FEDERAL COURT OF AUSTRALIA
Bertram v Naudi (Costs) [2024] FCA 1444
File number(s): SAD 87 of 2021 Judgment of: O'SULLIVAN J Date of judgment: 13 December 2024 Catchwords: COSTS — application for costs of claim and cross-claim on an indemnity basis — relevant principles — where the applicant commenced proceedings in the Court when a no-cost recovery alternative was available by internal review by Inspector-General — where applicant failed to file a genuine steps statement — where allegations that applicant prosecuted proceedings on no reasonable basis — where applicant refused to accept offers of compromise — exercise of discretion — where the judgment was more favourable than the formal offer of compromise — cross-claimant/respondent awarded party/party and indemnity costs pursuant to FCR 25.14(3)(a) and (b) Legislation: Bankruptcy Act1966 (Cth), ss 77A, 90-15 Schedule 2, 139ZA
Civil Dispute Resolution Act 2011 (Cth) ss 6, 9, 11 and 12
Evidence Act 1995 (Cth), s 131
Federal Court of Australia Act 1976 (Cth), ss 37M, 37N, 43, 43(2), (3)
Federal Court Rules 2011 (Cth), rr 1.61, 25.14, 25.14(2)
Cases cited: ALDI Foods Pty Limited as General Partner of ALDI Stores (A Limited Partnership) v Transport Workers’ Union of Australia [2020] FCAFC 231; (2020) 282 FCR 174
Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112
Bertram v Naudi (No 2) [2024] FCA 1239
Calix Limited v Grenof Pty Ltd (No 2) [2023] FCA 832
Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 364; (1988) 81 ALR 397
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151
Division: General Division Registry: South Australia National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 63 Date of hearing: 10 December 2024 Counsel for the Applicant: Mr J Cudmore Solicitor for the Applicant: CCK Lawyers Counsel for the Respondent: Mr B Roberts KC Solicitor for the Respondent: Charlton Rowley ORDERS
SAD 87 of 2021 BETWEEN: DAVID MORTON BERTRAM
Applicant
AND: ROBERT WILLIAM NAUDI
Respondent
ORDER MADE BY:
O'SULLIVAN J
DATE OF ORDER:
13 DECEMBER 2024
THE COURT ORDERS THAT:
1.The applicant is to pay the respondent’s costs of the claim and cross-claim on a party/party basis until 11.00am on 3 May 2022, and thereafter on an indemnity basis.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
O’SULLIVAN J
On 25 October 2024, I delivered reasons in this matter in which I dismissed the applicant’s claim and entered judgment for the cross-claimant (Mr Naudi) on the cross-claim in the sum of $162,968.34 plus pre-judgment interest to be calculated: Bertram v Naudi (No 2) [2024] FCA 1239 (Reasons).
I also ordered that the parties were to provide orders reflecting my Reasons within seven…
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- AGLC
- Bertram v Naudi (Costs) [2024] FCA 1444
- Case
- [2024] FCA 1444
- Decision Date
CaseChat Overview and Summary
The court considered four grounds for Mr Naudi's claim for indemnity costs: Mr Bertram's decision to proceed in the Federal Court instead of utilising the no-cost internal review process under the Bankruptcy Act; Mr Bertram's failure to file a genuine steps statement; the allegation that Mr Bertram commenced proceedings without a reasonable basis; and the imprudent refusal to accept offers of compromise. The court noted that while Mr Bertram's decision to proceed in the Federal Court was a matter of discretion, a breach of the Overarching Purpose of the Civil Practice and Procedure Provisions of the Federal Court Act could result in an award of costs. However, the court found that Mr Bertram's failure to accept the formal offer of compromise was unreasonable, and this alone was sufficient to justify the award of indemnity costs.
The court concluded that Mr Bertram's refusal to accept the formal offer of compromise was unreasonable, and therefore, the consequences set out in the Federal Court Rules applied. As a result, Mr Bertram was ordered to pay Mr Naudi's costs of the claim and cross-claim on a party/party basis until 11.00am on 3 May 2022, and thereafter on an indemnity basis.
The court's decision was based on the well-established principle that an imprudent refusal of an offer of compromise can justify an award of indemnity costs. The court held that Mr Bertram's failure to accept the formal offer of compromise was unreasonable, and this was sufficient to warrant the award of indemnity costs to Mr Naudi. The court also noted that the Overarching Purpose of the Civil Practice and Procedure Provisions of the Federal Court Act requires parties to act consistently with that purpose, and a failure to do so can result in an award of costs.
Orders
Orders of the court
1. The applicant is to pay the respondent’s costs of the claim and cross-claim on a party/party basis until 11.00am on 3 May 2022, and thereafter on an indemnity basis.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
The Full Court in Anchorage continued at [6] by observing that “A well-established circumstance justifying an award of indemnity costs is an imprudent refusal of an offer of compromise.”: Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 232-233 (Sheppard J)The parties’ submissions and consideration Mr Naudi’s claim for indemnity costs has four alternate bases:(i)The applicant unnecessarily invoked a costly procedure in the face of the no-cost alternative in s 139ZA of the Bankruptcy Act 1966 (Cth);(ii)By failing to file a genuine steps statement, the applicant did not comply with the Civil Dispute Resolution Act 2011 (Cth);(iii)The applicant prosecuted the proceedings in the knowledge that his communications with the respondent were at best misleading, if not false. That was a position that the applicant must have known when he commenced the proceedings (no reasonable basis); and(iv)Imprudent refusals to accept offers of compromise.Section 139ZA of the Bankruptcy Act The respondent submits that pursuant to s 139ZA of the Bankruptcy Act, a no-cost recovery procedure is available by which the applicant could apply for an internal review by the Inspector-General of Mr Naudi’s decision as Trustee, however instead Mr Bertram elected to proceed in this Court. There was no issue that the Court had jurisdiction to consider the matters the subject of the applicant’s claim: s 90-15 Schedule 2 to the Bankruptcy Act. The decision to proceed in this Court as opposed to utilising the internal review procedure set out in the Bankruptcy Act is a matter that went to the exercise of the discretion by the Court as to whether it would grant the relief sought by Mr Bertram. After the proceedings in this matter had been instituted, a proposal was put by Mr Naudi to the applicant by letter from its solicitors, Charlton Rowley, dated 16 August 2021, to the applicant’s solicitors, CCK lawyers. In summary, the proposal was that the proceedings be stayed whilst an internal review procedure pursuant to s 139ZA of the Bankruptcy Act was undertaken. That proposal was not accepted. As part of the submissions on this point, the respondent referred to ss 37M and 37N of the FCA in advancing a submission that given the Overarching Purpose of the Civil Practice and Procedure Provisions of the FCA and the obligation on the parties to act consistently with the Overarching Purpose, a failure to do so by not proceeding with the internal review process constituted a breach of those provisions. The consequence, so it was submitted, was that such a breach was a basis upon which an order for indemnity costs should be made. Section 37M(4) identifies the Civil Practice and Procedure Provisions as being the Federal Court Rules 2011 (Cth), and any other provision made by or under the FCA or any other Act with respect to the practice and procedure of the Court. I accept that a breach of s 37M and/or s 37N might provide grounds for the award of costs in favour of a party affected by such a breach: s 37N(4). However, Mr Naudi seeks to extend the Overarching Purpose and the obligation to conduct the proceeding in a manner consistent with that Overarching Purpose, to not bring proceedings before the Court at all or at least if instituted, to not prosecute those proceedings.