evidence, however, is that the petitioner was in possession of material indicating the possible existence of a dispute as to the debt before the petition was lodged. Certainly, it was on notice that it was raised by Ms Asraf’s notice of opposition, and it seems that she then promptly applied to the Local Court to set aside the default judgment. It is uncontested that her application was successful in the Local Court, and it would seem that the matter is now being litigated in the appropriate venue for the dispute.
It is reasonable to infer that the existence of the matters raised in the notice of opposition, and in particular the setting aside of the Local Court judgment, explains the petitioner’s concession that the petition should be dismissed.
In those circumstances, it appears to me that the normal principles for the award of costs in court proceedings should be applied in the court’s discretion in relation to costs. These principles support the view that only exceptionally would an unsuccessful applicant be awarded costs against a successful respondent after the application is dismissed by consent.
I examined the sources of the Court’s costs powers upon the dismissal of creditor’s petitions in a reserved judgment in World Best Holdings Ltd v Sarker [2006] FMCA 1876). At [17] I refer to the usual approach to a costs discretion, where a proceeding is discontinued or dismissed by consent. In such circumstances, courts are normally reluctant to award costs to an applicant if it requires the substantive merits of the proceedings to be determined or predicted. It seems to me that the present is such a case.
I am in no position to determine which, if any, of the grounds of opposition to the petition raised by Ms Asraf might have succeeded or been rejected, if the petition had run its course. Similarly, it is impossible and inappropriate for me now to determine whether indeed the debt relied upon by the petitioner existed ‘in truth and reality’, so as to be able to support the petition.
It appears to me that in a bankruptcy proceeding, a petitioning creditor relying on a default judgment always runs a risk that a contest to the existence of the debt might be raised, and that the Court might be induced to ‘go behind’ the judgment under the principles referred to in Wren v Mahony (1972) 126 CLR 212. Where a petitioner has chosen not to contest such a ground of opposition, I have difficulty seeing how it could be fair and just to award the petitioner its costs of the petition.
In World Best Holdings, I referred to a situation where the normal approach is often not followed, where a petition is dismissed because a debtor belatedly pays the debt which is not contested. Considerations which then arise were referred by me at [22]:
22.In my opinion, this appropriately focuses the attention of the costs discretion on the reasonableness of the bringing, pursuit and discontinuance of the creditor’s petition, weighed against the reasonableness of the debtor’s failure to pay the debt before the petitioner incurred its costs in a bankruptcy proceeding. In circumstances such as the present, where there has never been a dispute as to the indebtedness to the petitioner, I do not consider that the Court should be hesitant to form a conclusion that discontinuance as a result of a belated payment of the debt provides a justification for an award of costs to the petitioner. Of course, all the circumstances should be considered, before arriving at that opinion.
I still consider that that approach is consistent with authorities and appropriate. However, it cannot be applied in a situation where there is a contest as to the existence of the debt which the bankruptcy court is not asked to resolve. In such a case, the reasonableness of the petitioner’s pursuit of the debtor into the bankruptcy court would not normally be sufficient in itself to justify the exercise of the discretion to award costs against the debtor. I do not consider that an award of costs to the petitioner should follow merely because of an inability to identify a clear fault on the petitioner’s part when bringing the petition. Something extra is required in the conduct of the debtor when raising objections to the debt and the petition or in its antecedent conduct, which justifies ordering costs against that person in the face of their apparent success in the proceedings.
In the present case, it is submitted that Ms Asraf unreasonably failed to raise her dispute as to the existence of the debt in the Local Court until after the presentation of the petition. However, it seems to me that the Court would need to address the very grounds of opposition concerning service of various documents, before it could be persuaded as to that.
Moreover, on the inadequately explored evidence before me, I am not persuaded to reject Ms Asraf’s contentions that personal notice of various court documents and the bankruptcy petition did not come to her attention at a time when she should have taken action to dispute the debt earlier. I am not satisfied that she should have disputed this debt earlier than she did in this court. As I have indicated above, she has promptly opposed the petition and has, in my opinion, successfully done so.
I am not persuaded that the petitioner’s conduct was such that it should be awarded costs notwithstanding its concession that the petition must fail.
Therefore, performing my task of de novo hearing on the issue of costs of the petition on review of the Registrar’s order, I am not satisfied that the Registrar made the correct order. In my opinion, the appropriate exercise of the Court’s discretion in relation to the costs of the petition is that no order for costs should be made.
The consequence is that Ms Asraf’s application for review must succeed. She has not incurred costs which can be covered by a costs order in bringing that application. I would, therefore, make no order as to costs in relation to her application for review. It was not submitted to me on behalf of the respondent petitioner that costs should not follow the event, at least to the extent that it should be awarded costs.
An exception to this concerns the adjournment of the application for review on 28 May 2008, and its dismissal in Ms Asraf’s absence on 8 July 2008. The respondent petitioner sought costs of both of those listings, and this was opposed by Ms Asraf.
Ms Asraf has now presented evidence rectifying the inadequacy in the medical certificate which she sent to the Court on the last occasion. In all the circumstances, I accept that she was under the belief that the previous medical certificate was sufficient, and I consider that on balance it would not be just and fair to award costs against her in relation to that adjournment, given her success in the application to set aside the default order and in the review application.
However, in relation to costs in relation to the earlier adjournment on 28 May 2008, the judgment I gave on that occasion explains the inadequacy of the basis upon which Ms Asraf applied for an adjournment. She made assumptions that the Court would accede to a most informal adjournment application, without any proper foundation. That inadequacy has not been rectified in her evidence to the Court today.
In my opinion, a fair and just approach to the costs of that day would be to award costs to the respondent petitioner against Ms Asraf in an amount which would be appropriate to the circumstances. In my opinion, an appropriate party and party amount to award in circumstances, where it was apparent that Ms Asraf was unlikely to be in attendance and that the hearing would probably be adjourned or dismissed for non‑attendance, would be the sum of $500.
I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Lilian Khaw
Date: 3 October 2008
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