Cormack v Pacrim Trading Co Pty Ltd - [2009] FMCA 312

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CORMACK v PACRIM TRADING CO PTY LTD & ORS

[2009] FMCA 312

BANKRUPTCY – Costs – costs of bringing application for trustee’s authority to commence proceedings.

Bankruptcy Act 1966, s.34(1)(j)

Cormack v Pacrim Trading Co Pty Ltd [2007] FMCA 1839

Applicant:

DEBORAH CORMACK

First Respondent:

PACRIM TRADING CO PTY LTD T/AS ALL CRASH PARTS ACN 065 899 176

Second Respondents:

JOHN RICHARD PARK & LORRAINE DEBORAH SMITH

File Number:

BRG 912 of 2006

Judgment of:

Wilson FM

Hearing date:

27 March 2009

Date of Last Submission:

27 March 2009

Delivered at:

Brisbane

Delivered on:

9 April 2009

REPRESENTATION

Counsel for the Applicant:

N/A

Solicitors for the Applicant:

Corporate & Property Lawyer

Counsel for the First Respondent:

N/A

Solicitors for the First Respondent:

N/A

Counsel for the Second Respondents:

N/A

Solicitors for the Second Respondents:

Bennett & Philp

ORDERS

The application that the respondent trustees pay the applicant’s costs reserved on 2 February 2007 be dismissed.
The application that the respondent trustees pay the applicant’s costs of this application be dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 912 of 2006

DEBORAH CORMACK

Applicant

And

PACRIM TRADING CO PTY LTD T/AS ALL CRASH PARTS ACN 065 899 176

First Respondent

And

JOHN RICHARD PARK & LORRAINE DEBORAH SMITH

Second Respondents

REASONS FOR JUDGMENT

By interim application filed 4 March 2009 the applicant sought the following orders:
(1)The Trustee pay the reserved costs of the applicant’s application filed 13 December 2007 pursuant to the orders of Federal Magistrate Wilson made 2 February 2007;
(2)That leave be granted under s.33 of the Bankruptcy Act 1966 to extend time for the making of a request for a taxation of the Trustee’s claim for remuneration pursuant to Bankruptcy Regulation 8.09.
(3)That this Honourable Court order the Trustee to transfer the property at 30 Forrest Avenue, Molendinar in the State of Queensland, more particularly described as Lot 5 on RP 126280 title reference from the name of the Trustee back into the name of Deborah Cormack 14629133 (“the property”).
(4)That the Trustee pay the costs of and incidental to the transfer of the property including all legal costs on a solicitor and own client basis to affect the transfer, all registration fees, stamp duty and conveyance costs of whatsoever nature.
(5)That the Trustee be restrained from seeking vacant possession of the property under the provision of the Residential tenancy Act and the Property law Act 1974 or otherwise.
(6)That the trustee be restrained from prosecution his claim for fees until final determination of the trustee’s fee by review, taxation or agreement.
(6)That the Trustee pay the applicant’s costs of and incidental to this application.
By letter dated 27 March 2009 the solicitors for the applicant advised the Court, in correspondence copied to the solicitors for the respondents, that the applicant no longer sought the orders in paragraphs 3, 4, 5 and 6 (first appearing) in the interim application.
Order 2 sought by the applicant was not opposed by the respondent trustees. Accordingly, when the matter was argued before me on

27 March 2009
I made an order granting such leave.
There remains outstanding the applicant’s claim that the trustees pay her reserved costs of an application filed 13 December 2007, and the costs of the present application. There was no application filed on

13 December 2007
, rather the application was filed 28 November 2006. I have treated the application for costs as related to that application.
On 28 November 2006 the applicant applied to have her bankruptcy, commenced by the order of the Registrar made on 31 May 2006, annulled. The respondents were appointed as the applicant’s trustees in bankruptcy. In that application, the applicant also sought an interim order requiring her trustees in bankruptcy to authorise the applicant to bring proceedings against Workcover Queensland to have a default judgment set aside. That was in aid of the applicant being able to submit to the Court that she had no outstanding creditors, and that therefore her bankruptcy ought to be annulled.
The matter came before the Registrar on 13 December 2006, when he made directions for the further conduct of the proceedings, and listed the application for interim orders before me on 2 February 2007. The Registrar reserved costs.
On 2 February 2007, when the matter came before me, the applicant was represented, as was Workcover Queensland. The trustees did not appear. The solicitor for the applicant proved service of the application on the trustees.
After argument, I ordered that the trustees apply or authorise the applicant to apply pursuant to s.134(1)(j) Bankruptcy Act1966 to the Magistrates Court of Queensland at Brisbane to have the judgment in favour of Workcover Queensland in proceeding 1463/2006 set aside.

I reserved the matter of costs “pending the outcome in the Queensland Magistrates Court”.
At that hearing, the solicitor for the applicant described the trustees’ attitude to the application regarding Workcover as ‘ambivalent’ (Transcript 2 February 2007 at T2/24; T3/24; T9/36). It was said that the application to the court was therefore necessary.
When asked (T7/45) why the application was necessary when the trustees could have been asked to give the consent, the applicant’s solicitor’s response was (T8/1):
“That’s true, and I think I may have done that in my file and I haven’t deposed to it. But if I put that aside for a moment, having been served with the application, the trustee was quite at liberty to say, “Mr Senior, we consent. There is no need to proceed with this”.
Before me, on 2 February, the solicitor for Workcover filed, by leave, an affidavit of a solicitor acting on its behalf who deposed to a conversation with an employee of the trustees who told him that the trustees had not been served with the application or supporting affidavits. No material was put before the Court by or on behalf of the trustees themselves.
This affidavit from the solicitor for Workcover was directly contrary to the affidavit of another solicitor, the solicitor for the applicant, who deposed in an affidavit also filed on 2 February that the trustees had been served on 28 November, and had been advised of the adjourned hearing date on 19 January.
I am now satisfied, having read the more recent affidavits of the solicitor for the applicant, which exhibits a schedule provided by the trustees of work carried out by their office as at 6 December 2007 that the trustees were served with the application filed 28 November 2006, and that there was communication in January 2007 between the solicitor for the applicant and the trustees’ office about the application. I am satisfied that the trustees knew that the application was before the Court on 2 February. The employee of the trustees in charge of the applicant’s file in fact sent an email to the solicitor for the applicant on 6 February 2007 in the following terms:
“Could you please provide (sic) advise the outcome of Friday’s hearing”
The interim application for orders authorising the applicant to apply to set aside the Workcover judgment had been heard on the preceding Friday, 2 February.
There is no evidence before me, and the statement of the applicant’s solicitor extracted at paragraph 10 above confirms, that the applicant sought the trustees’ consent to bringing the application to set aside the Workcover judgment, before filing the application in this Court on

28 November 2006
.
That is in direct contradiction of more recent assertions from the applicant’s solicitor:
a)In his letter to the trustees dated 28 November 2007 the solicitor for the applicant stated, inter alia:
“. . . and thereafter I requested your consent to apply to set aside a judgment by Workcover. You refused that request without explanation and as a consequence [the applicant] was forced to apply to the Federal Court (sic) for orders allowing her to bring the Magistrates Court application against Workcover. In my view your refusal was obstructive and created unwarranted costs.”
b)
By letter dated 2 November 2008 the solicitor for the applicant put the solicitors for the trustees on notice that he would be seeking the costs previously reserved on an indemnity basis.

He again asserted that the trustees had refused to provide the necessary consent;
c)At paragraph 42 of his affidavit filed 4 March 2009 the solicitor for the applicant says:
“interim Order 1 of the Application filed on behalf of [the applicant] sought pursuant to Section 134 of the Bankruptcy Act, the Trustee authorise [the applicant] to bring proceedings in the Queensland Magistrates Court at Brisbane to have the judgment made on 29 March 2006 against her by Workcover Queensland set aside. It was necessary to frame the interim application as the trustee refused to give that consent.” (emphasis mine)
There is evidence that the solicitors for the applicant had sought, and obtained, the trustees’ consent to bring an application to set aside the default judgment of the petitioning creditor, thereby avoiding the need to apply to the court for such an order.
As I have said, however, there is no evidence that the applicant’s solicitor sought the consent of the trustees to the bringing of the application in the Brisbane Magistrates Court against Workcover, before filing the application on 28 November 2006.
Further, there is a difficulty in reconciling the strong language referred to in the instances adumbrated at paragraph 16 above with the solicitor for the applicant telling the Court on 2 February 2007 that the trustees’ attitude was ‘ambivalent’.
On 2 February 2007 I proceeded on the basis that the trustees had been served with the application for interim orders and supporting affidavits, and asked to give his consent, but that the trustees had failed to respond, such that they could be taken to have inferentially declined to exercise their power.
In my view, the application filed on 28 November 2006 had to be filed in any event, at least to the extent that it sought from the Court an order annulling the applicant’s bankruptcy. To the extent that such application also sought an interim order for authority to bring the application against Workcover, that was necessitated by the applicant’s solicitor’s failure to seek the trustees’ consent prior to filing the application. The affidavit material reveals that in the weeks preceding the filing of that application the trustees were pressuring the applicant’s solicitors to take some action; otherwise the trustees foreshadowed an intention to proceed to administer the bankrupt estate of the applicant.
In my view, the trustees should not be required to pay the costs reserved on 13 December 2006, as an attendance on that date was required in any event. Nor should the trustees be required to pay generally the costs of the application filed 28 November 2006. As I have said an application was necessary if the applicant wanted to have her bankruptcy annulled.
It is true that if the trustees consented prior to 2 February 2007 to the applicant bringing the proceeding in the Brisbane Magistrates Court, there would have been no need for there to have been a hearing on

2 February. Although the application was notionally opposed by Workcover Queensland, the standing of that party on that application was questionable. If the trustees had provided their consent, I am satisfied that the applicant could have applied to the Brisbane Magistrates Court without seeking the imprimatur of the Court on

2 February.
There is no explanation in the affidavit material from the trustees as to why the consent was not given in the intervening period, nor why the trustees did not appear on 2 February. The schedule provided by the trustees on 6 December 2007 reveals that the trustees were in regular communication with the applicant’s solicitor in the period between

13 December 2006
and 2 February 2007. It would be facile to contend that the consent was not given because it was not expressly asked for. The trustees had been served with the application that clearly set out the interim orders sought. Consistently with their duty in administering the applicant’s estate, the trustees ought to have given their consent.
That gives rise, prima facie, to an entitlement in the applicant to argue that the trustees should pay the costs wasted by reason of the hearing proceeding on 2 February. It seems to me that only those costs could have been saved if the trustees had given their consent prior to

2 February.
As to whether such costs should, in the exercise of discretion, be awarded, it is also relevant to look at the other matters including those leading up to the application filed on 4 March 2009, in respect of which the applicant seeks her costs on an indemnity basis.
After the orders were made on 2 February, the applicant agitated its application to have the Workcover Queensland default judgment set aside. On 7 August 2007 Workcover Queensland discontinued its claim against the applicant.
On 19 October 2007 I ordered that the applicant’s bankruptcy be annulled: see Cormack v Pacrim Trading Co Pty Ltd [2007] FMCA 1839.
Thereafter, the material put before me evidences considerable delay on the part of the applicant in bringing matters to a head, an extensive exchange of correspondence in which the quantum of the trustees’ remuneration is put in issue, and considerable frustration from the trustees’ side about when the matter would be finalised.
The trustees had written to the solicitors for the applicant on 18 July 2006 advising that they would not seek to realise the bankrupt’s residential property whilst the applicant sought to have the judgment debt set aside and the bankruptcy annulled. Further, by letter dated

29 September 2007
the solicitors for the trustees had advised:
“Finally we advise that our clients give their undertaking not to deal with the property vested in their name . . . until the quantum of the trustee’s remuneration has been determined provided that this issue is dealt with by your client in a timely manner.”
Almost twelve months later, on 4 September 2008, the solicitors for the trustees put the applicant on notice that unless an application was filed seeking a review of the trustees’ costs the trustees intended to sell the applicant’s property to recover outstanding fees.
On 2 November 2008 the solicitors for the applicant squarely asked the trustees whether he would refrain from enforcing costs against the applicant’s property. An application to the Court seeking an extension of time for the review of the trustee’s costs was foreshadowed.
On 8 December 2008 the solicitors for the trustees enquired as to whether that application had been filed seeking a review of trustees’ costs. The letter concluded:
“If neither of these applications have been made prior to the recommencement of business in the New Year then our client intends to proceed against your client as they are entitled to do.”
Still nothing was done by the solicitors for the applicant. A letter from the trustees was overlooked. An explanation has been proffered that work pressures delayed the applicant’s solicitor’s attention to the matter. It has not been suggested that the delay was caused by any act or omission on the part of the trustees. On 27 February 2009 the solicitors for the trustees wrote advising that time had expired and that they were proceeding to act against the property.
Finally, the interim application was filed on 4 March 2009.
Then, when the matter had been before the Court once on 27 March 2009, the applicant abandoned much of the relief sought in the application. Part of the relief abandoned was in respect of seeking orders restraining the trustees from enforcing their costs against the applicant’s property, a topic that had been the subject of much correspondence leading up to the bringing of the application.
In those circumstances, it was somewhat surprising that the applicant should seek her costs of the application filed 4 March 2009. In so far as the application sought an extension of time within which to apply to review the trustees’ costs, as I have said that was not opposed. However, an order of the court was necessitated by the applicant’s delay. The application therefore had to be brought.
The only contentious aspect of the application, once the letter referred to in paragraph 2 of these Reasons was sent, was the costs of the application filed 28 November 2006. Given that such an application was necessary to have the bankruptcy annulled, all that the applicant could hope to achieve was to have a costs order made in her favour pertaining to the wasted appearance on 2 February 2007 such that reserved costs should be awarded to her.
In my view, whilst with the benefit of hindsight the trustees can be criticised for not providing the requisite consent between 13 December 2006 and 2 February 2007, it has not been demonstrated that the trustees acted unreasonably in refusing to give that consent based on the material that they then had, or that an adverse costs order should be made against trustees who abstained from giving their authority, and allowing the matter to be decided by the Court. Given the delays on the applicant’s behalf up to that point in time and the attitude of the judgment creditor Workcover Queensland, the trustees may well have thought it better to let the Court decide the matter.
In those circumstances, I am not persuaded to award the costs reserved on 2 February 2009 against the trustees.
As I have said, much of the relief sought in the application filed 4 March is not proceeded with, but that decision was not taken until the matter had already been once before the Court. One matter was the subject of no opposition by the trustees, and in respect of the other (the issue of costs) the applicant has been unsuccessful. In those circumstances, the applicant should not have her costs of the application filed 4 March 2009.
There will be orders as set out at the commencement of these Reasons.

I certify that the preceding forty two (42) paragraphs are a true copy of the reasons for judgment of Wilson FM

Deputy Associate: James Gasteen

Date: 8 April 2009