Ebner v Official Trustee in Bankruptcy, in the matter of Ebner (No 2)

[2003] FCA 1374

FEDERAL COURT OF AUSTRALIA

Ebner v Official Trustee in Bankruptcy, in the matter of Ebner (No 2)
[2003] FCA 1374

COSTS – claims and counter-claims – apportionment of costs

IN THE MATTER OF MAXWELL WILLIAM EBNER

INGRID EBNER v THE OFFICIAL TRUSTEE IN BANKRUPTCY (AS TRUSTEE OF THE PROPERTY OF MAXWELL WILLIAM EBNER)

V 7179 of 1999

JUDGE:         FINKELSTEIN J

DATE:           28 NOVEMBER 2003
PLACE:         MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 7179 of 1999

In the matter of Maxwell William Ebner

BETWEEN:	INGRID EBNER Applicant
AND:	OFFICIAL TRUSTEE IN BANKRUPTCY (AS TRUSTEE OF THE PROPERTY OF WILLIAM MAXWELL EBNER) Respondent
AND BETWEEN:	OFFICIAL TRUSTEE IN BANKRUPTCY (AS TRUSTEE OF THE PROPERTY OF WILLIAM MAXWELL EBNER) Cross-Claimant
AND:	INGRID EBNER Cross-Respondent
JUDGE:	FINKELSTEIN J
DATE OF ORDER:	28 NOVEMBER 2003
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1.        The applicant pay:

(a)the respondent’s costs thrown away by reason of the adjournments on 3 and 12 December 2001;

(b)the respondent’s costs of the proceeding in so far as they relate to the claims abandoned by the applicant; and

(c)       the respondent’s costs of the cross-claim
           such costs to be taxed on a party and party basis in default of agreement

2.        The respondent pay:

(a)the applicant’s costs thrown away by reason of the adjournment on 11 December 2001; and

(b)       thirty per cent (30%) of the applicant’s costs of the proceeding
           such costs to be taxed on a party and party basis in default of agreement.

3.Save for orders 1 and 2 above, the application is otherwise dismissed. 

4.Paragraph 2 of the order made on 14 March 2003 be varied so that the words “as soon as practicable” be deleted and replaced by the words “on or before 31 March 2004”. 

5.Paragraph 5 of the order made on 14 March 2003 be varied so that the words “within 90 days of the date of authentication of these Orders” be deleted and replaced by the words “by 31 March 2004”.

6.The order made on 1 May 2003 staying the operation of orders 1 to 8 inclusive made on 14 March 2003 be discharged. 

AND THE COURT DECLARES THAT:

The respondent is entitled to be reimbursed out of the proceeds of sale of the chattels seized from the premises at 6 Watts Parade, Mt Eliza all of the costs incurred in relation to the insurance, transport and storage of the chattels.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 7179 of 1999

In the matter of Maxwell William Ebner

BETWEEN:	INGRID EBNER Applicant
AND:	OFFICIAL TRUSTEE IN BANKRUPTCY (AS TRUSTEE OF THE PROPERTY OF WILLIAM MAXWELL EBNER) Respondent
AND BETWEEN:	OFFICIAL TRUSTEE IN BANKRUPTCY (AS TRUSTEE OF THE PROPERTY OF WILLIAM MAXWELL EBNER) Cross-Claimant
AND:	INGRID EBNER Cross-Respondent

JUDGE:	FINKELSTEIN J
DATE:	28 NOVEMBER 2003
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1. I must decide the costs of the action between Mrs Ebner, the bankrupt’s wife, and the Official Trustee who was sued in his capacity as trustee of the bankrupt’s estate.  The parties agree that costs are entirely discretionary, although they will usually be applied in accordance with well known principles which, for the most part, are not hard and fast.  Here there is substantial disagreement regarding the manner in which the principles should be applied.  In this connection I should point out that the Official Trustee did not say, as he might have done, that he is entitled to his costs out of the estate provided I do not find he has been guilty of misconduct.  As to the existence of this right see Turner v Hancock (1882) 20 Ch D 303, 305 (per Jessel MR citing Cotterell v Stratton [1872] LR 8 Ch 295, 302); In re Love; Hill v Spurgeon (1885) 29 Ch D 348, 350. In this case, the parties have approached the issue as if the Official Trustee were an ordinary litigant. I will resolve the dispute on that basis.

2. The usual order as to costs is that they will follow the event, that is they go to the party who has been successful in the action.  Sometimes, though, it is not easy to determine who is the successful party.  See for example Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 where Devlin J (as he then was) discussed the situation of a plaintiff who recovered only nominal damages. In this case it is also difficult to identify the successful party.

3. The Official Trustee alleged that items of personal property, worth around $500,000, and located at the matrimonial home, were owned by the bankrupt and so formed part of his estate. He obtained possession of the chattels pursuant to a warrant issued under s 130(2) of the Bankruptcy Act 1966 (Cth). Mrs Ebner sued to recover the chattels. Mrs Ebner alleged that she was the owner or, alternatively, the co-owner of the seized chattels. The Official Trustee denied Mrs Ebner’s claim to ownership. In a cross-claim he sought a declaration that the chattels had vested in him as trustee of the estate or, alternatively, that some chattels belonged solely to the bankrupt and others were co-owned with Mrs Ebner. He also sought an order for the sale of the chattels and a division of the proceeds.

4. After a lengthy trial, which was limited to the issue of ownership, each party had a measure of success.  Mrs Ebner’s claim to ownership of all the chattels was rejected.  On the other hand, she did establish ownership of eighteen chattels (probably of no great value) as well as an entitlement to 20 per cent of the proceeds of the sale of the balance.  The basis of this entitlement was that Mrs Ebner owned a number of the seized chattels (estimated to be about 20 per cent in value) which she could not identify but which, in virtue of the seizure, had been converted by the Official Trustee.  So Mrs Ebner’s claim was limited to a share of the sale proceeds.  The order for sale was made on the Official Trustee’s cross-claim.  In due course Mrs Ebner appealed to the Full Court.  The appeal was settled on the basis that she would receive 50 per cent of the sale proceeds. 

5. Although the only orders made were on the Official Trustee’s cross-claim, it does not follow that he was the successful party.  In substance each party had a degree of success, albeit much less than was claimed.  This is a case where, subject to certain adjustments, it is appropriate to treat both the claim and the cross-claim as separate actions in respect of which there should be an order for costs on each.  In Bank of Victoria v Synnot & Anor (1885) 11 VLR 598 Williams J, laid down (at 608) what has become a general rule:

   “I am of opinion that where there is an action by the plaintiff, and as in the present case a counter-claim by the defendant, not in any sense in the nature of a set-off but a demand for unliquidated damages whether arising out of contract or tort, and where the plaintiff succeeds upon his claim and the defendant upon his counter-claim, the true rule is as follows:- For the purpose of entering judgment and of taxation, such claim and counter-claim should be regarded as separate actions, and judgment should be entered with costs for the plaintiff on his claim, and should be entered for the defendant with costs on his counter-claim; such costs as are common to both claim and counter-claim should be apportioned by the taxing master, who should give his allocatur for the balance of costs in favour of that party in whose favour that balance may be ascertained to be.”

6. The rule that costs follow the event may be departed from in appropriate circumstances.  In some cases a successful party may be deprived of part or all of his costs:  Walter v Steinkopff [1892] 3 Ch 489; Jenkins v Hope [1896] 1 Ch 278. On occasion a successful plaintiff may be ordered to pay all or part of the defendant’s costs: Fane v Fane (1879) 13 Ch D 228; Re T C and G F Kellock (Solicitors) (1887) 56 LT 887. Here there is good reason to depart from the general rule. As my reasons indicated, I rejected much of the evidence given by Mrs Ebner and her husband. Many aspects of her case lacked legal merit and moral legitimacy. Traditionally such factors have not been regarded as good reason for departing from the general rule: Lipman v Pullman (1904) 91 LT 132; Hudsons Limited v De Halpert (1913) 108 LT 416. But times have changed. Litigation is now a luxury few can afford. Litigants who waste the court’s time, and an opponent’s resources, with hopeless arguments must be made to pay. In this case most of the time at trial was taken up with Mrs Ebner’s pursuit of her truly unmeritorious claim to ownership. The fact that she succeeded in establishing a right to some of the sale proceeds is not a sufficient reason to allow her to recover in full the costs of her claim. This is notwithstanding that she was forced to bring the claim to vindicate her rights. Justice would be better served if Mrs Ebner is limited to recovering 30 per cent of her costs. On the other hand, the Official Trustee should have all of the costs of his cross-claim. In this connection I do not think it is appropriate to order that the costs should be taxed on an indemnity basis, despite the nature of Mrs Ebner’s case, her unreliability as a witness and the fact that she rejected a reasonable offer of compromise.

7. Some adjustments must be made.  On three occasions the trial was adjourned resulting in wasted costs.  Those costs must be dealt with.  First, the case was listed for trial to commence on 3 December 2001.  When it was called on Mrs Ebner did not appear and the trial was adjourned until 5 December 2001.  It is conceded that Mrs Ebner should pay the costs thrown away by reason of the adjournment. 

8. The trial was also interrupted on 11 December 2001.  The interruption was caused by the failure by the Official Trustee to make proper discovery of photographs of the seized chattels.  At first the hearing was adjourned for one day to give Mrs Ebner time to decide what to do.  The Official Trustee does not dispute that he should pay the costs of this adjournment.  On 12 December 2001, the trial did not proceed principally because Mrs Ebner said she needed further time to file additional evidence based on the photographs.  Accordingly the trial was adjourned until 8 April 2002.  When the trial resumed Mrs Ebner did not tender any further evidence.  In other words, it turned out that the third adjournment was unnecessary.  Mrs Ebner should pay the costs thrown away by reason of that adjournment.

9. The final adjustment arises from the fact that Mrs Ebner abandoned all causes of action not disposed of at the initial trial.  A trial of the outstanding claims was to begin on 15 October 2003.  Mrs Ebner accepts that she must pay the costs of the proceeding insofar as they relate to her abandoned claims. 

10. There is still one outstanding dispute.  The dispute concerns the Official Trustee’s entitlement to an indemnity for the cost of transportation of the seized chattels to their place of storage as well as the cost of storage and insurance.  The Official Trustee has no statutory right of indemnity for any costs incurred by him.  He has the same right as an ordinary trustee under the general law:  Adsett v Berlouis & Ors (1992) 37 FCR 201. According to the general law a trustee is entitled to be reimbursed out of trust property for all expenses which he has properly incurred, having regard to the circumstances of the case: Worrall v Harford (1802) 8 Ves 4 [(1802) 32 ER 250]; Chippendale, Ex parte; Re German Mining Company (1853) 4 De G M & G 19 [(1853) 43 ER 415]; Turner v Hancock (1882) 20 Ch D 303; Re Beddoe; Downes v Cottam [1893] 1 Ch 547; Re Grimthorpe [1958] 1 Ch 615.

11. Mrs Ebner submitted that the Official Trustee did not properly incur the expenses of transportation, storage and insurance.  She said that the chattels could have remained at her home, pending the outcome of the proceeding, and then taken to the auctioneer for sale.  Thus, Mrs Ebner said that the costs in question were unreasonably incurred and therefore not recoverable out of the fund.

12. In the absence of any direct evidence establishing that the Official Trustee has acted unreasonably, I reject Mrs Ebner’s argument.  The Official Trustee is accordingly entitled to recover the costs of transportation, storage and insurance out of the proceeds of sale.  There will be a declaration to that effect.

I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Associate:

Dated:             28 November 2003

Counsel for the Applicant:

Mr G Bigmore QC

Mr M Harvey

Solicitor for the Applicant:

Clayton Utz

Counsel for the Respondent:

Mr M Clarke

Solicitor for the Respondent:

Deacons

Date of Hearing:

15 October 2003

Date of Judgment:

28 November 2003