Di Felice, Fillizio v Bent, Everett Thomas

[1982] FCA 319

PRACTICE - PROCEDURE - Security for Costs -

'	impercunious appellant - appellant in receipt
of legal aid - jurisdiction of single judge to
order security for costs.
Federal Court Rules, 0.52, r.20
Legal Aid Act - 1978 (Qld)
PRACTICE - PROCEDURE - injunction restraining
transaction in pursuance of judgment appealed from.
FILL1210 D1 FELICE (also known as PHILIP D1 FELICE)
v. EVERETT THOMSON BENT and VINCENT SAMUEL HUTTLEY &
MAUREEN MAVIS HUTTLEY
No. Qld G63 of 1982

BRISBANE

1

FITZGERALD J.

14 MAY 1982

I N THE FEDERAL COURT OF	AUSTRALIA	)
) No. G 63 of 1982

QUEENSLAND DISTRICT REGISTRY

GENERAL D I V I S I O N 1

F I L L I Z I O D 1 F E L I C E (also known as

P H I L I P D 1 F E L I C E

Appellant

EVERETT THOMSON BENT

First Respondent

VINCENT SAMUEL HLTTTLEY and

MAUREEN MAVIS HUTTLEY

Second Respondent

JUDGE MAKING ORDER: FITZGERALD J .

DATE OF ORDER:	14 MAY 1982
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:
1.	The appllcation of the second respondents that the appellant be ordered to glve security for costs is dismissed.

2.    Upon the usual undertaking as to damages of the appellant by his counsel, and upon condition that

upon condltion that the appellant pay into court	the appellant prosecute the appeal diligently, and
wlthln 14 days the	sum of $3,000 to be available

to satisfy any order for costs In favour of the second respondents in respect of these proceedings elther at first lnstance or on appeal:

(a) the first respondent and the second respondents are restrained by themselves their servants

and thelr agents or otherwise howsoever
until the conclusion of the Brisbane
sittings of the Full Court in August 1982

or the conclusion of the hearing of the appeal

(whichever is	earher) or until further earlier
order from entering Into or carrylng	mto

effect any option to purchase or ageeement

for the sale of certain leasehold lands more

\	particularly described as perpetual lease
selection 2591, portion 103 District of Cairns,
Parish of Tinaroo, County of Nares, area 252.8805 hectares and perpetual lease selectlon 2592,
portions 98V, 99V and 101V, Dlstrict of Cairns,
Parish of Tinaroo, County of Nares, area 256.8707 hectares, and other property described in the sub-lease in these proceedings.

(b) The order made on 28 April 1982 that the bankrupt

pay the costs of the first respondent and the

second respondents of and incidental to the

application before me dlsmlssed on 7 April 1982,

lncludlng reserved costs, is stayed until the

concluslon of the Brlsbane sittings of the

Full Court in August 1982 or the concluslon of

the hearing of the appeal (xvhichever is earher)

or until further earlier order.

3 .   The costs of these applications are reserved for the

!

determination of the court which dlsposes of the appeal.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY ) No. G 63 of 1982

DIVISION GENERAL 1

FILLIZIO D1 FELICE (also kn wn as

PHILIP D1 FELICE

Appellant

EVERETT THOMSON BENT

First Respondent

VINCENT SAMUEL HUTTLEY and

MAUREEN MAVIS HUTTLEY

Second Respondents

FITZGERALD J.

14 MAY 1982

EX TEMPORE REASONS FOR JUDGMENT

15 May 1979 Fillizio Di Felice (also known as

Philip D1 Fellce) executed	a Deed of Asslgnment pursuant
to Part	X of the Bankruptcv Act 1966 (Cwlth) and

Everett Thomson Bent was appointed controlling trustee. However, Mr Di Felice (the bankrupt) remains registered

as lessee under the Land Act 1962-1978 (Queensland) of

two perpetual lease selections in the Cairns District,

numbers 2591 and 2592. A reglstered sub-lease of the

selectlons to Vlncent Samuel Huttley and Maureen Mavis

Huttley (Mr and Mrs Huttley) expired in late 1981. The

trustee accepts that Mr and Mrs Huttley have exercised an option in the sub-lease to purchase the selections, together with improvements and certain equipment (the

property), and proposes to conclude a sale of the property
to them. An application by the bankrupt for orders to

prevent the trustee from proceeding was dlsmlssed by	me
on 7 April 1982. On 28 Aprll 1982	I ordered that the

bankrupt pay the taxed costs of Mr and rs Huttley and the trustee in respect of the proceedings before me. The bankrupt has appealed from my substantive determination

to the Full Federal Court of Australia. In substance, he
perseveres in his assertion that there is no valid and
enforceable agreement entitling and obliging the trustee
to sell the property to Mr and Mrs Huttley. The bankrupt

has been given legal aid to prosecute the appeal.

There are now before me two applic atlons. Mr and Mrs

Huttley seek an order that the bankrupt, or alternatively the trustee, provide security for thelr costs of and incidental to the appeal by the bankrupt. The bankrupt

has applied for an order	estralnmg the trustee and
Mr and Mrs Huttley from entering	mto an agreement for

sale requlred by the option or from performing such

agreement, and for a further order that my order that the

bankrupt pay the costs of and incidental to the proceedlngs

before me be stayed pending	fmal determination of the
appeal.

The bankrupt's estate conslsts of the property the

subject of the dispute, a few dollars more than is required

to meet the trustee's costs In relation to the proceedings
before me, and some equipment, most of which according to

the solicitors for the bankrupt In	a letter whlch they
wrote to the	solxitors for the trustee on 25 March 1982

is "broken down or not in working order". The amount

payable by Mr and Mrs Huttley for the property	1 s
approximately $300,000,	approximately $200,000 of which

is to be paid by instalments within a period of'10 years

from the transfer of the property to them. The bankrupt

alleges that the property is worth more. The max~mum

-.

I

debts in the estate apart from the costs of litigation

are approximately $400,000 but may be no more than

$200,000 depending on whether or n t, and if so to what

extent, the trustee is able to have an income tax

assessment of nearly $200,000 reduced.

It seems to me to be appropriate, In the circumstances,

to proceed on the footing that, on the one hand, not

only the bankrupt himself but hls creditors may be

significantly advantaged If the appeal	1 s prosecuted
successfully but that, on the other hand, the appeal may	I ,

well be unsuccessful and the amount available In the estate

may be substantially less than is required for:

(1) the trustee's costs of the appeal proceedings,

( 2 ) the present debts requlred to be paid out of the

estate,

( 3 ) costs of Mr and Mrs Huttley in relation to the

appeal proceedings,

(4) any amount payable to them pursuant to the

bankrupt's undertaking	as to damages proffered
by his counsel In respect of the	lnpnction sought.

I shall deal first with MC and Mrs Huttley's

application for security for costs. As I have said,

the bankrupt has been granted legal aid to prosecute

the appeal. My attention was drawn to s.35(l)(a) of

! the Leqal Aid Act 1978 (Queensland), from which It appears

that if the appeal is unsuccessful the Legal Aid Commisslon

may, but need not, pay Mr and Mrs Huttley any costs

ordered to be paid to them by the bankrupt.	I have
already mentioned that there is	a real possibillty that
if the appeal is unsuccessful there	wlll be insufflcient

in the bankrupt's estate to pay Mr and Mrs Huttley any costs of the appeal ordered to be paid to them by the bankrupt, or indeed the costs below which the bankrupt

has already been ordered to pay. Added	to this is the
as yet unquantifled risk that they	wlll have a clalm In

respect of the bankrupt's undertaking as to damages If

an injunction is granted.

It seems to me there is a very real potential for

injustice involved in all this. By law, the bankrupt's

affairs have been placed in the hands of his controlllng

i

trustee. The trustee is prepared, and indeed wishes,

to conclude the transaction wlth Mr and	rs Huttley.
I have already held that he should do	so although
I acknowledge that there is	a real posslbillty that

my order will be reversed on appeal. It is true

that the Bankruptcy Act does let	a bankrupt question
decisions by his trustee. However,	I am unable to see
that he should be able to	do s , particularly perhaps

beyond the hearlng at flrst instance, in circumstances

in which he may not be able to make good his

responsibility to pay the costs of another party if

he is unsuccessful. In R. and T. Thew Ltd v. Reeves

1981 3 W.L.R. 190, reference was made by the learned

Master of the Rolls to the injustice which may result where legal aid is given to one slde but the other side

is left entirely unassisted and may have to bear hls own

costs, with no practical recourse, even if successful.

It is true that Order 52 ule 20 of the Rules of

this Court envisage that an order for security for
costs of an appeal should be the exception rather than

the rule. It has also, it seems, been held that the

court will not require security for costs to be glven

by a trustee in bankruptcy where the estate is in insolvent circumstances: see McDonald Henry and Meek's Australian Bankruptcy Law and Practice, 5th edition,

paragraph 796. However, here the appellant is the

bankrupty, not his trustee, and the trustee opposes
the appeal.

The bankrupt's solicitor has filed an affidavit

in which he states that he was informed by the bankrupt

and verily believes that the bankrupt 1 s not in a

position to provide security for the costs of the

appeal and that to order him to do so at all or in

any substantial manner would render a hardship upon

him as it would deny hlm an opportunlty fully to pursue

his rlght to appeal. However, I am not convinced that

that will necessarily be so, and I note that the

i	bankrupt was apparently able to finance the proceedings
before me, which took four days, and indeed, as I
recollect, there was evidence before me that he had paid money to his solicitors prlor to those pxoceedings to cover costs, notwlthstanding his bankruptcy. He gave
some evidence I think, although this is not critical to
my declsion, that he was earning income. Consclous as I am of the possible effect of my order upon the rights
of the bankrupt, I must also take Into account the
position of Mr and Mrs Huttley who already have an order against the bankrupt for an amount of costs which will
doubtless be substantlal, which may not be satisfied If

the bankrupt's appeal 1s successful. I do not think the

bankrupt's impecuniosity ought be permitted to overtake

all other factors.

If I were able to do s . I would order that the

bankrupt give security for costs of the appeal. The
solicitor for Mr and Mrs Huttley swore that, in his
opinion, the appeal will take approximately three days
and the costs of such appeal wlll be approximately
$4500. The solicitor for the bankrupt swore that, in
his opinion, the appeal should not take any longer

than two days and that the taxed costs of	Mr and Mrs
Huttley on	a party and party basis should not exceed
$2500.	I thmk that the appeal could easily take
three days if all the grounds raised	in the notice of

appeal are fully argued. I note, for example, that

the grounds are not confined to questions of law but

extend to matters of fact and	I recollect that the facts
were qulte difflcult to unravel.	No precision 1s
possible and the amount of security whlch	I would

direct were I able to do so is $3000.

I would order that the security be given within

14 days. That would give the bankrupt an adequate

opportunity to	fmd the security as well as ensuring
that the appeal papers may be	prepred next Thursday
as is anticipated and that	a date for hearlng of the
appeal can be fixed.	I would order that the security

be given by payment into court of the	sum in question.
However, the significance of these matters is	In

the event concerned with the bankrupt’s applications,

at least at this point. I have no power to order

security: that is for the Court in its appellate

jurisdiction: see Federal Court Rules, Order 52 rule 20.

and Order 52 rule 1 where “court” as referred to in Order 52

rule 20 is deflned.

It remains to deal with the bankrupt's

applications for an injunction and that the order

for costs below should be stayed. I have no doubt

that, if I can possibly do so, I should seek to ensure

that the bankrupt's appeal, if successful, is not
nugatory. For the bankrupt it was contended that,
even if the trustee and Mr and Mrs Huttley do no more
than execute an agreement for sale and take ancillary
steps under it, such as seeking Mlnlsterial approval under
the Land Act, although not proceeding to performance,
nonetheless the bankrupt may be irreparably disadvantaged.
Although it is by no means clear to me that this
submission is correct, it was not galnsaid by counsel
for the trustee or counsel for Mr and Mrs Huttley.
Accordlngly, I proceed on the assumption that it is
necessary for the preservation of the bankrupt's

position that any further step be restrained pending

the determination of the appeal.

An affidavit flled on behalf of the trustee by

his solicltor Indicates that the smaller creditors

of the bankrupt's estate are now strongly presslng
for the administration of the estate to proceed as
It is causing them financial hardshlp not to have
their clalms satisfied notwithstanding the time whlch
has elapsed. Further, the affldavlt points out that
Mr and Mrs Huttley remain In possession of the property
which is produclng nothing for the bankrupt's estate

at this point. However, I attach little welght to these

matters. If the appeal succeeds, which must be acknowledged

as a real possibility, then even though delayed a

little longer, the bankrupt's present creditors may

be much better off than as at the present, with the

bankrupt's application dismissed.	I do not	know whether
or not they will	be, but the extent	of the potential

I

benefit to them is such that, in my opinion, it 1s In

their interests that the appeal should go on.

The bankrupt's application for an injunction was

brought on on extremely short notice and those
representing Mr and Mrs Huttley were able to argue

the matter fully. I was asked by counsel for

Mr and Mrs Huttley to provide, if I was minded to

grant the injunction sought, that they might come

back to argue that the order should be dlscharged if

so advised once their position had been properly

considered: for example, if it appeared that the

injunction might be productive of conslderable damage
to them, say, by causing them to lose	a sale of the
property. Mr Cooper, for the bankrupt, did	not, as I
understood the positlon, ob-Ject to thls course, and	I

propose to grant an injunction on that basis.

Consistently with that course,	I do not propose, at
this stage, to impose	a condition requlring the bankrupt
to support his undertaking as to damages by	bond

!

-10-

or other securlty. However, it must be clearly

understood that it is open to Mr and Mrs Huttley

to make application either to set aside or vary the

injunction, or to seek the imposition of additional

or other conditions, and that	If any such appllcation
is made	I will treat the proceedings on that occasion

as a fresh application by the bankrupt for an injunction:
It will remain for the bankrupt to establlsh why an

inymction ought to be granted. In other words, although

i I do not suggest that such a course was deliberately

adopted, and on the contrary feel confldent that that

was not so, I am not prepared to let the bankrupt reverse

the onus by brlnging an appllcatlon for an injunctlon on

such short notice that the other parties were unable to

prepare properly and so are, In point of fact, left

later to apply for	a discharge or variation of the order
if so advised.

Further, I am not prepared to grant the inlunction

unconditionally. Worthless though it may	be, the
bankrupt must give an undertaking as to damages. It
is a possibility, on the material before	me, that there

will be something left in the estate for the bankrupt

even if he fails and, in my oplnion, It s only lust

that his potential interest In the estate should stand
at risk to support hls claim for an inpnction.

The bankrupt must prosecute the appeal with

the utmost diligence. I was informed that the appeal

papers have to be settled by the Registrar on

Thursday next week, 20 May 1982. There 1 s no doubt

in my mind that he wlll be able to obtain a hearing

of the appeal at the Brlsbane Sittings of the

Full Court commencing on	2 August 1982, If not before.
I do not think that	I should grant any inlunction at

l this point which wlll go beyond the conclusion of the
hearing of the appeal. The application for an injunctlon
can be renewed to the Full Court which hears the appeal.
It will be able to assess more accurately how long
judgment on the appeal is likely to take and what the
prospects are: the bankrupt and the other partles will
all be able to point to matters affecting the balance of
convenience at that point.

Further, in my opinion, the bankrupt ought as a

condition of the injunction pay into court the sum

of $3,000, to abide the result of the appeal and to be

available, if the appeal fails, to satisfy the clalms

for costs at first instance and on appeal of Mr and Mrs

Huttley. It 1s not in my opinion a satisfactory solutlon

to make an order for the Huttleys' costs which relates
them to the estate: that may reduce the amount available
to creditors if the appeal fails.

The bankrupt's other appllcatlon for	a stay of
the order that he pay the costs of the proceedings	l

before me was only briefly mentioned In argument. The
response of counsel for Mr and Mrs Huttley was that
an undertaking by their solicitors that the costs would
be repaid in the event of the bankrupt succeeding on
the appeal and it being ordered on the appeal that they
should pay the costs of the proceedings before me would
be satisfactory. However, in all the circumstances, and

particularly taking into account my expectation that

the appeal will be able to be disposed	of exp ltiously
and the proposed payment into Court,	I think It is
preferable to stay the order for costs which	I made on

28 April 1982. It was not suggested that I do not have

power to do so.

The orders of the court are that on the usual

undertaking as to damages by the bankrupt through

I

his counsel and on conditions that the bankrupt prosecute

the appeal diligently and pay into court within 14 days

the sum of $3,000, to be available to satisfy any order

for costs in favour f Mr and Mrs Huttley in respect of

the proceedings at first Instance or on appeal, an

inlunction is granted to restrain the trustee and

Mr and Mrs Huttley by themselves, their servants or

agents or otherwise howsoever until the conclusion of

the Brisbane sittings of the Full Federal Court in

August 1982, or the conclusion of the hearlng of the
appeal, whichever is the earlier, or until further order,
from entering into or carrying into effect any
optlon to purchase or agreement for the sale of
certain leasehold land more particularly descrlbed

as perpetual lease selection 2591, portion 103,

District of Cairns, Parish of Tlnaroo, County of
Nares, area 252.8805 hectares and perpetual lease

selection 2592, portions 98V. 99V and 101V, District

of Cairns, Parish of Tinaroo, County of Nares,

area 256.7807 hectares, and other property described
in the sub-lease in these proceedings, and that the
order made on 28 April 1982 that the bankrupt pay the
costs of the trustee and Mr and Mrs Huttley, of and

incidental to the application before me dismlssed on

7 Aprll 1982, including reserved costs, be stayed until

30 June 1982 or the concluslon of the hearing of the

appeal or further earlier order.

These applications are lncidental to the hearlng

of the appeal. In the circumstances, It seems to me

to be approprlate to reserve the costs of these

proceedings for the determinatlon of the court whlch
disposes of the appeal and	I so order.

1 certify ehat his and the 14 preceding

pages are a true copy of the reasons for

Judgment hcrein of the Court

/y S&

bated