Bartrop v Nilant and Anor (No.2) - [2003] FMCA 115

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BARTROP v NILANT & ANOR (No.2)

[2003] FMCA 115

PRACTICE & PROCEDURE – Costs – offer of compromise.

Bankruptcy Act 1966, ss.120, 178

Federal Court Rules, O 23

Federal Magistrates Court Rules 1999, Part 2 Sch 3

Brady v Official Trustee (No.2) [2001] FMCA 87
Calderbank v Calderbank (1975) 3 WLR 586

Applicant:

MARIANNE ELIZABETH BARTROP

Respondent:

CHARLES PHILLIPE LOUIS NILANT and OREN ZOHAR

File No:

WZ 103 of 2002

Delivered on:

4 April 2003

Delivered at:

Melbourne

Hearing Date:

7 February 2003

Judgment of:

McInnis FM

REPRESENTATION

Applicant:

In person

Counsel for the Respondent:

Mr A Aristei

Solicitors for the Respondent:

Carles Solicitors

ORDERS

Order 14 of the Orders of the Court made on 7 February 2003 be varied by adding further words to the last sentence of that order as follows:-
“up to and including 30 August 2002 and on and from 1 September 2002 the costs ordered shall be payable on an indemnity basis”.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

WZ 103 of 2002

MARIANNE ELIZABETH BARTROP

Applicant

And

CHARLES PHILLIPE LOUIS NILANT and OREN ZOHAR

Respondents

REASONS FOR JUDGMENT

In this application I delivered a decision on 7 February 2003 and made orders that the application filed on 21 May 2002 by the Applicant be dismissed. I made consequential orders and declarations.
Upon delivery of the judgment on 7 February 2003 Counsel for the Respondents made application for costs to be awarded against the Applicant in favour of the Respondents on an indemnity costs basis. An Offer of Compromise dated 29 August 2002 was relied upon in support of the submission. Having regard to the fact that the Application had been dismissed, it was submitted that the Offer of Compromise was far more favourable to the Applicant than the orders arising from the judgment and accordingly on and from 1 September 2002 the costs as ordered should be payable on an indemnity basis.
At that stage the Applicant though having been represented at the hearing appeared in person. In those circumstances whilst I referred to a decision of this Court in Brady v Official Trustee (No.2) [2001] FMCA 87 as being similar to the present circumstances, I was concerned when the Applicant advised the Court that she had not been made aware of any Offer of Compromise prior to judgment. The Applicant had hitherto been represented by solicitors Messrs Solomon Brothers and in particular Mr Alexander Atkinson.
I was prepared to give the Applicant an opportunity to consider the issue further and to make submissions in writing. Ultimately submissions were received from both the Applicant and the Respondents. The Applicant has been assisted by her former solicitors.
The Applicant filed an Outline of Submissions under cover of letter dated 5 March 2003 together with an Affidavit of Alexander Atkinson sworn the same day. In those submissions a claim is made for costs in relation to an issue relevant to s.120 of the Bankruptcy Act. It is claimed by the Applicant that a final hearing on 12 July 2002 could not proceed because ten days earlier the Respondents initiated a counterclaim under s.120 of the Bankruptcy Act 1966 (the Bankruptcy Act) and that no notice had been given to the Applicant of that counterclaim. A time frame for filing of the Respondents’ cross application and Notice of Intention to Oppose the Application had been given in directions made on 12 July 2002. It is claimed this was against the background of correspondence between the parties where both had been appraised of the issues as to the claims. The Applicant asserts that there was a good defence to the s.120 claim on the basis that the transaction in question took place more than two years prior to the date of bankruptcy and at the time of the transaction the transferor was solvent.
It is submitted on behalf of the Applicant that orders were made on

12 July 2002 for discovery of all documents relevant to s.120 of the Bankruptcy Act. It is noted in passing however that a specific order for discovery in relation to s.120 was not made by the Court as asserted by the Applicant in written submissions.
Ultimately it is submitted that in bringing the action under s.120 of the Bankruptcy Act at short notice the hearing on 12 July 2002 could not proceed and by reason of the Respondents’ conduct the Applicant seeks payment to the Applicant of costs of and incidental to the Respondents’ application under s.120 of the Act including but not limited to the hearing on 12 July 2002 and costs thrown away by reason of the adjournment of the hearing on 12 July 2002.
On the issue of the Offer of Compromise the Applicant submits that in the event that Order 23 of the Federal Court Rules apply and if the Respondents are pursuant to the provision of that Order entitled to indemnity costs then at best they are entitled to such costs as from “the date of the offer namely 29 August 2002 onwards”. Any costs prior to 29 August 2002 are payable on a party/party basis according to the Applicant’s submissions.
In the Affidavit of Alexander Atkinson sworn 5 March 2003 the order for costs is referred to by the deponent who claims to be preparing the Affidavit at the request of the Applicant. He otherwise recites the chronology to which I have referred. Reference is made to the issue of discovery and additional preparation relating to the defence of the s.120 claim.
The Respondents claim costs arising out of the Offer of Compromise and suggest any dispute about notification of the Offer of Compromise to the Applicant herself is irrelevant to the Respondents’ right to receive an indemnity costs order in their favour. A variation is sought of the present party/party costs order made in favour of the Respondents to an indemnity costs order whereby on and from

1 September 2002 the costs as ordered shall be payable on an indemnity basis.
I should note in passing that the variation of the costs order for indemnity costs on and from 1 September 2002 is slightly more generous to the Applicant than the order suggested by the solicitors for the Applicant who submitted that indemnity costs should only occur on and from the date of the offer namely 29 August 2002.
The Affidavit of Alan François Carles sworn 21 March 2003 refers to correspondence passing between the parties in relation to issues relevant to the dispute. The Affidavit asserts that the hearing on

12 July 2002 effectively became a directions hearing rather than a substantive trial and that this had been the subject of an agreement in a telephone conversation between Mr Atkinson and Mr Carles confirmed by correspondence to the Court from Mr Carles dated 11 July 2002. In any event it is submitted that the Orders made on 12 July 2002 were directions which could be regarded as productive use of Court time setting a timetable for various matters including exchange of points of claim and defence, hearing of submissions in relation to an argument that the cross application was “an abuse of process” and other issues concerning the basis of the claim under s.178 of the Bankruptcy Act. The Respondents rely upon the Affidavit of Mr Carles in opposition to the Applicant’s claim for costs thrown away and in support of the application for indemnity costs.

Reasoning

In my view Part 2 of Schedule 3 of the Federal Magistrates Court Rules 2001 clearly provide that Order 23 of the Federal Court Rules (except Rules 14 and 15) apply to the Federal Magistrates Court. I am satisfied that in the present case an Offer of Compromise was forwarded to the solicitors then acting for the Applicant on 29 August 2002. Applying the principles set out in Order 23 of the Federal Court Rules and/or the principles set out in Calderbank v Calderbank (1975) 3 WLR 586 the appropriate order of the Court is that Order 14 of the Orders made by the Court on 7 February 2003 be varied by adding the following words as part of the last sentence of that order as follows:-
“up and including 30 August 2002 and on and from 1 September 2002 the costs ordered shall be payable on and indemnity basis”.
I am satisfied the Offer of Compromise was expressed in clear terms and that in the present case the orders made by the Court result in orders not more favourable than the terms of the offer.
I am further satisfied that the hearing on 12 July 2002 became the subject of directions orders in the interests of both parties and in the circumstances costs of that day and costs associated with the pursuit of the s.120 issue should not be the subject of any additional or separate order for costs claimed to be thrown away. It is not necessary nor appropriate for me to determine whether the Respondents were entitled to the declarations sought and findings made concerning s.120 of the Bankruptcy Act. That will no doubt be a matter for the Appeal Court to consider in dealing with the appeal which this Court notes was lodged on 28 February 2003. It is sufficient to note that the outcome of this Application and orders made included orders which arose from the Respondents’ Notice of Intention to Oppose and Cross-Application and it would be presumptuous of this Court to make a costs order which in effect may deal with issues currently the subject of a Notice of Appeal. In my view it is not appropriate in any event having found that the proceedings on 12 July 2002 were the subject of directions in the interests of both parties to further make an order for costs otherwise thrown away in pursuit of an issue dealt with by the Court arising out of s.120 of the Bankruptcy Act.
Accordingly the order of the Court will be as follows:
Order 14 of the Orders of the Court made on 7 February 2003 be varied by adding further words to the last sentence of that order as follows:-
“up to and including 30 August 2002 and on and from 1 September 2002 the costs ordered shall be payable on an indemnity basis”.
The order as amended shall be –
The respondents’ costs, including any reserved costs of the application filed 21 May 2002 and the cross-application filed 2 July 2002 and notice of motion filed 5 December 2002 be taxed in default of agreement pursuant to order 62 of the Federal Court Rules upon the Federal Court scale with such costs to be paid on a party-party basis up to and including 30 August 2002 and on and from 1 September 2002 the costs ordered shall be payable on an indemnity basis.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of McInnis FM.

Associate:

Date: 4 April 2003