Batiste, in the matter of St George Bank Limited v Batiste
[2002] FCA 1623
•24 DECEMBER 2002
FEDERAL COURT OF AUSTRALIA
Batiste, in the matter of St George Bank Limited v Batiste [2002] FCA 1623
BANKRUPTCY – costs of Creditor’s Petition – whether costs should be awarded on an indemnity basis
Colgate Palmolive Co v Cussens Pty Ltd (1993) 46 FCR 225 cited
Sony Computer Entertainment Australia Pty Ltd v Dannoun (No 2) [2001] FCA 1530 cited
Chapman v Luminis Pty Ltd (No 7) [2002] FCA 1098 citedIN THE MATTER OF DONNA MARIA BATISTE
ST GEORGE BANK LIMITED v DONNA MARIA BATISTE
N 7516 OF 2001
HELY J
24 DECEMBER 2002
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N 7516 OF 2001
BETWEEN:
ST GEORGE BANK LIMITED
APPLICANTAND:
DONNA MARIA BATISTE
RESPONDENTJUDGE:
HELY J
DATE OF ORDER:
24 DECEMBER 2002
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1. The Creditor’s Petition be dismissed.
2.The applicant’s costs of the Petition be paid out of the estate of the debtor with the same priority as if a sequestration order had been made, on a party-party basis.
3.The costs referred to in Order 2 are not to include the costs of the hearing on 18 December 2002.
4.The applicant’s costs of and incidental to the Notice of Motion filed on 5 June 2002 be paid by the debtor on an indemnity basis.
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 7516 OF 2001
BETWEEN:
ST GEORGE BANK LIMITED
APPLICANTAND:
DONNA MARIA BATISTE
RESPONDENT
JUDGE:
HELY J
DATE:
24 DECEMBER 2002
PLACE:
SYDNEY
REASONS FOR JUDGMENT
This matter has a long history. It is summarised in the chronology of some five pages in length attached to a document styled “Outline of Applicant Creditor’s Submissions” which I have placed with the papers. I will not repeat that history in these reasons, which should be read against the background provided by that chronology.
It is common ground that the Creditor’s Petition (“the Petition”) should be dismissed having regard to the composition approved by the requisite majority of creditors on 29 November 2002. It is also common ground that the Court has power, notwithstanding the dismissal of the Petition, to order that the applicant’s costs be paid out of the debtor’s estate with the same priority as if a sequestration order had been made.
The contest between the parties is as to whether:
(a)an order for payment of costs should be made in relation to the Notice of Motion filed on 5 June 2002 on an indemnity basis;
(b)an order for payment of costs should be made in relation to the Petition on an indemnity basis; and
(c)the corporate respondents to the motion should be ordered to pay the costs in relation to the Petition, although they are not parties to the Petition.
Costs of the Motion
The Notice of Motion filed on 5 June 2002 also sought orders for the punishment of the debtor and the corporate respondents for contempt of court by reason of the non-production of documents whose production was required, in the case of the debtor, by a Notice to Produce, and in the case of the corporate respondents, by subpoenas.
On 13 November 2002 I ordered that the applicant’s costs of and incidental to the contempt motion should be paid by the corporate respondents on an indemnity basis. The failure to produce the documents in question pursuant to the Notice to Produce and subpoenas, notwithstanding that the matter was listed before a registrar on four occasions for that purpose, and the failure to produce the documents after I made a consent order on 22 May 2002 for their production, is quite a serious contempt. No satisfactory explanation has been given for these failures, which significantly and unnecessarily increased the applicant’s costs of these proceedings. For those reasons I made an order that the corporate respondents should pay the costs of the contempt motion on an indemnity basis.
At the request of the parties, I reserved the question whether a similar order should be made against the debtor for later consideration, once it became clear whether or not the Petition would be dismissed.
The debtor is in the same position in relation to non-production of documents, and contempt, as the corporate respondents which she controls. For the same reasons an order should be made that the debtor pay the applicant’s costs of and incidental to the contempt motion on an indemnity basis. Thus all respondents to the motion will be liable to pay the applicant’s costs of the motion on an indemnity basis.
Costs of the Petition
Wilful disregard of known facts, and undue prolongation of a case by groundless contentions, are examples of conduct that might warrant the making of an order for payment of costs other than on a party and party basis: Colgate Palmolive Co v Cussens Pty Ltd (1993) 46 FCR 225 at 233.
The applicant contends that the debtor’s opposition to the Petition was untenable, that her failure to file evidence, and produce documents as directed, added greatly and inappropriately to the time and costs of the litigation and that her conduct was so unreasonable in every respect as to make it unjust that the applicant should be limited in its recovery to party and party costs. See Sony Computer Entertainment Australia Pty Ltd v Dannoun (No 2) [2001] FCA 1530. To some extent the applicant’s contention involves a confusion between the Petition itself, and the contempt motions.
The litigation falls into two stages. The debtor’s defaults in the first stage of the proceedings have resulted in indemnity costs orders being made against her in relation to particular defaults, and in relation to the contempt motion. Those defaults have been dealt with and would not justify the making of an order for the payment of the general costs of the Petition itself on an indemnity basis.
If, however, the debtor knew that the allegation in the Notice of Opposition that she was not insolvent was untenable, then the position would be otherwise. In the Statement of Affairs prepared by the debtor in connection with the debtor’s petition which she filed on 12 November 2002, she acknowledged that she first had difficulty in meeting her debts two years before. This falls short of an acknowledgment that the allegation in the Notice of Opposition was untenable.
Such affidavits as were filed by the debtor indicate that her affairs were of some complexity, and that her financial position was inextricably bound up with that of the companies which she controlled. Accounts which may have exposed what that financial position was had not been produced by the company’s accountant. The affairs of the companies appear to have been in a state of flux and to have deteriorated during the final stage of the proceedings when payments pursuant to the instalment plan could not be kept up.
Whilst inferences may be drawn against the debtor by reason of her failure to file affidavits as to her solvency as directed, I am not satisfied that I should infer from those failures that she knew her defence of the Petition was untenable. Another possibility is that although she believed she was solvent, she was having problems adducing positive evidence to that effect having regard to fluctuations in the affairs of her companies and the failure of the accountant to prepare reports.
The second stage of the proceedings began on 19 June 2002, when orders were made and agreements noted which had the effect that thereafter the Petition could not be defended. A regime for payment of instalments was agreed upon. The Petition could be restored to the list on default in payment of an instalment, but would be discontinued if all payments were met.
At least $87,000 was paid by the debtor pursuant to these arrangements. Neither the making of the arrangements, nor the debtor’s inability to perform them, justifies the making of an order for payment of the costs of the proceedings during the final stage on an indemnity basis.
I am not satisfied that the applicant has made out a case for payment of the general costs of the Petition on an indemnity basis.
Corporate respondents
The Court has jurisdiction to make costs orders against non-parties, but it is a power which is to be exercised with circumspection. See generally Chapman v Luminis Pty Ltd (No 7) [2002] FCA 1098 (von Doussa J).
In the applicant’s contention, had the corporate respondents produced the records the subject of the subpoena, then an informed decision could have been made earlier in the proceedings whether or not to pursue the proceedings. The failures on the part of the corporate respondents caused the prolongation of the proceedings. Had they produced the subpoenaed documents back in May, the applicant may never have agreed to the instalment proposal.
There is no evidence that the corporate respondents have financed the debtor’s defence of the Petition or that they have intermeddled in the defence of that Petition. It was not the corporate respondents who raised the defence of solvency, nor was it they who failed to comply with the timetable. The proposition that had the corporate respondents complied with the subpoenas the instalment arrangements may not have been entered into, and the Petition followed a different course, is pure speculation.
No sufficient foundation has been shown for the making of an order that the corporate respondents should pay the applicant’s costs of the Petition.
Orders
The orders which I make are:
-the Creditor’s Petition is dismissed;
-the applicant’s costs of the Petition are to be paid out of the estate of the debtor with the same priority as if a sequestration order had been made, on a party-party basis;
-those costs are not to include the costs of the hearing on 18 December 2002;
-the applicant’s costs of and incidental to the Notice of Motion filed on 5 June 2002 be paid by the debtor on an indemnity basis.
These orders do not derogate from orders as to costs made at earlier stages of the proceedings.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely . Associate:
Dated: 24 December 2002
Counsel for the Applicant: Mr D Knoll Solicitor for the Applicant: Henry Davis York Counsel for the Respondent: Mr M Aldridge SC Solicitor for the Respondent: Licardy & Associates Date of Hearing: 18 December 2002 Date of Judgment: 24 December 2002
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