Bechara v Reidy
[2014] FCCA 2766
•20 November 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BECHARA & ANOR v REIDY | [2014] FCCA 2766 |
| Catchwords: COSTS – In favour of non-party – power to award such costs – factors relevant to the exercise of the discretion. |
| Legislation: Bankruptcy Act 1966 (Cth), s.58 |
| Kebaro Pty Ltd v Saunders [2003] FCAFC 5 Knight v FP Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28 O’Keefe v Hayes Knight GTO Pty Ltd [2005] FCA 1559 |
| First Applicant: | MARIA BECHARA T/A BECHARA AND COMPANY |
| Second Applicant: | FERIDUN AKCAN |
| Respondent: | GEOFFREY REIDY |
| File Number: | SYG 1629 of 2013 |
| Judgment of: | Judge Barnes |
| Hearing date: | 20 November 2014 |
| Delivered at: | Sydney |
| Delivered on: | 20 November 2014 |
REPRESENTATION
| Applicants: | No appearance |
| Respondent: | No appearance |
| Counsel for David John Kerr as Trustee in Bankruptcy for Gabriel Cross and Rosabelle Cross: | Mr A. Spencer |
| Solicitors for David John Kerr as Trustee in Bankruptcy for Gabriel Cross and Rosabelle Cross: | Norton Rose Fulbright |
ORDERS
There being no appearance by the Applicants the Amended Application in a Case filed on 19 May 2014 is dismissed pursuant to r.13.03C(1)(c) of the Federal Circuit Court Rules.
The Applicants pay the costs of the Respondent Geoffrey Reidy.
The Applicants pay the costs of David John Kerr as Trustee in Bankruptcy for Gabriel Cross and Rosabelle Cross.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1629 of 2013
| MARIA BECHARA T/A BECHARA AND COMPANY |
First Applicant
FERIDUN AKCAN
Second Applicant
And
| GEOFFREY REIDY |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
On 24 April 2014 Ms Bechara filed an Application in a Case seeking orders under s.58(3) of the Bankruptcy Act 1966 (Cth) in relation to the bankrupt estates of Gabriel and Rosabelle Cross. Mr Reidy, the then trustee of the bankrupts’ estates, was named as the Respondent. By an Amended Application in a Case filed on 19 May 2014 Mr Akcan was included as an applicant. The Applicants seek leave to take further steps in New South Wales Supreme Court and Court of Appeal proceedings. The Amended Application in a Case lists two file numbers in an apparent endeavour to seek orders in relation to both the bankrupt estates of Gabriel Cross and Rosabelle Cross.
The matter has been before a Registrar on several occasions. There was no appearance for Mr Reidy when the matter came to me from the Bankruptcy Registrar’s list on 3 November 2014. There was an appearance for the Applicants and, in addition, as had occurred on a number of occasions when the matter was before the Registrar, an appearance for David John Kerr who became the trustee of the bankrupt estates of both Gabriel Cross and Rosabelle Cross on 28 June 2014 in place of Mr Reidy. It became apparent that there was an unresolved issue as to the appropriate parties to these proceedings.
On 3 November 2014 an agent of the First Applicant (who is also the solicitor for the Applicants) appeared for the Applicants. I ordered that the Applicants file and serve any further amended application by 7 November 2014 and any further affidavit evidence by 14 November 2014. The matter was listed for directions today at 9.30 am. I also ordered the solicitor for the Applicants to notify Mr Reidy of the orders made in case he saw fit to appear today.
The Applicants have not filed any further material. There was no appearance today by or for the Applicants (or Mr Reidy), notwithstanding that the Applicants are represented by the First Applicant who is a solicitor and an agent appeared on behalf of both Applicants on the last occasion.
There is no evidence as to whether Mr Reidy has been notified by the Applicants. However, as on all occasions the matter has been before the Registrar after 28 June 2014 there was an appearance for Mr Kerr. I am satisfied on the basis of the evidence before me, in particular copies of the certificates of appointment of trustee, that Mr Kerr was appointed trustee of the relevant bankrupt estates on 28 June 2014.
In the absence of any appearance for the Applicants at the time the matter was listed, I had my associate check that no message had been left with the Registry. There is no evidence of any attempt by Ms Bechara to contact the Court to explain her non-appearance as solicitor for the Applicants.
Counsel for Mr Kerr contended that the proceedings should be dismissed for non‑appearance pursuant to r.13.03C(1)(c) of the Federal Circuit Court Rules. Mr Kerr sought orders that the Applicants pay the costs of Mr Reidy, the former trustee (who at present is as the named respondent to these proceedings).
It was submitted that as the current trustee, Mr Kerr sought to protect other creditors of the estates of Mr Cross and Ms Cross from incurring costs in relation to these proceedings that ought properly to be borne by the Applicants, who have not appeared today to pursue these proceedings and who have not sought the removal and replacement of Mr Reidy as a party to the proceedings, notwithstanding that Mr Kerr was appointed trustee of the relevant estates as at 28 June 2014.
In addition, Mr Kerr made an oral application that the Applicants pay his costs in relation to these proceedings albeit that he is a non‑party, on the basis that he is the trustee of the bankrupt estates in relation to whose estates these proceedings are brought.
Mr Kerr relied on two affidavits. The first of these was an affidavit of Ms Cleo Parissis, a solicitor employed by the solicitors for Mr Kerr, of 3 November 2014. It annexes copies of a considerable amount of correspondence between the solicitors for Mr Kerr and Bechara and Company, Ms Bechara’s firm. Ms Parissis attested to the appointment of Mr Kerr and a letter of 8 July 2014 from Bechara and Company on behalf of the Applicants in these proceedings to Mr Kerr’s solicitors bringing to their attention to the present application for leave. Ms Bechara sought information as to the attitude of Mr Kerr to the leave application, as well as to the proceedings in the NSW Supreme Court.
Mr Kerr’s solicitors sought further information from Ms Bechara on more than one occasion. Ultimately, they received a letter of 21 July 2014 enclosing the Amended Application in a Case. It is apparent that on the first occasion this matter came before the Registrar after Mr Kerr was appointed as trustee (21 July 2014), Counsel for Mr Kerr appeared as friend to the Court and tendered copies of the notices of appointment of Mr Kerr as trustee of the bankrupt estates. Ms Bechara sought an adjournment. According to Ms Parissis, this was to enable her to consider amending the application to join Mr Kerr as a party to the proceedings as the current trustee in bankruptcy. The proceedings were adjourned to 1 September 2014.
On 1 September 2014 Ms Bechara sought a further adjournment. There was again an appearance for Mr Kerr. The Registrar ordered that the Applicants file and serve any amended application to join Mr Kerr in his capacity as trustee, notify other parties and adjourned the hearing to 22 September 2014. By letter of 3 September 2014 Mr Kerr’s solicitors sought clarification of the basis on which leave was being sought. No response to this letter was received.
On 22 September 2014 there was a further appearance by Ms Bechara who foreshadowed filing a further amended application joining Mr Kerr as a second respondent, but leaving Mr Reidy as a respondent. A copy of this proposed application was provided to Mr Kerr’s solicitor. In other words, it appeared that the Applicants intended to maintain the proceedings against both the former and the present trustee. The matter was adjourned after the registrar ordered that the Applicants serve the proposed further amended application on Mr Reidy and that Mr Reidy file any affidavit evidence by a specified date. Such an application was not ultimately filed.
A Notice of Appearance for Mr Kerr was filed on 22 September 2014. The proceedings came back before the Registrar on 13 October 2014. In the interim, the solicitors for Mr Kerr served a sealed copy of the Notice of Appearance on Ms Bechara by letter of 23 September 2014 and raised the issue of the Applicants’ failure to file any further amended application in these proceedings in accordance with the orders of 1 September 2014. No response was received.
On 13 October 2014 there was an appearance before the Registrar on behalf of Mr Kerr, but no appearance by Ms Bechara or any other person on behalf of the Applicants. The Registrar adjourned the proceedings, ordered that the solicitors for Mr Kerr notify the parties of the adjourned date and that the Applicants be notified that if there was no appearance on the next occasion the Court may strike out the application on its own motion. As on the earlier occasions, costs were reserved. On 13 October 2013 Mr Kerr’s solicitors wrote to Ms Bechara advising her of the orders that were made.
The matter came before the Registrar on 3 November 2014. There were appearances for the Applicants and for Mr Kerr. The matter was referred to me on the basis that the Applicants sought a hearing date and the putative respondent (the new trustee) sought a timetable and directions.
In an affidavit sworn on 19 November 2014 Ms Parissis attested that on the instructions of Mr Kerr she had attended Court in respect of these proceedings on five occasions as detailed and that despite the orders made on the last occasion, Mr Kerr’s solicitors had not been served with any sealed further amended application or affidavit evidence as required. Nor is there any evidence of filing of any such documentation.
In addition, the solicitors for Mr Kerr wrote to Ms Bechara on 18 November 2014 requesting confirmation of the Applicants’ intention with respect to these proceedings, in particular whether it was intended to press the current application or any further amended application. The solicitors also indicated that Mr Kerr reserved all rights, including the right to seek an order against the Applicants for costs of and associated with his appearance in these proceedings.
As indicated, there was no appearance today by or on behalf of either of the Applicants. In the absence of any explanation for the failure to appear, where there was an appearance for the Applicants on the last occasion, I am satisfied that the Applicants are on notice of the hearing today and I consider that it is appropriate to dismiss the proceedings pursuant to r.13.03C(1)(c) of the Federal Circuit Court Rules. If in fact there is a satisfactory explanation for the non-appearance it would of course be open to either or both of the Applicants to apply to this Court to set aside any orders made in their absence.
In relation to the issue of costs, as indicated, costs orders are sought by Mr Kerr, the present trustee in bankruptcy of the estates of Gabriel and Rosabelle Cross, in favour of both the present respondent (the former trustee in bankruptcy) and also in his own favour as the trustee in bankruptcy, notwithstanding that he is not a party to the proceedings.
In support of this application reliance is placed on O’Keefe v Hayes Knight GTO Pty Ltd [2005] FCA 1559, in which Nicholson J considered an oral application by a new trustee for the holders of debenture stock for the respondent to pay its costs of seeking to enforce a court order in circumstances where the new trustee was not a party to the proceedings. While this case did not involve a trustee in bankruptcy, Nicholson J considered the power of the Federal Court to award costs in favour of a non-party having regard to s.43 of the Federal Court of Australia Act 1976 (Cth).
Relevantly, s.79 of the Federal Circuit Court of Australia Act 1999 (Cth) is similar to s.43. Under s.79 this Court has jurisdiction to award costs in all proceedings before the Court, other than proceedings in respect of which some other Act provides that costs must not be awarded. Except as provided by the Rules or any other Act, the order of cost is in the discretion of the Court or judge.
As Nicholson J pointed out at [17] in O’Keefe, the Court’s jurisdiction to award costs depends on there being “costs” in proceedings before the Court. His Honour referred to authority indicating that it would be contrary to long-established principle for the grant of such power to be construed as subject to a limitation that did not appear in the words of the grant and that the discretion ought to be exercised judicially. As was pointed out by Gaudron J in Knight v FP Special Assets Limited (1992) 174 CLR 178 at 205; [1992] HCA 28, the necessity for such a power to be exercised judicially tends in favour of the most liberal construction.
Nicholson J also referred to authorities supporting the conclusion that the Court had power to make an order for costs in favour of a non-party in exceptional circumstances (see in particular Kebaro Pty Ltd v Saunders [2003] FCAFC 5 at [103]). In O’Keefe at [24] his Honour set out a number of principles which I regard as also relevant in this case. First, his Honour found that s.43 of the Federal Court of Australia Act was cast in sufficiently wide terms to enable the Court to make an order for costs in a proceeding for the benefit of the non-party, I am of the same view in relation to s.79 of the Federal Circuit Court Act. However, as his Honour stated, there must be “costs” and they must be incurred in “proceedings before the Court”. Further, even if these requirements are met, s.79 (like s.43) “requires an exercise of discretion in the particular circumstances in which the issue arises and the requirements of reason and justice”. As his Honour observed, and as is of relevance in this case, the making of an order for payment of costs in favour of a non-party will be exceptional and therefore must be treated “with considerable caution”. His Honour also noted that “the nature of the relationship between the non-party and the litigation will be relevant”.
In O'Keefe, the respondent had not ultimately challenged the jurisdiction of the Court to make a costs order in favour of a non-party. In this case the Applicants have not appeared, but it cannot have been a matter of surprise to them that such an order might be sought in light of the past appearances before the Court, the orders that were made and the indication in the various letters from the solicitors for Mr Kerr that Mr Kerr intended to seek an appropriate costs order (in particular in the most recent letter of 18 November 2014).
In this case the current trustee has appeared before the Court, despite being a non-party, in circumstances where he is the trustee of the bankrupt estates of those persons in relation to whose estates orders are sought under s.58(3) of the Bankruptcy Act. It would appear that there is no reason why he would not be the appropriate respondent in such proceedings. His conduct has been that of a real party to the litigation. That is so notwithstanding that there appears to have been some issue in relation to the Applicants’ apparent intention to retain Mr Reidy (the former trustee) as a respondent in addition to joining Mr Kerr as respondent. It appears that Mr Reidy did not participate in these proceedings after Mr Kerr’s appointment.
The orders I made on the last occasion were intended to resolve the issue of the appropriate respondent. That did not occur because the Applicants did not comply with those orders. There is no appearance by or for them today. However the relationship between Mr Kerr, the non-party who is the trustee of the bankrupt estates in question and the litigation in which leave of the Court is sought by the Applicants (as creditors of Mr Cross and Ms Cross) to take steps in legal proceedings in respect of provable debts in their bankrupt estates is clear. It is also clear that as trustee of the bankrupt estates of the debtors in relation to whom these proceedings are brought, Mr Kerr seeks costs orders to ensure that other creditors of the estates are not out of pocket in relation to proceedings which the Applicants have failed to pursue.
In these exceptional circumstances I consider that it is appropriate to exercise my discretion to order that the Applicants meet the costs of Mr Kerr as trustee of the bankrupt estates of Gabriel Cross and Rosabelle Cross.
Mr Kerr also submitted that a costs order against the Applicants should be made in favour of Mr Reidy as the former trustee (who is still the respondent to these proceedings), rather than it being left to Mr Reidy to seek payment of his costs from the bankrupt estates of Mr Cross and Ms Cross. In circumstances where the proceedings are dismissed for non-appearance, I am of the view the Applicants should meet the costs of Mr Reidy as Respondent, notwithstanding that he is not present today.
I am prepared to make the orders sought. However, if there is a satisfactory explanation for the failure of the Applicants to appear today, they have the opportunity under r.16.05 of the Federal Circuit Court Rules to seek to bring the matter back before the Court and to reopen the proceedings. I say that not by way of an invitation to them to do so, but rather because there is simply no explanation for their non-appearance today and because of the nature of the proceedings and the orders made today.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Judge Barnes
Associate:
Date: 26 November 2014
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