Dimasi v Nangiloc Colignan Farms Pty Ltd (No.4)
[2006] FMCA 1605
•24 October 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DIMASI & ANOR v NANGILOC COLIGNAN FARMS PTY LTD (No.4) | [2006] FMCA 1605 |
| BANKRUPTCY – PRACTICE AND PROCEDURE – Costs – Indemnity costs – allegation of fraud – whether order against both Applicants where bankruptcy notice set aside against one Applicant – where both Applicants relied upon allegations of fraud. |
| Dimasi & Anor v Nangiloc Colignan Farms Pty Ltd (No.3) [2006] FMCA 1562 Ugly Tribe Co Pty Ltd v Sikola & Ors [2001] VSC 189 Fox v Robinson & Ors (No.2) [2005] FMCA 1382 Calderbank v Calderbank (1975) 3 All ER 333 |
| First Applicant: | FRANK DIMASI (TRADING AS F & M DIMASI) |
| Second Applicant: | MARIA DIMASI (TRADING AS F & M DIMASI) |
| Respondent: | NANGILOC COLIGNAN FARMS PTY LTD (ACN 008 447 603) |
| File number: | MLG 512 of 2006 |
| Judgment of: | McInnis FM |
| Hearing date: | 24 October 2006 |
| Delivered at: | Melbourne |
| Delivered on: | 24 October 2006 |
REPRESENTATION
| Counsel for the Applicants: | Mr T.D. Best |
| Solicitors for the Applicants: | V.M. Roccisano |
| Counsel for the Respondent: | Mr D.C. Harrison |
| Solicitors for the Respondent: | Leonard Legal |
ORDERS
IT IS ORDERED –
That Bankruptcy Notice No. VN2484/05 against the Second Applicant is declared void and be set aside.
The Application filed 18 April 2006 be otherwise dismissed.
IT IS ORDERED BY CONSENT -
The Respondent Creditor be granted leave in Application number MLG754 of 2006 to amend the Creditors' Petition filed on 13 June 2006 by deleting the Second-named Respondent Debtor therein.
Liberty to apply within 14 days of the date of this order is granted to the Second-named Respondent in Application number MLG754 of 2006 in relation to any question of costs.
Reservice of the Creditors' Petition as amended in Application number MLG754 of 2006 be dispensed with.
IT IS FURTHER ORDERED -
The Applicants shall pay the Respondent's costs of and incidental to the Application filed 18 April 2006, including any reserved costs, on an indemnity basis pursuant to the Federal Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 512 of 2006
| FRANK DIMASI (TRADING AS F & M DIMASI) |
First Applicant
| MARIA DIMASI (TRADING AS F & M DIMASI) |
Second Applicant
And
| NANGILOC COLIGNAN FARMS PTY LTD (ACN 008 447 603) |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
In this matter, the Court delivered a judgment on 20 October 2006 and in delivering that judgment in the matter of Dimasi & Anor v Nangiloc Colignan Farms Pty Ltd (No.3) [2006] FMCA 1562, the Court indicated that it proposed making orders that the bankruptcy notice, number VN2484 of 2005, against the second applicant be declared void and set aside and that the application filed 18 April 2006 seeking to set aside the bankruptcy notice be otherwise dismissed.
It was indicated in the judgment of the court that the court would hear counsel in relation to the question of appropriate consequential orders, including costs orders and further orders that may be made in relation to a creditors' petition which I note appears to have been filed in the court in Application number MLG754 of 2006 on 13 June 2006.
Counsel this day have made submissions in relation to the question of costs, though sensibly it has been agreed that the court should make consequential orders in relation to the creditors' petition which I shall refer to later in this judgment. Hence, the remaining issue in dispute between the parties is the question of costs.
Counsel for the Respondent Creditor has sought an order that the Applicants should pay the Respondent's costs of and incidental to the Application filed 18 April 2006 on an indemnity basis pursuant to the Federal Court Rules. That application is opposed. The Applicants have submitted the costs should be reserved; in the alternative, in any event, the costs of the Second Applicant, who of course has succeeded in this application, should be met by the Respondent. It is that order which is the preferred order and outcome, though in the alternative, as I understand it, it is submitted that the Court should simply reserve costs.
In brief terms, the argument advanced in relation to the reserving of costs is simply that the parties may now have an opportunity to further discuss issues between them with the hope of resolving outstanding issues prior to the hearing of the Creditors' Petition which is to occur before a Registrar on 23 November 2006.
In support of the Respondent Creditor's submission that an indemnity costs order should be made against both applicants, the Court was referred to its decision delivered on 20 October 2006 referred to earlier in this judgment. It is not necessary to recite the findings in that decision, though it is noted that in that decision, the court made what I could only describe as significant adverse findings against the Applicant Debtors in this application to set aside the bankruptcy notice. The Court made significant adverse findings against the First Applicant who gave evidence before the Court at the trial of this matter.
It is noted in passing that the amount referred to in the bankruptcy notice is what could only be described as a relatively small amount and unfortunately has generated what could only be described as significant proceedings involving the potential of significant costs to the parties. As I noted during the course of submissions, there seems to be a complete lack of correlation between the intensity of the dispute between the parties and the amount of money which constitutes the claim. It is regrettable that these proceedings have continued in this manner, incurring, as they no doubt have, significant costs to the parties.
It is submitted on behalf of the Respondent Creditor in this application that the Court should take into account, in making an order of indemnity costs against both Applicants, the principles which have been helpfully set out by His Honour Harper J in Ugly Tribe Co Pty Ltd v Sikola & Ors [2001] VSC 189 which I had referred to in a judgment of this court in the matter of Fox v Robinson & Ors (No.2) [2005] FMCA 1382 as follows:-
“7. In seeking costs on an indemnity basis, the first defendant is asking the Court to depart from its usual course: Spencer v. Dowling. Special circumstances must be present to justify such a departure: Australian Electoral Commission v. Towney (No. 2). These include:
(i) The making of an allegation, known to be false, that the opposite party is guilty of fraud: Fountain Selected Meats (Sales) Pty. Ltd. v. International Produce Merchants Pty. Ltd. (1988) 81 A.L.R. 397.
(ii) The making of an irrelevant allegation of fraud: Thors v. Weekes (1989) 92 A.L.R. 131.
(iii) Conduct which causes loss of time to the Court and to other parties: Tetijo Holdings Pty. Ltd. v. Keeprite Australia Pty. Ltd. (unreported, Federal Court, French, J., 3 May 1991).
(iv) The commencement or continuation of proceedings for an ulterior motive: Ragata Developments Pty. Ltd. v. Westpac Banking Corporation (unreported, Federal Court, Davies, J., 5 March 1993).
(v) Conduct which amounts to a contempt of court: EMI Records Ltd. v. Ian Cameron Wallace Ltd. [1983] Ch. 59.
(vi) The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law: J-Corp. Pty. Ltd. v. Australian Builders Labourers Federation Union of Workers (W.A.) Branch (No. 2) (1993) 46 I.R. 301.
(vii) The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial: National Australia Bank v. Petit-Breuilh (No. 2) (unreported, [1990] VSC 395, 18 October 1999).
8. The categories of special circumstances are not closed: Tetijo Holdings, supra. The cases must not, therefore, be read "in an endeavour to establish a set of inflexible guidelines which should thereafter be determinative of the manner in which the Court's discretion is to be exercised [for this] would be to fetter the Court's discretion": National Australia Bank v. Petit-Breuilh, supra.”
It seems to me that in this application, the principles referred to by His Honour Harper J are applicable in this application.
A further issue has been raised for and on behalf of the Respondent Creditor that this Court should exercise its discretion to make an order for indemnity costs against the Applicants based upon two items of correspondence dated 20 April 2006 and 30 May 2006 from the Respondent Creditor's solicitors to the Applicant Debtors' solicitors which, it is argued, could both be characterised as Calderbank letters, that is, letters to which the principles in the decision Calderbank v Calderbank (1975) 3 All ER 333 should apply. It was correctly noted, however, by counsel for the Respondent Creditor that the offer set out in that correspondence, perhaps at least in relation to the Second Applicant, does not represent a better outcome than the outcome achieved as a result of this Court setting aside the bankruptcy notice as it applies to the Second Applicant.
It is further noted that the costs which have been referred to in that correspondence may likewise be costs, at least in relation to the Second Applicant, which are perhaps not more favourable to the Second Applicant than might be the case as a result of orders of this court.
I note also in passing that unfortunately the Second Applicant in both items of correspondence continues to be misdescribed by the solicitors.
In my view, it is not necessary for the court to have regard to the items of correspondence, though if I were required to do so, I would not be prepared to rely upon them in support of any order for indemnity costs as I am satisfied that, at least at that stage potentially for the Second Applicant, the outcome, that is the dismissal of the bankruptcy notice as against the Second Applicant, is clearly more favourable to the Second Applicant than might be the case had she accepted what was proposed in the correspondence to which I referred.
The reason why I do not regard it as necessary to refer to the items of correspondence is that I am otherwise satisfied that in this application an indemnity costs order against both Applicants should be made.
The Applicants relied upon a document which the Court has ultimately found not to be authentic. The Court dealt with what were effectively significant and serious issues involving, at the very least by inference, an allegation of fraud against a witness of the Respondent Creditor.
It is clear from the findings made by the Court in its judgment delivered on 20 October 2006 that it has made significant and adverse findings against the Applicants and it is equally clear that at least by inference, the issue of fraud was raised by the Applicants as against a witness of the Respondent.
When allegations are made of fraud by one party against the other and that allegation is not sustained, then there is clear authority for the proposition that the party making the allegation may well put himself or herself at risk of an indemnity costs order should the allegation of fraud fail. I am satisfied that in the present application, the failure of the Applicants to successfully rely upon the receipt and the consequential failure of the Applicants to persuade the Court to accept evidence in relation to alleged payment of the debt by inference is tantamount to a failure to establish an allegation of fraud.
In the alternative, I am otherwise satisfied that in any event, the allegations are of such a significant nature and the adverse findings of such importance that in the exercise of the Court's discretion, it is appropriate that a costs order be made on an indemnity basis.
That leaves the question of whether or not the costs order on an indemnity basis should be made against the First and Second Applicants or whether it should only be made against the First Applicant with other separate orders to be made against the Second Applicant who, as I have noted, has been successful in the application to set aside the bankruptcy notice as against her on the basis of misdescription.
It has been submitted by counsel for the Respondent that the Second Applicant, though not giving evidence before this Court, did provide an affidavit sworn by her on 3 June 2006. That affidavit became exhibit A5. In the affidavit, the Second Applicant purports to corroborate assertions of payment and signature on the receipt which of course this Court has rejected. It is clear that the evidence of the Second Applicant was relied upon by both Applicants.
It is also noted that in submissions for and on behalf of the Respondent, the Court in considering the issue of the invalidity of the bankruptcy notice as against the Second Applicant further referred to the Second Applicant and gave consideration to the Second Applicant and her position arising from the allegation that the debt had been paid and a valid receipt duly executed by a representative of the creditor.
It is clear to me that if the Court were found to be in error in declaring the bankruptcy notice as against the Second Applicant to be invalid, then the Second Applicant at least potentially stood to gain the benefit from the evidence adduced by the First Applicant, corroborated in part by the affidavit evidence of the Second Applicant in relation to the question of payment of the debt and execution of the receipt which I have now found was not authentic.
To that extent, although not giving evidence in the trial, I am satisfied that the Second Applicant has actively participated by deposing to the matters in her affidavit which became exhibit A5. It is clear that by doing so, the Second Applicant sought to take advantage of the same arguments advanced by the First Applicant before this Court, both in his affidavit material and otherwise in evidence, both in his own right and evidence called on his behalf.
In exercising the discretion the Court undoubtedly has in relation to the costs question, it is noted that, as with any other discretion, it must be exercised judicially. In my view, it is relevant to take into account the significant adverse findings made by the Court. I am satisfied, for the reasons given, it is appropriate to make a costs order on an indemnity basis. I am further satisfied in the exercise of my discretion, having regard to the role played in the proceedings by the Second Applicant in relation to the affidavit material sworn by her, which became exhibit A5, that it is also appropriate to make an indemnity costs order against her, so that the indemnity costs order should be made against both Applicants.
Whilst the Court has expressed some concern about the extent to which the Second Applicant may have freely provided the affidavit evidence in support of her husband's claim to have made payment, there is simply no evidence before the Court which would enable the Court to draw a conclusion that there has been any undue influence imposed upon the Second Applicant, resulting in the affidavit being sworn and provided to this Court.
In my view, it follows for the reasons given that it is appropriate to make an order against both Applicants for costs to be paid on an indemnity basis. I am further strengthened in that view by a consideration of the extent to which the trial itself was conducted in a manner where by far, the majority of the time of the court was devoted to the factual dispute between the parties arising directly out of the Applicants' reliance upon the alleged payment of the debt and production of the receipt which I found not to be authentic. Having regard to my reasons it is not appropriate to reserve costs.
I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 24 October 2006
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