Burlington Centre Supermarket Pty Ltd, in the matter of Karandonis v; Karandonis

[2000] FCA 1318

FEDERAL COURT OF AUSTRALIA

Burlington Centre Supermarket Pty Ltd, in the matter of Karandonis v
Karandonis [2000] FCA 1318

IN THE MATTER OF JOHN KARANDONIS

BURLINGTON CENTRE SUPERMARKET PTY LTD v
JOHN KARANDONIS

N 7637 OF 2000

EMMETT J
5 SEPTEMBER 2000
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7637 OF 2000

IN THE MATTER OF JOHN KARANDONIS

BETWEEN:	BURLINGTON CENTRE SUPERMARKET PTY LTD APPLICANT
AND:	JOHN KARANDONIS RESPONDENT
JUDGE:	EMMETT J
DATE OF ORDER:	5 SEPTEMBER 2000
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.        The parties’ costs of the petition to date abide the outcome of the petition.

2.        The costs of today be the costs of the parties of the petition.

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 7637 OF 2000

IN THE MATTER OF JOHN KARANDONIS

BETWEEN:	BURLINGTON CENTRE SUPERMARKET PTY LTD APPLICANT
AND:	JOHN KARANDONIS RESPONDENT

JUDGE:	EMMETT J
DATE:	5 SEPTEMBER 2000
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. On 18 April 2000, judgment was entered in the Local Court in favour of Burlington Centre Supermarket Pty Limited (“the Creditor”) against John Karandonis (“the Debtor”).  On 10 May 2000 bankruptcy notices were issued based on that judgment.  On 21 May 2000 bankruptcy notices were served on the Debtor.  They were not complied with and accordingly an act of bankruptcy was committed.  On 9 June 2000 the Debtor applied to the Local Court for leave to pay the amount of the judgment by instalments.  On 13 July 2000 that application was refused. 

2. On that day discussions took place between the legal advisers of the Creditor and the Debtor and his son, Nicholas.  The discussions took place at the conclusion of the hearing before the Registrar of the Local Court.  Participating in the conversation were Mr Braham, counsel for the Creditor and Mr Sacks, solicitor for the Creditor.  The conversation is significant:

   The Debtor said to Mr Braham:           

   “You are a hard man and I bet you won’t accept anything less than the full amount”

   Mr Braham:                 “Yes, that’s right, I’m just doing my job”. 
   Nicholas, then said:

   “That’s fine.  If we pay the amount in full, will you accept that?” 

   Mr Sacks, the solicitor for the Creditor said:

   “Yes, it must be made in one payment”. 

   Nicholas said:               “Look I’ll pay it, but only if you guarantee that there will no further action taken against my father”. 

   There was then an exchange about legal advice that had previously been given to the Debtor. 

   Nicholas then said:       “Where do we go from here, I am prepared to pay the debt in one hit, if we give you the $13,000 odd, you won’t take any further action”.

   Mr Sacks said:           “It is more than that we have to add interest.” 
   Nicholas said:              “How much then?” 
   Mr Sacks:                   “I will have to work it out I can’t tell you now”. 
   Nicholas:   “Well go and calculate the figure and send it to me”. 
   Mr Sacks:                   “I would rather send it to your father’s solicitor”. 

   Nicholas: “That’s fine, but he is away at the moment, why don't you fax it to his office and he can relay it to us, I'm sure you have his details”. 

   Mr Sacks:                   “Yes I will fax it to his office”. 

   There was other conversation not presently relevant.

3. On 19 July 2000, the petition was presented by the Creditor.  It was served on 7 August 2000.  In the interim there was no communication from the Creditor or its solicitors to the Debtor.  The return date for the petition was 23 August 2000.  On 21 August, payment of the debt was made in full by the Debtor to the Creditor.  On the return day on 23 August, the Creditor was given leave to withdraw and the petition was adjourned to today.  A supporting creditor was given leave to file a motion for substitution, such motion to be filed by 25 August 2000 and to be returnable on 5 September 2000.  The question of costs was also adjourned to today.  The argument before me has been concerned with the Creditor’s costs of the petition up to the time of being given leave to withdraw. 

4. It is undisputed that the Debtor committed an act of bankruptcy.  Ordinarily, in circumstances where a creditor, in reliance upon an act of bankruptcy, files a petition and the debtor pays the amount owing to the creditor after service of the petition, the petitioner would be entitled to costs even though the petition were dismissed at that stage.  However, the conversation that took place on 13 July 2000 gives rise to different circumstances. 

5. The Court, of course, has an unfettered discretion as to costs under section 32 of the Bankruptcy Act 1966 (Cth). Normally costs follow the event, except in the circumstances such as I have just mentioned. While there must be some limitation on the weight to be put on pre-litigation conduct, the court is entitled to look beyond the actual conduct of proceedings and have regard to the circumstances under which the proceedings arise – see Re Skase; Ex parte Donnelly (1992) 37 FCR 509 and 522.

6. The conversations set out above were not disputed before me.  I consider that those conversations gave rise to a legitimate expectation on the part of the Debtor that no further action would be taken, including action in relation to bankruptcy proceedings, at least until the information sought as to the precise amount owing had been furnished.  There was no explanation proffered on behalf of the Creditor as to why the information was not sent and why the petition was presented and served without any further communication.

7. On the other hand, once the petition was served, it must have been apparent to the Debtor that the Creditor was insisting on its strict rights.  Had payment been made immediately upon service, there would have been a real question as to whether the Creditor would have been entitled to any costs of the petition at that stage, in the light of the conversation that had taken place.  However, some two weeks elapsed before payment was proffered.  I have no information as to what costs were incurred in that time nor is there any clear explanation as to why that delay was occasioned, having regard to the conversation that took place on 13 July 2000.

8. The petition is still on foot, having regard to the application for substitution.  In my view, the appropriate order to be made in relation to the reserved costs of the Creditor is that those costs follow the event so far as the petition is concerned.  That is to say, if, for whatever reason, the petition is dismissed then the Debtor would be entitled to his costs against the Creditor.  On the other hand, if a sequestration order is made then the Creditor would be entitled to the costs of the petition against the Debtor.

9. The possibility of the substituted creditor being paid and the petition being dismissed should be considered.  In those circumstances, it seems to me that the Debtor will have been successful in relation to the proceedings, so far as the Creditor is concerned and, in those circumstances, the Debtor would be entitled to his costs of the petition against the Creditor.  Of course, nothing I say has any bearing on the position as between the Debtor and the applicant for substitution.  I order that the costs of today be the costs of the parties of the petition.

I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:             15 September 2000

Counsel for the Applicant:	Mr B Skinner
Solicitor for the Applicant:	Sacks Australian International
Solicitor for the Respondent:	Mr H Williamson for Williamson Solicitors
Date of Hearing:	5 September 2000
Date of Judgment:	5 September 2000