Bayles v Nominal Defendant
[2012] FMCA 184
•19 January 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BAYLES v NOMINAL DEFENDANT | [2012] FMCA 184 |
| BANKRUPTCY – Application for annulment – application refused – question of understatement of sum on bankruptcy notice – regularity of underlying judgment – costs sought by third party – consideration of principles relevant to costs by third parties – costs allowed. |
| Bankruptcy Act 1966 (Cth), ss.32, 41(5), 58(3), 82(1), 109A, 109(1)(a), 153B, 153B(1), 306 Motor Accident Insurance Act, s.60(2) |
| Croker v Commission of Taxation (2008) 58 ATR 327 Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 Foots v Southern Cross Mine Management Pty Ltd (2007) 241 ALR 32 Lawman v Queensland Building Services Authority (No.2) [2000] FCA 174 Nominal Defendant v Chaffey & Ors [2011] QSC 88 Olivieri v Stafford (1989) 24 FCR 413 |
| Applicant: | MICHAEL LLEWELLYN BAYLES |
| Respondent: | NOMINAL DEFENDANT |
| File Number: | BRG 60 of 2010 |
| Judgment of: | Burnett FM |
| Hearing date: | 2 September 2011 |
| Date of Last Submission: | 2 September 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 19 January 2012 |
REPRESENTATION
| The applicant appeared on his own behalf |
| Counsel for the Respondent: | Ms J.E. Fitzgerald |
| Solicitors for the Respondent: | McKays Solicitors |
| Counsel for the Trustee: | Mr C. Coulsen |
| Solicitors for the Trustee: | Broadley Rees Hogan Lawyers |
ORDERS
That the application be dismissed.
That the Trustee file an affidavit as to its costs incurred in responding to this application on or before 27 January 2012.
That the parties submit a draft order to Chambers.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 60 of 2010
| MICHAEL LLEWELLYN BAYLES |
Applicant
And
| NOMINAL DEFENDANT |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
In paragraph 1 of his affidavit in support of his application the applicant states:
“I am an indigenous person and self-represented in this matter, and I request that the court set aside the bankruptcy notice as I have suffered a miscarriage of justice.”
The opening words are true and reflect the socioeconomic disadvantage of the applicant. However the circumstances of his bankruptcy have not been occasioned by any miscarriage of justice as alleged or at all. Therefore his application must be dismissed for reasons which follow.
Before proceeding to detailed reasons, it must first be noted that the applicant was assisted in the prosecution of his application by a person who claimed to have some legal training. Unfortunately that person has not materially assisted the applicant in the presentation of the application. If anything her intervention simply served to confuse the applicant further as he mounted the baseless arguments formulated by her.
The second matter to note is that the original application itself seeks numerous heads of relief. The application was subsequently amended, even though the relief sought in the amended application was largely unavailable because in this instance the applicant had already been subject to a sequestration order. The other relief which was sought will not be necessary by reason of the orders dismissing this application.
The application proceeded on a premise that it was to be one for annulment pursuant to s.153B of the Bankruptcy Act1966 on the basis that the original sequestration order ought not to have been made because “the judgment does not found a real debt and there is no debt in truth and validity”. It is on that basis that the application substantially proceeded to be argued and resolved. The judgment relied upon for the bankruptcy notice and subsequent creditor’s petition was a default judgment, however, to understand the nature of that judgment and the applicant’s complaints it is necessary to review the background facts.
On or about 6 August 2000 at approximately 1650 hours the applicant was driving a Ford station wagon along Tazi Road at Dunwich in an easterly direction when he was involved in a single vehicle incident in which he drove the vehicle off the road and caused it to overturn a number of times. Five persons were in the vehicle at that time. A breath reading taken by police shortly after the accident revealed that the applicant had a blood alcohol concentration of .111. A further inquiry by the police revealed that one of the passengers in the vehicle, one Brooke Pyrran Kaden Borey suffered some injuries, although they appeared, on paper, to be minor.
Initial inquiries also revealed that the applicant driver was not licensed. However, more relevantly for this application, it further transpires that the vehicle was neither registered nor insured. Although the material indicates that a police brief was prepared charging the applicant with various offences including driving with a blood alcohol concentration, unlicensed driving, driving an unregistered vehicle and driving an uninsured vehicle, for reasons which were not explained the latter charge was not prosecuted. However, the applicant was subsequently fined and convicted in respect of the first two charges. That is a matter which in part was relied upon by the applicant in response to default judgment but for reasons which follow it is in my view of little importance in this application.
Subsequently the injured passenger, an infant, commenced proceedings to recover damages for personal injuries. The applicant was nominated as the first defendant in those proceedings and allegations were made against him as the driver. The Nominal Defendant was the second defendant in the proceedings, and although the complaint itself was not well-particularised, it is apparent, by reason of the claim made by the plaintiff against the Nominal Defendant, that she claimed for indemnity from it in respect of the applicant’s negligence pursuant to its statutory obligations to insure in respect to uninsured motor vehicles.
As I noted, while not specifically pleaded, the matter can be readily inferred by the fact that the Nominal Defendant ultimately settled the proceeding with the plaintiff. I make this point in passing for completeness. The real basis however for the applicant’s complaint was that the proceedings were resolved without reference to him as a defendant. His view was further based upon his subjective assessment of the appropriate quantum of damages which were allowed in the settlement, when measured against his subjective knowledge of the physical and long-term effects of the injuries suffered by the passenger.
His immediate difficulty concerned his suspicion that he had been subjected to some fraud which had been perpetrated by some conspiracy between the plaintiff and the Nominal Defendant to inflate the sum agreed that he pay by way of settlement. This belief was undoubtedly fuelled by his lack of appreciation of the adversarial nature of litigation and the failure by the person who was assisting him in the application to appreciate the relevant positions of the parties in the context of the particular litigation question.
For instance – and I suspect by reason of the intervention of the person assisting him – he failed to appreciate that once the plaintiff had engaged with the Nominal Defendant it was open for those parties to discontinue proceedings against him, principally upon a commercial basis. He also failed to recognise their regard for his capacity to actively involve himself in proceedings concerning an action by a passenger in a single-vehicle accident wherein the applicant was the driver: that is, putting aside questions of the applicant’s admission as to his blood alcohol concentration, among other things being relevant to the negligence occasioning the accident.
The applicant found it all the more puzzling that the Nominal Defendant joined with the Plaintiff in this course, that is, to discontinue against him, and accordingly that he was excluded from the litigation and in turn from engagement in it. As I have noted, given the Nominal Defendant’s engagement with the plaintiff and its lawyers and the Nominal Defendant’s appreciation of the applicant’s financial situation, it required little deduction to appreciate why each of the plaintiff and the Nominal Defendant moved to discontinue against the applicant, leaving them to negotiate between themselves.
As I noted, notwithstanding the traffic offences to which the applicant pleaded guilty, this incident involved the uncontested fact of an injured plaintiff suing the driver’s insurer inevitably meant that a payment would follow. Plainly, the Nominal Defendant did not require the applicant in that context. Given the adversarial nature of the proceedings and the prospect of no recovery against the insured in this case there was no real reason to continue to have the applicant remain in the proceedings, and indeed it was convenient for both parties to discontinue in order to permit them to proceed to effect the most favourable settlement that could be achieved in the circumstances.
The other factor which the applicant was unaware of but which is relevant to that matter is of course the adversarial nature of proceedings and his failure to appreciate that for both the plaintiff and the Nominal Defendant, in the competitive environment of litigation, the sum negotiated would be seen to be the most favourable to each side having regard to the relative risks that each was to assume in the further prosecution of the action.
The other matter which troubled the applicant was the matter in which the judgment sum was made up. The original judgment sum in the action brought by the plaintiff against the Nominal Defendant in District Court proceeding 1108 of 2008 was for the sum of $51,803.25. That sum included not only damages but also costs. While it is not apparent from the judgment exactly how that sum is made up, a sum in that order for damages of the kind which were reflected in the police report together with an allowance for costs does not seem in any sense unreasonable.
With that sum having been agreed between the Nominal Defendant and the applicant, the Nominal Defendant then commenced proceedings against both the owner of the vehicle and the applicant as the driver to recover the sum of $51,803.25 having been paid by it to the plaintiff in the first proceedings. It is those proceedings that gave rise to the judgment debt supporting the bankruptcy notice. Those proceedings issued in the District Court of Queensland on 8 December 2005 and were subsequently served on the applicant after a number of unsuccessful attempts. In an affidavit filed in this application on 21 May 2010 the process server swore in relation to attempts on service, and that matter becomes relevant for reasons which follow shortly. But in any event, he deposed to service on those proceedings.
Although the material relevant to support a default judgment was not placed before me, a default judgment could not have been entered without an affidavit of service of the relevant proceeding; such service as is deposed to in the affidavit filed 21 May 2010. A review of the electronic court index for the second District Court proceedings shows that an affidavit of Mr S Coleman being of service of the claim was filed on 14 April 2008, the date of entry of the default judgment. It follows that at least from the court record the judgment appears to regular. The matter of the service of those proceedings was not challenged in the application before me except by the applicant’s affidavit. More significantly, however, before any complaint as to service of those proceedings was made to me, the applicant brought an application in the District Court to set aside the default judgment. That application was made on 21 May 2010 and was determined on 8 February 2011, when the application was dismissed.
Significantly, the application was based upon a complaint that the judgment was not regularly entered. The reasons of the applications judge, Judge Koppenol, do not disclose the arguments advanced by the applicant, except to conclude that the judgment was in his view regularly entered. It is not entirely apparent whether the matter of service was raised before his Honour. However, given that only the merits were addressed in his judgment I have concluded that there was no substance to the applicant’s complaints in respect of the judgment entered and that the issue of service was not raised in that application.
Further, given that the applicant raised the matter in this application in his affidavit filed 23 January 2010, I doubt that the matter was overlooked in proceedings to set aside the judgment on the basis it had been irregularly entered. If that matter were proven it would have demonstrated an unimpeachable right to the relief sought. Accordingly I am satisfied there was no issue in the District Court proceedings. The applicant now complains about the conduct of those proceedings but I note he did not seek to appeal the orders made.
In reaching that conclusion I am also mindful that the application to set aside the judgment was one made in response to an order made by me on 12 May 2010 permitting that course. Plainly against the background facts such as were in issue here, and in particular the earlier evidence challenging service of the initiating application (the District Court application) it would have been within the contemplation of the applicant and I expect it was pursued by him on that basis.
The only order made by Judge Koppenol that requires specific mention is his order amending the judgment sum from $91,804.49 to $85,877.04. The adjustment reflects a miscalculation of interest evident in the initial judgment sum, a matter of significance which I will address shortly.
When the matter came before me considerable time was initially spent in exchange with the applicant explaining the principles of subrogation and explaining why the original proceedings had probably been discontinued, and why the settlement sum would have reflected a reasonable outcome and why he was not required to be consulted on the question of quantum. Once those matters were addressed, the next issue to be addressed concerned service of the creditor’s petition, a matter to which I will turn now.
The applicant’s principal argument was that he was not served with the creditor’s petition because at the time of service he was on bail and a condition of his bail was that he was not to be at the Nimbin Museum, a place where he was subsequently served. The process server, Mr Coleman, says he served the applicant at or about the location of the Nimbin Museum.
I heard evidence from both the applicant and Mr Coleman on this matter. The applicant says he was not served, and Mr Coleman says he did serve him. Mr Coleman is a process server who has worked as a process server for 15 years. Before that time he was a police officer. He swore that he had served the applicant on two previous occasions prior to the occasion of the service of the creditor’s petition. The first was with the District Court proceedings, which were the subject of the application to set aside the default judgment which I have earlier referred to, and the second was the service of the bankruptcy notice.
He stated that by reason of those matters he knew the applicant and therefore was quite adamant that on the occasion of service of the creditor’s petition he indeed served the applicant. He noted that prior to service of the creditor’s petition he asked the applicant if he was indeed Michael Llewellyn Bayles, and that the applicant responded, “Yes.” No doubt this was a question which he had asked as a matter of form. He gave a brief physical description of the applicant which accorded with his appearance. Although the applicant suggested that Mr Coleman may have indeed served another such as his brother, no one was produced to give any evidence of having been served.
In the result I accept Mr Coleman’s evidence as being generally reliable. He has no interest in the outcome of the application and I am satisfied by reason of his background and experience in the business of process service that he was careful in the manner in which he effected service and the affidavit that he swore. Unfortunately I am not so confident of the applicant’s reliability. He has a significant interest in the outcome; indeed his interest in the matter was really only enlivened after a Supreme Court order for the appointment of statutory trustees for sale of a piece of land which is owned by him.
He has a considerable interest in that real estate in terms of the equity which is available to him in the land and I am satisfied that he is motivated by his interests to protect it, particularly because until this proceeding he had no appreciation of the basis of his obligations to the Nominal Defendant. I am satisfied that he was served with the creditor’s petition as deposed and that in turn he failed to appear upon the return of the application, he having had proper notice of it, and that ultimately prima facie an efficacious sequestration order was made.
I also specifically find and accept Mr Coleman’s evidence that he also served the District Court proceedings upon the applicant. Although it may not be necessary for me to formally make such order by reason of the orders of Judge Koppenol, I think it is important that such a finding be made in the circumstances of this case for reasons which follow. In particular I note Mr Coleman’s observations in his affidavit that the applicant stated that at the time of service when the papers were presented to him and he was required to ask whether he accepted he was a plaintiff nominated in the plaint, he stated, “Yes, but I am disputing this.” This statement is not inconsistent with his attitude to the merits of the District Court proceedings but also entirely consistent with his demeanour and personality as observed by me through the course of these proceedings.
In summary then to this point, I am satisfied that the Nominal Defendant had regularly obtained a judgment against the applicant initially for a sum of $91,804.49, which was subsequently varied to $85,877.04, and that a bankruptcy notice issued in respect of the judgment sum, the bankruptcy notice was not complied with, and that a creditor’s petition issued in respect of that non-compliance.
I am satisfied that the creditor’s petition was served upon the applicant by the process server, Mr Coleman. That then leaves the following issues to be resolved:
a)should the bankruptcy notice be set aside by reason of the misdescription of the sum stated in it? or
b)is there in fact a true state of indebtedness by the applicant to the Nominal Defendant such that the sequestration order ought not to have been made, thereby enlivening an entitlement to the applicant for relief by operation of s.153B(1) of the Bankruptcy Act?
It is axiomatic, following the orders of Judge Koppenol that the judgment sum has been misstated. However, it is not in contention that the sum stated in the bankruptcy notice is the original judgment sum, and in that sense there has been no misdescription in the bankruptcy notice, which states the actual sum stated in the original default judgment. The overstatement only became evident in the hearing of the application to set aside the default judgment.
That application postdated the judgment by some two and a quarter years. Plainly until that time the applicant had no issue with the quantum of the sum noted in the bankruptcy notice, although he has always maintained a challenge to the merits underlying the judgment awarded. In the circumstances of this case, the overstatement does not in my view give rise to invalidity. First, the applicant did not give notice of the overstatement pursuant to s.41(5). Had he done so, his objection may have been on firmer ground. In the absence of such a complaint, it is well settled that provided the bankruptcy notice accurately follows the judgment it can be valid, notwithstanding the judgment overstates the amount due, in the absence of any reason to go behind it. See Olivieri v Stafford (1989) 24 FCR 413 and Emerson v Wreckair Pty Ltd (1992) 33 FCR 581. That is to say, provided the judgment is otherwise one which is soundly based in law. See Olivieri at page 423.
In this instance the case advanced by the applicant is that it was not soundly based in law, but for reasons following that argument must fail. The underlying judgment sum was misstated because of a miscalculation of interest, not due to any absence of jurisdictional foundation for relief such as in the situation considered in Croker v Commission of Taxation (2008) 58 ATR 327, where the mistake arose because of the inclusion of a sum in the judgment with respect to which there was no legislative power. Plainly this case is distinguishable from those facts.
Even were there to be a discretion, the excess here was not significant having regard to the quantum of the judgment. It is well-settled that a court should not go behind a judgment where the grounds upon which the judgment is challenged are such that if accepted they would only support a finding that the amount of the debt be reduced, and would not support a finding that there was in truth no debt at all. See Emerson at page 589.
Finally, it should not be overlooked that once an act of bankruptcy has been committed by the debtor’s failure within the time required to comply with the requirements of a notice, it remains an available act of bankruptcy although the judgment upon which it is based is set aside; again, see Emerson at 387. It follows in my view that in this context there is no irregularity requiring consideration of s.306 of the Act. The bankruptcy notice in my view was valid and properly supported a creditor’s petition which I am satisfied was served, and in turn properly gave rise to the sequestration order.
It follows then that a second issue arises, that being whether or not there was in fact a true judgment underlying the judgment of Judge Koppenol. Although the original judgment was a default judgment, it is apparent from the conduct of the application to set aside the default judgment, which was heard in Ipswich on 29 April 2011, that various matters raised demonstrated the true nature of the debt. In the application the applicant was allowed to give evidence on oath and to be cross-examined by counsel for the Nominal Defendant.
In the course of the application the real question for consideration by the court was whether or not the applicant was entitled to rely upon s.60(2) of the Motor Accident Insurance Act. Section 60 relevantly provides that:
“(1) If personal injury arises out of a motor vehicle accident involving an uninsured vehicle, the Nominal Defendant may recover, as a debt, from the owner or driver of the vehicle (or both) any costs reasonably incurred by the Nominal Defendant on a claim for personal injury.
(2) It is a defence to an action by the Nominal Defendant under this section -
...
(b) as far as recovery is sought against the driver – for the driver to prove that the driver believed on reasonable grounds that the driver had the owner’s consent to drive the motor vehicle and that the motor vehicle was insured.”
I have earlier made observations in relation to the prosecution of the proceedings in the Magistrates Court in respect of driving an uninsured and unregistered motor vehicle on a proceeding. For reasons that follow, in addition to that which I have earlier observed, those findings cannot assist the applicant on this occasion. In his Honour’s judgment, Judge Koppenol observed the evidence of the applicant relevant to that issue in these terms:
“Before me the second defendant [that is, the applicant here] gave evidence that whether the motor vehicle was insured or not was not on his mind; he did not turn his mind to it.”
In the Nominal Defendant v Chaffey & Ors [2011] QSC 88, Philippides J when considering the question of whether the driver of an uninsured vehicle believed on reasonable grounds that a motor vehicle was insured made this finding and drew this conclusion, commencing at paragraph [50]:
“Counsel for the plaintiff submitted that the evidence indicated that the first defendant simply did not turn his mind to the critical matter of whether the vehicle was registered. It was submitted that an assumption by the first defendant that the vehicle was registered and insured, unless told otherwise, was not a belief on reasonable grounds, in circumstances where no thought was given to the matter by the first defendant and where it was not denied that the vehicle bore an expired registration label.
[51] In my view, the plaintiff’s submission is clearly correct.”
That authority was presented to his Honour Judge Koppenol, who having considered the facts and the argument premised upon the observations of Philippides J in Nominal Defendant v Chaffey concluded that:
“In those circumstances the second defendant had not established the second criterion in section 60(2)(b) of the MAIA. Accordingly, the second defendant does not have a prima facie defence on the merits, and this application must be refused.”
Counsel for the trustee submitted that, accepting that position, there is no utility in this court going behind the judgment, for notwithstanding the judgment was entered by default, the application to set the judgment aside was determined adversely to the applicant on his own evidence, such evidence not simply being by way of affidavit and the trial judge applying well-established principles to the evidence.[1]
[1] Nominal Defendant v Chaffey & Ors [2011] QSC 88
He continued that it follows that the present circumstances therefore should not be viewed in the same light as a conventional application to set aside a default judgment determined solely by the consideration of affidavit material, and the pleaded defence on which the applicant seeks to rely for the leave to defend to be given. In this case it was submitted that the applicant was really asking the court to go behind the judgment, which in substance was no different from a judgment obtained after a trial. I think the trustee’s submissions on this point are correct and I adopt them.
It follows on that premise that in fact there is a true state of indebtedness, for there is no defence allowable to the applicant against the Nominal Defendant’s judgment, and in the circumstances he has failed to demonstrate why the sequestration order ought not to have been made. It follows the application is dismissed.
Each of the parties contends for an interim order for costs. The trustee seeks his costs by an order that the costs be paid out of the estate. The Nominal Defendant, who is the respondent to the bankrupt’s application, seeks an order that its costs be paid out of the estate. The trustee contends that the Nominal Defendant is not entitled to its costs because its costs would constitute an order against the bankrupt, and being a costs order made after bankruptcy that order could not be a provable debt under the bankrupt’s estate. So much is correct. If it is not a provable debt then on s.82 it cannot enjoy priority in terms of s.109.
The Nominal Defendant, however, relies upon an authority in the decision of Lawman v Queensland Building Services Authority (No.2) [2000] FCA 174 which is a decision of the Full Court where the court, in considering an application which materially is identical to the application before me, and did make an order permitting the petitioning creditor to have its costs out of the estate. I will come to the ratio of the decision shortly, however the trustee contends that that decision is no longer good law by reason of the High Court’s decision in Foots v Southern Cross Mine Management Pty Ltd.[2] In summary, the trustee says that s.32, which was the section largely relied upon by the Full Court in Lawman, cannot be read to change the legislative regime provided by the Bankruptcy Act to convert what is a non-provable debt, that is a judgment for costs against the bankrupt in and after the day of bankruptcy, into a provable debt.
[2] (2007) 241 ALR 32
Before considering whether or not I am bound by law to follow the High Court authority, I think it is first helpful to look at Foots v Southern Cross Mine Management Pty Ltd. This was a case involving an application in respect of a costs order made by a court against a bankrupt after the date of judgment. In the head note the issue was identified as whether the costs order, having been made after the appellant became bankrupt, fell within s.82(1) of the Bankruptcy Act, such that it could only be further pursued in the courts with the leave of the court under s.58(3). The majority conclusion which is, in effect, the decision of the court is summarised at paragraph 65 where his Honour the Chief Justice and Justices Gummow, Hayne and Crennan said as follows:
“If the distraction of British Gold Fields is resisted when construing the text of the Bankruptcy Act, and the nature of a costs order is appreciated, several difficulties lie in the path of the admission to proof of the costs order made against Mr Foots. First, the order made falls outside s 82(1) because it was made after bankruptcy, and was thus not a liability “to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy. Secondly, as explained earlier in these reasons, Mr Foots was under no antecedent obligation to pay costs until the order was made against him. Thirdly, there is no scope in the text or structure of the Bankruptcy Act for the notion of an obligation or liability “incidental” to a provable debt. The necessary corollary of the appellant’s argument is the admission that such an obligation is not itself a provable debt, but is only “incidental” to one. If such an obligation is not a provable debt, when then should it be admitted to proof? Dressing the notion in the language of “incidence” does not alter matters: rather, it is apt to disguise the text of the Bankruptcy Act.”
The facts of that case, as evidenced in the head note, are significantly different to those which were considered by the court in Lawman. As in this case, in Lawman, the costs order made against the bankrupt was made following unsuccessful application for annulment of the bankruptcy. On that occasion, as in this instance, the relevant respondent to the application was the petitioning creditor. In ordering, in that instance, that the first respondent’s costs are to be paid out of the bankrupt estate, with the same priority accorded by s.109(1)(a) to the trustee’s costs, the court reasoned as follows at paragraph 5:
“Though the Act by section 109(1)(a) makes an express provision for the priority in which costs to which the trustee is entitled in respect for the annulment proceedings are to be paid, that provision is expressed to be “subject to this Act,” ie subject to section 32. Under section 32 of the Bankruptcy Act the court has wide power with respect to costs orders. This will extend in an appropriate case to order that a party to the proceedings of bankruptcy entitled to costs of those proceedings should have those costs out of the estate in a particular priority. The petitioning creditor was plainly not acting only in its interests. The petitioning creditor by successfully resisting the bankruptcy annulment application has reserved the bankrupt’s property such as it is for distribution among the creditors generally. It can therefore be said to have a claim to payment out of the estate of its costs of doing that in the same priority to which section 109(1)(a) accords to the trustee; costs of the annulment proceedings. This consideration in our opinion entitles the petitioning creditor to be put in the same position so far as priority for the payment of his costs is concerned as is the trustee. The fact that the trustee has incurred expenses substantially in excess of what was expected is not conclusive against the result that we have reached.”
The trustee contends that, by reason of the observations I have earlier noted in Foots, the Full Court’s decision, although not considered by the High Court in Foots, must by inference be no longer binding, having been superseded by the decision in Foots. Respectfully, I do not agree. The decision of Foots is premised upon an entirely distinguishable set of facts and in Foots’ case the question there plain and simply was whether or not a creditor in his own right was entitled to a priority in respect of a costs order which followed the event of sequestration, the circumstances of the case then in question giving rise to the judgment for costs having occurred well after the date of bankruptcy. It would seem that in pursuing the order for costs the applicant wanting orders in those terms could not be seen to be seeking to act in any sense on behalf of or for the trustee but only in self interest.
In this instance, however, as in Lawman’s case, the facts plainly lend support to the conclusion that the petitioning creditor was acting in the same capacity as the trustee in preserving the bankrupt’s property, such as it was, for his distribution among the creditors generally. It is upon that particular relationship between the petitioning creditor and the trustee in terms of their conduct in response to the application that gives rise to the distinguishable qualities that occur between the application of s.32, so far as it operates upon s.109(1)(a) as is indicated in Lawman, than the facts of Foots, which are more directed to the question of whether or not the postdated order gives rise to a provable debt.
In any event, I am also of the view that the argument presented by counsel for the Nominal Defendant is extremely persuasive; that is that s.109(1)(a) deals with the priority of payments to be made from the estate and provides in the first instance that the first priority is in respect of the payment of taxed costs of the petitioning creditor and the costs, charge and expenses of the administration of bankruptcy, including the remuneration of expenses of the trustee, which costs are provided for in schedule 3 and in particular, so far as it relates to this application, item 2, they being expenses reasonably incurred on behalf of the trustee in protecting all or part of the bankrupt’s assets.
In this instance there can be no question that the Nominal Defendant’s involvement in the application as a respondent to the bankrupt’s application for an annulment was one designed to protect the bankrupt’s assets such as they were or are for the benefit of creditors, and accordingly, it is, by operation of the schedule, an appropriate expense which ought to be afforded priority under s.109(1)(a). It follows in my view that the trustee and the Nominal Defendant ought to be entitled to an order for costs.
The difficulty in this case concerns the quantum and that has not yet been the subject of that material and accordingly will not be the subject of any express order today. In broad terms, counsel for the trustee has informed the court that some $17,000.00 remains in the trustees’ account presently undistributed and otherwise available for meeting expenses. That excludes the sum the trustee has paid to its lawyers on its behalf for its representation on the hearing of this application.
It follows that once the quantum of costs incurred by the trustee on the hearing of this application is added back to the $17,000.00 the notional sum available for the payment of costs of both the trustee and the Nominal Defendant could be readily available for distribution between them, and in my view, having regard to their different involvement in the application. Given that most of the earlier part of the application simply involved appearances on the part of the Nominal Defendant without the involvement of the trustee, it seems that an appropriate order would involve the payment of the respective costs of those parties from the fund that remains available for distribution between them on a pari passu basis having regard to their respective quantums of costs when measured against the total of the costs incurred by both parties in resisting the application.
I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 21 March 2012
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