Djunaedi v Collins - [2022] SADC 132

District Court of South Australia
(Civil: Interlocutory Application)
DJUNAEDI & ORS v COLLINS & ANOR (No 2)
[2022] SADC 132
Judgment of his Honour Judge Burnett
9 November 2022
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - INTERLOCUTORY PROCEEDINGS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - SET-OFF OF COSTS
The applicants instituted proceedings against the respondents in January 2015 for damages. In January 2015, the applicants obtained a freezing order against the respondents, which was not discharged until 2022. In 2015, the applicants obtained summary judgment against the respondents in the sum of $423,658.25 together with an order that the respondents pay the costs of the applicants on a party/party basis. An appeal from that judgment was dismissed in February 2016. The respondents were declared bankrupt in March 2016 but are now discharged from their bankruptcy. In March 2016 an order was made that the first respondent be liable for costs of the proceedings on an indemnity basis. The Full Court ordered on 23 May 2016 that the respondents pay the costs of the applicants of the appeal.
In 2021, two further applications were brought. The respondents sought to discharge the freezing order, which application was ultimately granted. The applicants sought the costs of the whole proceedings on an indemnity basis, which application was dismissed. The respondents now seek costs, on an indemnity basis, in relation to those two applications. The applicants opposed that application.
Held:
(1) The respondents were entitled to indemnity costs in resisting the applicants’ application for indemnity costs for the period in which the respondents’ solicitors were acting and prior to advice by the applicants that they were not pursuing that application.
(2) Although the Court will not generally make an order for costs where there has been no hearing on the merits, there are some cases where it should do so. These circumstances include where a party has (a) capitulated after an application has been made (2) where a party has acted unreasonably or (3) where the court may be confident one party would have almost certainly have succeeded: Coastal Ecology Protection Group v City of Charles Sturt [2020] SASC 215; Chapman v Luminis Pty Ltd [2003] FCACFC 162 applied.
(3) The applicants had acted unreasonably in bringing the application which was doomed to fail in that existing costs orders had been made. The applicants ultimately capitulated. The order sought by the applicants was not a valid supplemental order: Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd [1993) 45 FCR 224 applied.
(4) The respondents were entitled to costs on the standard basis in relation to their application to discharge the freezing order for the period in which the respondents’ solicitors were acting and prior to advice by the applicants that they were not opposing the order.
(5) The above costs order in favour of the respondents should be set off against existing costs orders in favour of the applicants. The liability of the respondents arising from the costs order made by the Full Court, having been made after the bankruptcy of the respondents, was not released by the discharge of the respondents from their bankruptcy: Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 53.
District Court Act 1991 (SA) s 42; Uniform Civil Rules 2020 (SA) rr 194.1, 194.6; Bankruptcy Act 1966 (Cth) s 82, 153, referred to.
Collins & Anor v Djunaedi & Ors [2016] SASCFC 48; Collins & Anor v Djunaedi & Ors (no 2) [2016] SASCFC 63; Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; ASC v Aust-Home Investments Ltd (1993) 116 ALR 523; Minister for Immigration and Ethnic Affairs (Cth); ex parte Lai Qin (1997) 186 CLR 622; Murray v Lesicar [2014] SASC 43; Coastal Ecology Protection Group v City of Charles Sturt [2020] SASC 215; Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; ONE.TEL Ltd v Commissioner of Taxation [2000] 101 FCR 548; Chapman v Luminis Pty Ltd [2003] FCAFC 162; Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52; Mutton v Living Australia Pty Ltd, in the matter of Living Australia Pty Ltd [2020] FCA 739; Darwin Food Pty Ltd v Gray [2018] SASCFC 84; National Australia Bank Ltd v Market Holdings Pty Ltd (in liq) (2001) 161 FLR 1; Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224; Oliver Hume South East Queensland Pty Ltd v Barclay (No 2) [2021] FCA 1426; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; Henke v Carter [2002] FCA 492; Cachia v Hanes (1994) 179 CLR 403; Trevorrow v State of South Australia (No 7) [2008] SASC 5, considered.

DJUNAEDI & ORS v COLLINS & ANOR (No 2)
[2022] SADC 132
Civil
Introduction

The applicants’ claim was determined in December 2015 when the applicants obtained summary judgment against the respondents. An appeal from that judgment was dismissed by the Full Court. Both of the respondents were declared bankrupt in 2016 but are now discharged from their respective bankruptcies.
In September 2021, two further matters arose in relation to the proceedings. First, the respondents brought an application to discharge a freezing order that had been granted on the application of the applicants in 2015. The applicants initially opposed that application, but later withdrew their opposition to the application. An order was made on 11 March 2022 discharging the freezing order.
Secondly, some of the applicants brought an application that the respondents pay the costs of the proceedings on an indemnity basis. This application was misconceived as costs had already been dealt with at the time of the summary judgment application. The applicants who had brought the application, subsequently decided not to proceed with the application.
The respondents have now brought an application:
1. Seeking costs, on an indemnity basis, in relation to their application to discharge the freezing order.
2. Seeking costs, on an indemnity basis, in relation to resisting the application of the applicants for indemnity costs of the proceedings.
It is necessary to examine in some detail the chronology of events in relation to the freezing order and indemnity costs application as well as the orders that were made and events that occurred in 2015 and 2016.
Chronology
The applicants instituted proceedings on 22 January 2015 for damages arising out of what was found to be the fraudulent conduct of the respondents. A freezing order was made on 29 January 2015. The freezing order was varied from time to time.
In May 2015, the applicants took out an application for summary judgment against the respondents. On 22 December 2015, Judge Tilmouth awarded judgment in favour of the applicants against the respondent in the sum of $423,658.25. Individual applicants were awarded different sums, depending on the amount they had invested. A further order was made on 22 December 2015 that the respondents pay the costs of the applicants on a party/party basis, such costs to be agreed or taxed.
The respondents instituted an appeal to the Full Court from the summary judgment entered on 22 December 2015. That appeal was dismissed on 4 February 2016,[1] but reasons were published later. Costs were also dealt with on a later date.
[1] Collins & Anor v Djunaedi & Ors [2016] SASCFC 48.
By an interlocutory application dated 24 February 2016, the applicants sought an order that the respondents pay the cost of the proceedings on an indemnity basis. By the time that the application was heard on 4 March 2016, the second respondent had been made bankrupt, having presented a debtor’s petition on 2 March 2016. The applicants then amended their application to seek an indemnity costs order only against the first respondent. At the hearing of the application on 4 March 2016, the Court was advised that the first respondent had also been made bankrupt, although there was no evidence of this fact. On 4 March 2016, Judge Slattery ordered that in the event that the costs of the action between the applicant and the first respondent were to be taxed, the applicants were entitled to recover their costs on an indemnity basis.
The first respondent in fact went bankrupt on 4 March 2016. Both respondents are now discharged from their bankruptcy.
On 11 May 2016, the Full Court published reasons as to why it had dismissed the appeal of the respondents. On 11 May 2016, the applicants sought the costs of the appeal. On 23 May 2016,[2] the Full Court ordered that the respondents (in these proceedings, but the appellants on the appeal) pay the costs of the applicants, notwithstanding that the respondents had already gone bankrupt.
[2] Collins & Anor v Djunaedi & Ors (no 2) [2016] SASCFC 63.
Criminal proceedings were brought against the first respondent in relation to the subject matter of these proceedings. The first respondent was found guilty on 29 November 2019 and sentenced to imprisonment for 6 years with a non-parole period of 4 years. He was released on home detention bail on 29 July 2021.
On 17 September 2021, the respondents brought an interlocutory application that the freezing order made on 23 February 2015 in relation to their assets be discharged. At that time, the respondents were self-represented and the respondents had each filed notices of acting in person. The affidavit of the first respondent in support of that application did not clearly set out the basis for the application and why the freezing order should be discharged.
At a directions hearing on 29 September 2021, the applicants sought to re-agitate the application for indemnity costs that it brought on 24 February 2016. The parties were ordered to file and serve any further affidavits and the applications for indemnity costs and for the discharge of the freezing order were listed for argument on 4 November 2021.
On 30 September 2021, the applicants submitted a detailed claim for the costs of the proceedings against the respondents.
Also on 30 September 2021, the respondents sent an email to the Registry advising that they wished to discontinue and withdraw their application for the discharge of the freezing order.
The first respondent filed a further affidavit in support of their application for the discharge of the freezing order and also filed a response to the applicants’ claim for costs, denying both the quantum of the claim and liability for the costs.
The applicants’ solicitors filed an affidavit in relation to the application for indemnity costs. The affidavit wrongly stated that the Judge Tilmouth made no order for costs on the summary judgment application and further that the application for indemnity costs on 4 March 2016 did not proceed against the first respondent. On 2 November 2021, the applicants filed written submissions in support of their application for indemnity costs. Those submissions were based on the mistaken premise that no order for indemnity costs had been made on 4 March 2016 as the respondents had both been made bankrupt.
On 3 November 2021, the respondents brought an interlocutory application in which they sought inter alia orders dismissing the applicants’ application.
At the hearing on 4 November 2021, the respondents were represented. Their legal representatives had only just been instructed. The respondents had not previously been represented in relation to the applications then before the Court. The respondents made an application for an adjournment of the proceedings and further sought that the order of Judge Slattery on 4 March 2016 be set aside or quashed. The setting aside of that order is to be considered by Judge Slattery and is not part of the costs applications before me. Counsel for the respondents also stated that they wished to resurrect the application for the discharge of the freezing order.
On 4 November 2021, the Court adjourned the matter to 13 December 2021 with a view to listing the matter for hearing at that adjourned date. The Court also made orders for the filing of further affidavit material.
The legal representatives for the respondents filed a notice of acting on 5 November 2021. The legal representatives for the applicants filed a further notice of acting on 17 November 2021 which specified the applicants for which it was still acting.
At the adjourned hearing date on 13 December 2021, the applicants’ solicitor advised the Court that they were no longer pursuing the application for indemnity costs and that they had advised the respondents’ solicitors of that fact on 12 November 2021. That application was dismissed. The Court also made orders for the respondents to file further affidavits by 3 January 2022, the applicants to file further affidavits by 17 January 2022 and the parties to file and serve outline of submissions by 4 February 2022. The respondents’ applications for the discharge of the freezing order and for costs, on an indemnity basis, was set down for argument on 8 February 2022.
The respondents did not file any further affidavit material in accordance with the above orders. The applicants’ solicitors advised by email on 17 December 2021 that they consented to the freezing orders being set aside. The respondents’ solicitors did not respond to the email until 8 February 2022, the day which had been fixed for the hearing. The hearing on 8 February 2022 was adjourned, at the respondents request, for further directions to 3 March 2022. The applicants’ solicitors were also ordered to file Notice of Cessation of Acting in relation to the applicants that they no longer represented. That notice was subsequently filed on 10 February 2022. The applicants were ordered to have costs of the attendance on 8 February 2022 in any event.
The respondents only advised the parties no longer being represented by the applicants’ solicitors of the application to discharge the freezing order on about 27 February 2022. At the hearing on 3 March 2022, the matter was adjourned to 11 March 2022 to allow the non-continuing applicants further time to obtain instructions and for the respondents to file an affidavit providing notification of the application and the adjourned hearing date. The Court ordered that there be no order for costs of the hearing on 8 March 2022.
At the hearing on 11 March 2022, the Court ordered that the freezing orders be discharged and that the respondents’ applications for costs be adjourned to 26 May 2022 for argument. The argument took place on that later date.
Costs claims of the respondents
The respondents have sought indemnity costs in relation to the application by the applicants for the indemnity costs of the proceedings. The basis for the application for indemnity costs was that the application had no prospects of success given that the Court had made an order for costs on 22 December 2015 and had made an order for indemnity costs against the first respondent on 4 March 2016. The applicants notified the respondents on 12 November 2021 that they were not proceeding with the application and the Court subsequently dismissed the application. The respondents submitted that they were entitled to costs even though the application had not been determined on its merits and further submitted the application fell within one of the established categories in which indemnity costs might be ordered.[3]
[3] Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225.
The applicants opposed that application on a number of bases including (1) the respondents were self-represented until 4 November 2021 (2) on 12 November 2021, the applicants advised the respondents that they were not proceeding with the application (3) any order should be set off against existing orders in favour of the applicants.
The respondents also sought indemnity costs in relation to their application for the discharge of the freezing order. The basis of this application was that they were wholly successful in respect of that application. They further submitted that the applicants’ opposition to the application was unreasonable and unnecessary.
The applicants also opposed that application on the bases that (1) on 17 December 2021 they had advised the applicants that they withdrew their opposition to the application, which opposition had been justified; (2) the respondents were self-represented until 4 November 2021 and (3) any order should be set off against existing orders in favour of the applicants.
The respondents have brought an application before Judge Slattery to set aside the indemnity costs order that his Honour made in March 2016 for indemnity costs against the first respondent. That does not form part of this application.
Legal principles
Pursuant to s 42 of the District Court Act, costs will be in the discretion of the Court.
The Uniform Civil Rules 2020 (UCR), rule 194.6 provides for a broad discretion in the exercise of the power to award costs. It states that:
(1) In exercising its discretion, the Court may have regard to any factors it considers relevant.
Sub-rule (2) provides examples of matters that the court may have regard to.
UCR 194.1 provides that a Court may make an order for costs in favour of a party and against a party at any stage of a proceeding up to and after the final determination of the proceeding. Pursuant to UCR 194.3, costs may be awarded on various bases including on the standard costs basis or indemnity basis. UCR 194.3 provides:
(4) The Court may order that costs awarded to a party be set-off against any liability of the other party (including a liability for costs).
UCR 194.4 sets out certain presumptive costs rules which will apply subject to an order of the Court to the contrary. Relevantly, these presumptive costs rules include a rule that the costs of a directions hearing and the costs of an interlocutory application are costs in the cause.
UCR 194.5 sets out some general costs principles (which are subject, inter alia, to the overriding discretion of the Court as to costs) including the principle under UCR 194.5(2) that costs follow the event.
Where an application has not been determined, the Courts will not usually embark on a hypothetical hearing to determine what would have been the likely outcome of the application.[4] Further, as Stanley J held in Murray v Lesicar,[5] “the Court should be slow to create a situation in litigation where the parties are discouraged from conceding points for practical reasons because of the risk of suffering in costs as a result.”
[4] ASC v Aust-Home Investments Ltd [1993] FCA 585; (1993) 116 ALR 523 at 530; Re Minister for Immigration and Ethnic Affairs (Cth); ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622.
[5] [2014] SASC 43 at [28].
However, there will be some cases where the Court will make a costs order, notwithstanding that there has not been a hearing on the merits of the application or the proceedings. One of those cases will be where a party has acted unreasonably and another will be where a party has capitulated after a full hearing. That latter instance was discussed by Livesey J in Coastal Ecology Protection Group v City of Charles Sturt[6] where it was held that the consequence of capitulation (as to the adequacy of an existing pleading) after a full hearing warranted an adverse costs order.
[6] [2020] SASC 215 at [34]-[43].
In Nichols v NFS Agribusiness Pty Ltd,[7] Basten JA held that in unusual cases it may be possible, without a hearing, to identify success which is manifest on the face of the record. Similarly, in ONE.TEL Ltd v Commissioner of Taxation,[8] Burchett J held that although both parties may have acted reasonably, one party was almost certain to have succeeded if the matter was fully tried.
[7] [2018] NSWCA 84 at [3]
[8] [2000] 101 FCR 548 at 552-3.

In Chapman v Luminis Pty Ltd,[9] the Full Federal Court summarised the position in the following terms:
The authorities establish the following propositions in relation to the making of costs orders in circumstances such as the present:
- where a proceeding terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd
- this does not mean that a Court can never make an order for costs. Often it will be unable to do so, but in other cases an examination of the reasonableness of the conduct of the parties may provide the basis for an order, or a judge may be confident that one party was almost certain to have succeeded if a matter had been fully tried: Re Minister for Immigration& Ethnic Affairs; Ex parte Lai Qin.
- a distinction is to be drawn between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should be bear the costs: ONE.TEL Ltd v Deputy Commissioner of Taxation
[citations omitted].
[9] [2003] FCAFC 162 at [7]
In the present case, the principles relating to costs orders and bankruptcy are also important.
Section 82 of the Bankruptcy Act defines what are provable debts. Section 82(1) states:
Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy are provable in his or her bankruptcy.
Section 153 of the Bankruptcy Act provides for the effect of a discharge from bankruptcy. It provides:
(1)Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally.
(2) The discharge of a bankrupt from a bankruptcy does not:
(a) …
(b) release the bankrupt from a debt incurred by means of fraud…
The High Court in Foots v Southern Cross Mine Management Pty Ltd[10] held:
What, then of the appellant's first submission? This is, that his exposure to an adverse costs order arose from an "obligation" incurred prior to his bankruptcy. The submission should be rejected: no such obligation arose until the costs order was made. This conclusion is consistent both with the Australian authorities upon which Chesterman J had relied and the 20th century English authorities regarding the proof of costs in bankruptcy, particularly In re A Debtor, In re Pitchford and Glenister. Each of these authorities emphasises the distinct nature of the proof of a costs order and the proof of an underlying debt.
The most that can be said, as Mummery LJ observed in Glenister, is that "[o]nce legal proceedings have been commenced there is always a possibility or a risk that an order for costs may be made against a party". But that risk is not a contingent liability within the sense of s 82(1). The order for costs itself is the source of the legal liability and there is no certainty that the court in question will decide to make an order. It should be remarked that in support of his reasoning in Glenister, Mummery LJ referred to what had been said by Kitto J in Community Development Pty Ltd v Engwirda Construction Co and by Tadgell J in Federal Commissioner of Taxation v Gosstray The first submission by the appellant should be rejected.
Upon like considerations, and again contrary to the appellant's submissions, it cannot be said that exposure to an adverse costs order is "incidental" to liability for the underlying judgment debt. For reasons that will be explored later in these reasons, it is highly doubtful that the text of s 82 supports the notion of "incidental" liabilities that are not themselves provable debts. However, it is sufficient for present purposes to observe that, as a factual and legal matter, costs are no longer an "incident" of either verdict or judgment. As explained above, the making of an adverse costs order turns upon discretionary considerations that arise independently of the entry of judgment against the debtor.
Had the costs order made by Chesterman J on 3 February 2006 been made and taxed before the appellant's bankruptcy ensued, it would have been a provable debt. Even if the order had not been taxed before bankruptcy, it would nonetheless have been provable as a debt incurred "by reason of an obligation incurred before the date of the bankruptcy"; namely the antecedent making of the costs order. However, the order was made only after bankruptcy had already intervened, and the appellant's liability to meet that order did not arise from an obligation incurred before bankruptcy. Thus, it was not a provable debt, and the stay contained in s 58(3) of the Bankruptcy Act was not engaged. His Honour was therefore entitled to make the costs order against Mr Foots.
[citations omitted]
[10] [2007] HCA 56; (2007) 234 CLR 52, [35] – [37], [67].
The effect of this decision is that a costs order made after the date of bankruptcy is not a provable debt. It is the order for costs which is the source of the legal liability and until the costs order is made, there is no liability, even on a contingent basis.[11] For there to be a contingent liability, there must be an obligation upon which the contingency can operate and for the purposes of s 82(1) of the Bankruptcy Act, that obligation must exist at the date of the bankruptcy.[12]
[11] See also Mutton v Living Australia Pty Ltd, in the matter of Living Australia Pty Ltd [2020] FCA 739 at [33].
[12] Darwin Food Pty Ltd v Gray [2018] SASCFC 84 at [83].
However, a costs order made before the date of bankruptcy, even if not taxed or agreed as at the date of bankruptcy, will be a provable debt.[13]
Determination
[13] National Australia Bank Ltd v Market Holdings Pty Ltd (in liq) [2001] NSWSC 253; (2001) 161 FLR 1 at [133]-[134].
1. Application by the applicants for indemnity costs of the proceedings
The affidavit material and the submissions made by the applicants in support of this application indicate that the application was made in the mistaken belief that no order for costs had been previously made in the proceedings. This belief was incorrect in that when awarding summary judgment, Judge Tilmouth had ordered that the respondents pay the applicants’ costs on a party/party basis, such costs to be agreed or taxed. Further, Judge Slattery had ordered on 4 March 2016 that the first respondent pay the applicants costs on an indemnity basis. The applicants had, at that time, elected not to proceed with their application for indemnity costs against the second respondent as she had already gone bankrupt.
It is evident that by reason of those matters the application of the applicants for indemnity costs of the proceedings was doomed to fail.
In these circumstances, an order that the respondents pay the costs of the applicants on an indemnity basis, would not be a valid supplemental order made after judgment. The validity of such an order was discussed by the Full Federal Court in Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd.[14] In that case, the applicant sought an order for costs against the respondent’s solicitors after judgment. The Full Court held there was a power to make supplemental orders where it was necessary to do so. The Court held that a supplemental order may be made after judgment is entered provided that is does not vary or alter an existing order.[15] An order that the solicitors of the unsuccessful litigants pay the costs of the successful litigants did not vary or alter the previous costs orders imposing liability on the unsuccessful litigant. The order against the solicitors was therefore a valid supplemental order.
[14] [1993] FCA 667; (1993) 45 FCR 224.
[15] Ibid at 234.
The application of the applicants seeking indemnity costs did not seek a supplemental order but sought the setting aside or varying the existing order of costs made by Judge Tilmouth that costs be made on the standard party/party basis. It was not therefore a valid supplemental order. No application had been made to vary or set aside the existing orders as to costs. No such application was likely to have been successful under UCR 186.1 as the applicants would have had to satisfy the Court that it was in the interests of justice to make such an order.
Insofar as the application of the applicants sought an order that the first respondent pay the applicants’ costs of the proceedings on any indemnity basis, such an application was unnecessary as Judge Slattery had already made such an order.
In these circumstances, it would normally be the case that indemnity costs would be awarded to the person in the position of the respondents. The circumstances in which indemnity costs will be awarded was set out in Colgate Palmolive Co v Cussons Pty Ltd[16] where Sheppard J held that:
In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court from departing from the usual course.
[16] [1993] FCA 801; (1993) 46 FCR 225 at [30], 233-234.
Sheppard J went on to say that the categories of cases in which the discretion might be exercised are not closed.
In the present case, subject to the matters that I will discuss below, I am of the opinion that it is appropriate that the respondents have the costs of resisting the application made by the applicants to have the costs of the proceedings on an indemnity basis.
The relevant test is whether the facts and circumstances of the case justify making an order for the payment of costs other than on a party and party basis.[17] However, the categories of cases in which indemnity costs may be awarded include where “the applicant, properly advised, should have known that he had no chance of success”[18] or where an application is “wholly untenable and misconceived.”[19]
[17] See Oliver Hume South East Queensland Pty Ltd v Barclay (No 2) [2021] FCA 1426 at [9].
[18] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1998] FCA 202; (1988) 81 ALR 397 at 401.
[19]Henke v Carter [2002] FCA 492 at [22].
In my opinion, the application for indemnity costs was misconceived in that it proceeded on the factual basis that there had been no previous order for costs. As that factual basis was incorrect, the applicants could never have succeeded on their application. The application was not tenable. It does not matter for these purposes that the applicants were honestly mistaken in their belief and failed to recall the earlier costs orders that were made.
However, the period in respect of which the respondents are entitled to indemnity costs is very limited. The respondents were self represented at the time that the applicants advanced the application. As the High Court held in Cachia v Hanes,[20] a self represented litigant is not entitled to their time in the preparation and conduct of their case. Their claim for costs is limited to out of pocket expenses.
[20] (1994) 179 CLR 403
In the present case, the respondents were self represented throughout the period from 17 September 2021 to 4 November 2021. On that latter date, they were represented at the hearing, although a notice of acting was not filed until the following day. The respondents submitted that they were entitled to claim costs of their solicitors prior to them filing a notice of acting as the solicitors were engaged to work on their behalf. The respondents relied on the decision of Gray J in Trevorrow v State of South Australia (No 7).[21] In that case, Gray J held that a retainer could be implied and that the onus was on the party seeking to avoid an order to establish that there was no liability on the part of the claimant to his or her solicitor for costs.
[21] [2008] SASC 5 at [17].
In my opinion, Trevorrow has no relevance to the applications of the respondents. In Trevorrow, the relevant solicitor had filed a notice of acting and the question for determination was whether costs could be claimed in the absence of an express retainer. In the present case, prior to 5 November 2021, no retainer had been entered into. Further, the respondents conceded at the hearing on 26 May 2022,[22] that the retainer had not been secured as at 3 November 2021. Further, in my view the fact that the respondents had filed a notice of acting in person and that notice of acting by the respondents had not been withdrawn as at 4 November 2021, provides conclusive evidence that until that time the respondents were acting in person. It would be an abuse of process for solicitors to be retained to act on behalf of a party in proceedings and not to file a notice of acting or otherwise notify the other party that they were acting. Certainly, it would be a matter that would be a relevant factor in the exercise of my discretion as to costs.
[22] T18.1.
I therefore decline to award any costs to the respondents in relation to the application of the applicants for indemnity costs prior to 4 November 2021. In that period the respondents were self-represented. There is no evidence that the respondents incurred any out of pocket expenses in relation to the application. Given the nature of the application, the period in which the application was extant and what occurred during that period, it is, in my view, unlikely that the respondents would have incurred anything other than minimal out of pocket expenses. For the reasons that I have expressed above, I would not make any order of costs in favour of the respondents in relation to any liability for costs incurred by them to their solicitors for work done prior to 4 November 2021.
On 12 November 2012, the applicants’ solicitors advised the respondents’ solicitors that they were not proceeding with the application for indemnity costs of the proceedings. I therefore do not consider that the respondents are entitled to any costs in relation to the application after that date. No further documents were filed by the respondents in relation to that application.
I therefore order in respect of this part of the respondents’ application that the applicants are entitled to their costs on an indemnity basis in relation to legal professional services rendered in the period between 4 November 2021 and 12 November 2021. I do not consider that it is likely that these costs will be substantial.
2. Application by the respondents for the discharge of the freezing order
For the reasons that I have previously expressed, I do not consider that the respondents are entitled to any costs in relation to this application prior to 4 November 2021 when solicitors commenced acting for them in relation to the application. On 17 December 2021, the applicants’ solicitors advised the respondent’s solicitors that they withdrew their opposition to the application.
Although there was no opposition to the application after that date, it was always necessary for the respondents to satisfy the Court that it was appropriate that the freezing order be discharged. However, it is clear that the freezing order did not serve any purpose once the respondents went into bankruptcy. Pursuant to s 58(1) of the Bankruptcy Act, on bankruptcy all of the assets of the bankrupt respondents vested in their trustee. At the end of the bankruptcy, the assets do not revest in the bankrupts, although in practice, there will be unlikely to be any assets remaining as the trustee will have realised all assets to pay the creditors of the bankrupt estate. Further, provable debts are discharged at the end of the bankruptcy.
In these circumstances, it is difficult to see how the freezing order could continue to have any relevance once the respondents went into bankruptcy.
No documents were filed in the period between 12 November 2021 and 17 December 2021. A hearing took place on 13 December 2021 when the matter was listed for argument in February 2022.
Given the lengthy period between 2015 and 2021 and the lack of clarity as to the circumstances of the freezing order and why it should be discharged, I do not consider that the applicants’ conduct was so unreasonable that it should be required to pay costs, even for a limited period, on an indemnity basis. I also take into account that the respondents needed to bring the application and satisfy the Court that an order for discharge of the freezing orders ought to be made.
In these circumstances, I consider that the respondents are entitled to their costs incurred in the period between 4 November 2021 and 17 December 2021 in relation to the discharge of the freezing order on the standard basis.
Set off
However, I consider that it is appropriate that I set off the costs that I consider that the respondents are entitled to against the existing orders for costs in favour of the applicants.
UCR 194.3 (4) provides that a court may order that costs awarded to a party be set off against any liability of the party (including a liability for costs).
In the present case, there are two existing orders for costs against which these costs orders may be set off. These are (1) the costs order made in favour of the applicants at the directions hearing on 8 February 2022 and (2) the costs order made by the Full Court on 23 May 2016. As to the latter order, it was made after the respondents were made bankrupt and in accordance with the decision of Foots is not a provable debt in the bankruptcy. A costs order made after bankruptcy has not, for the purposes of s 82 of the Bankruptcy Act, been incurred by reason of an obligation that has arisen prior to the date of bankruptcy (see Foots). As the costs do not give rise to a provable debt, the respondents are not released from that liability by reason of the discharge of their bankruptcy.
Orders
I make the following orders:
1.The respondents are entitled to costs incurred in the period between 4 November 2021 and 12 November 2021 on an indemnity basis in relation to resisting the application by the applicants for indemnity costs.
2.The respondents are entitled to their costs incurred in the period between 4 November 2021 and 17 December 2021 on the standard costs basis in relation to their application for the discharge of the freezing orders.
3.The applicants are entitled to set off the whole of the amount of their liability under orders 1 and 2 above against the liability that the respondents have to them under the following orders:
a. Orders made on 8 February 2022 in these proceedings.
b. Orders made by the Full Court on 23 May 2016 in the appeal from the summary judgment (matter number SCCIV-15-1477).