Gaynor v Von Peltz
[2019] WASC 421
•21 NOVEMBER 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: GAYNOR -v- VON PELTZ [2019] WASC 421
CORAM: MASTER SANDERSON
HEARD: 26 SEPTEMBER 2019 AND ON THE PAPERS
DELIVERED : 21 NOVEMBER 2019
PUBLISHED : 21 NOVEMBER 2019
FILE NO/S: CIV 3049 of 2018
BETWEEN: CHARLOTTE GAYNOR
Plaintiff
AND
STEPHEN PHILIP VON PELTZ
Defendant
Catchwords:
Costs - No hearing of action - Turns on own facts
Legislation:
Bankruptcy Act 1966 (Cth)
Cross Border Insolvency Act 2008 (Cth)
Foreign Judgments Act 1991 (Cth)
Service and Execution of Process Act 1992 (Cth)
Result:
Costs order made
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr R G Macaulay |
| Defendant | : | Mr R W Douglas |
Solicitors:
| Plaintiff | : | Pryor Tzannes & Wallis Solicitors |
| Defendant | : | K J Levy |
Case(s) referred to in decision(s):
Australian Mutual Provident Society v Gregory (1908) 5 CLR 615
Palmer v Registrar General of Land Titles of Australian Capital Territory (2017) 181 ACTR 1
MASTER SANDERSON:
This matter began life as an application by the plaintiff to register a judgment under the Foreign Judgments Act 1991 (Cth) (the Act). The application was supported by an affidavit of Robert Gale Macaulay sworn 14 November 2018. Appearing as attachment 'A' to Mr Macaulay's affidavit was a judgment of the Supreme Court of New South Wales entered 5 April 2018. That judgment recorded that a judgment of the High Court of Justice, Queens Bench division in England had been registered in the New South Wales Supreme Court. The judgment was for an amount of just over $4 million.
It should have been immediately apparent any judgment registered in this court was not to be registered under the Act. That step had been taken by registering the judgment in New South Wales. Rather, registration in this State would be effected under the Service and Execution of Process Act 1992 (Cth) (SEPA). Neither counsel for the plaintiff nor I picked up that obvious error. In opposition to the application the defendant filed an affidavit sworn 8 January 2019. That affidavit raised certain matters which I will deal with below. It did not raise the issue of under which Act any judgment would be registered.
The matter proceeded and the defendant left the jurisdiction. There was some difficulty locating him. I need not go into detail. Suffice it to say that on 23 July 2019 I entered judgment in terms sought in the originating motion filed 29 November 2018. On 5 August 2019 the defendant filed an interlocutory application seeking to set aside the judgment. There was then discussion between the parties solicitors and on 26 September 2019, by consent, I made an order that the registration of the judgment be set aside. There remain outstanding the question of standing and costs. These reasons deal with those issues.
It might be thought that given the defendant was successful in having the judgment set aside he should be entitled to his costs. But, there is a difficulty. In his affidavit of 8 January 2019 the defendant says he was declared bankrupt on 17 March 2016 in Singapore. The plaintiff proved in the defendant's bankruptcy. A copy of what is referred to as an 'application notice' appears as attachment 'A8' to the defendant's affidavit. The registration of the English judgment in New South Wales occurred after the plaintiff proved in the defendant's bankruptcy in Singapore.
In this action, each party sought to have the other pay their costs. In par 10 of the defendant's written submissions the defendant says the plaintiff's submissions distil into five arguments.[1] With respect, that is a fair analysis of the plaintiff's position. The submissions read as follows:
[1] Defendant's reply submissions on standing and costs filed 23 October 2019.
(a)first, defendant had no standing, and therefore has no ground to seek his costs an argument itself depending upon arguments that:
(i)an unregistered foreign bankruptcy has effect of itself in the forum by reason of the Cross Border Insolvency Act 2008 (Cth) (CBIA);
(ii)the Singapore Bankruptcy is recognised in Australia;
(iii)the cases which hold that real property is not transferred to a foreign trustee in bankruptcy (or equivalent) without a successful application to the court have therefore been superseded by the CBIA;
(iv)whether the defendant has any property in the jurisdiction against which a putative foreign judgment may be executed is irrelevant;
(v)the foreign trustee has been fully informed of the proceedings, and could have intervened if it wished; and
(vi)of the parties to these proceeding, only the plaintiff had standing as to the Impugned Orders;
(b)second, the defendant was not the 'successful party' because the plaintiff "instigated" the setting aside of the Impugned Orders;
(c)third, the defendant caused the problem by his unexplained absence from the hearing at which the Impugned Orders were made, and he therefore sought an indulgence from the Court in applying to set aside the orders;
(d)fourth, it is unfair to order plaintiff to pay costs where defendant's status is:
(i)a person subject to a (foreign) bankruptcy;
(ii)ordinarily resident outside of the jurisdiction; and
(e)fifth, plaintiff offered reasonable opportunity to agree sensible orders to resolve the proceedings and defendant refused offers unreasonably; and
by reason of those matters, no costs should be granted, or at least any discretion as to costs should be exercised against the defendant.
The defendant accepts that if he has no standing that would be a compelling argument against costs in his favour. The plaintiff has two contentions. First, the plaintiff says a debtor in an Australian bankruptcy has no standing to defend claims made against pre‑petition assets. The rationale for that doctrine is that the bankrupt debtor/defendant is not answerable for such claims. They go exclusively against the bankrupt's estate and not the debtor himself. Therefore the debtor has no interest in the outcome of proceedings.[2] The second argument is that when this matter was first initiated the defendant maintained as a bankrupt a judgment could not be entered against him. The plaintiff argues the defendant cannot now resile from that position. In other words having maintained he had no standing he cannot now seek costs on the basis that he does in fact have standing.
[2] Defendant's reply submissions on standing and costs filed 23 October 2019 at pars 13 – 16.
It is convenient to deal with this second point first. The question of whether or not the defendant has standing is a question of law because it involves a determination of whether or not the court has jurisdiction. The statements of the defendant (who is legally qualified) are of no moment. The court either has jurisdiction or it does not. There can be no question of any consent on the part of the defendant in some way affecting the determination of the jurisdictional issue.
As to the first point, the defendant says the plaintiff is making a claim against the assets of the debtor, not the estate. That is why the action is not subject to an automatic stay and it is why relief is sought against the defendant personally to the point where the trustee has not been served. It is the defendant's position that there is a difference between a defendant in an Australian court subject to a domestic bankruptcy and a defendant in an Australian court subject to a foreign bankruptcy. In the defendant's submission this plays out in a number of ways.
First, an unrecognised foreign bankruptcy (as here) has no automatic effect pursuant to the Bankruptcy Act 1966 (Cth) s 29 or the CBIA. In support of this proposition the defendant relies on the decision of Mossup J in Palmer v Registrar General of Land Titles of Australian Capital Territory (2017) 181 ACTR 1 where his Honour said:
Therefore in the present case, the position is that Australian law does not automatically recognise the title of the plaintiff to the real property of the bankrupt within Australia. That is notwithstanding that under the Insolvency Act 1986 (UK) property vests automatically without any requirement for registration: s 306 of the Insolvency Act and extends to property outside the jurisdiction: s 436 of the Insolvency Act 1986 (UK); Singh v Official Receiver [1997] BPIR 530 at 531. As a consequence, in the absence of orders of the court under s 29 of the Bankruptcy Act or, as here, orders made under the CBI Act, the plaintiff, as foreign trustee, has no immediate entitlement to have the property registered in her name or capacity to take control of it for the purposes of the bankruptcy. Section 132 of the Land Titles Act operates (and its predecessors referred to at [14] have operated) within the context of the rules of private international law and hence does not compel her registration as a proprietor [38].
The defendant says the foreign bankruptcy has no effect unless an application is made in the Federal Court of Australia to register the foreign bankruptcy. That is because neither statute provides for any automatic recognition of a foreign bankruptcy. The defendant says any submission by the plaintiff that the Singapore bankruptcy is recognised by the CBIA or otherwise is mistaken. That means there is no factual basis to support the contention that the Singapore bankruptcy is presently recognised in Australia.[3]
[3] Defendant's reply submissions on standing and costs filed 23 October 2019 at pars 19 – 27.
The second, there is authority to the effect that a foreign bankruptcy does not affect a change in title or interest to real property in Australia. That proposition emerges from the High Court decision in Australian Mutual Provident Society v Gregory (1908) 5 CLR 615. It follows then the defendant is the legal proprietor of real property in Western Australia. That means he has standing to be heard on a question in which he has a special interest.
Based upon these propositions the defendant points out that post‑petition income and assets do not form part of the bankrupt estate. So long as the defendant has any post‑petition property he has standing to oppose registration of a foreign judgment. A consequence of this argument (favourable to the plaintiff) is that a cost order against the defendant would not be futile. Post‑petition debts are not stayed and answer from the debtor's post‑petition assets and income.[4]
[4] Defendant's reply submissions on standing and costs filed 23 October 2019 at pars 28 – 32.
Bearing in mind I am dealing with the question of costs, I am reluctant to determine finally whether the defendant has standing. After all in the end orders were made by consent which set aside the registration of the judgment. This is a complex area of the law and although written submissions were filed full argument did not take place. That being the case and for the purpose of determining costs I am satisfied that the defendant's position he had standing is not only arguable but strongly arguable. That then feeds into the discretion which is always a feature of any costs determination.
The plaintiff's argument that the defendant was not the successful party cannot be accepted.
The outcome of this application was that no judgment was entered against the defendant. Although there has not been a full hearing on the matter, and therefore the relative merits of the parties arguments have not been determined, the defendant has achieved the outcome he desired.
There is some merit in the submission that the defendant caused the problem by his unexplained absence from the hearing when orders were made. The defendant points out he is claiming costs for three hearings, three sets of submissions and four affidavits. At all material times (so the defendant says) the plaintiff refused to consent to the setting aside of an ultra vires order obtained at an ex parte hearing.[5] While that is the case the failure of the defendant to appear at the hearing was the genesis of all the problems that followed.
[5] Defendant's reply submissions on standing and costs filed 23 October 2019 at par 38.
The fact the defendant is subject to a foreign bankruptcy and an ordinary resident outside the jurisdiction does not in my view determine whether or not he is entitled to costs. I have already dealt with the question of standing and will not say anything further on that matter. The fact the defendant is resident outside the jurisdiction does not have any impact one way or the other. The fact is registration of a judgment in this jurisdiction would have an impact on the defendant.
The evidence does not demonstrate the plaintiff offered reasonable orders and the defendant refused unreasonably. The defendant invited the plaintiff to consent to the orders being set aside without any order as to costs. That offer was rejected by letter from the plaintiff's solicitors dated 6 August 2019.[6] The defendant repeated that offer on a number of occasions but varied it by suggesting costs be determined by the court. The plaintiff rejected those offers in slightly differing ways on a number of occasions. But the fact remains the offers were refused.
[6] Annexure 'SVP-12' to the affidavit of Katja Jane Levy filed 23 October 2019.
The defendant also says counter offers put by the plaintiff were not reasonable for a number of reasons. First, the plaintiff demanded settlement of other issues – including SEPA registration and costs as a pre‑curser to resolving the question of whether the judgment ought be set aside. Second, the concession to have the orders set aside was made at the last minute and really reflected a belated recognition the order could not stand.[7]
[7] Defendant's reply submissions on standing and costs filed 23 October 2019 at par 55.
On balance, I am satisfied the plaintiff ought pay the defendant's costs. I have reached this conclusion for two main reasons. First, although the question of standing has not been determined there is, as I have said, a strong argument the defendant did have standing to oppose the registration. At least in part by agreeing to set aside the judgment the plaintiff recognised that to be the case. Second, and perhaps most importantly, the application to register the judgment under the Act was misconceived. Once that was pointed out to the plaintiff there should have been a concession and the judgment ought to have been set aside by consent. The defendant offered that option and suggested no order as to costs. That would have been the reasonable and responsible course to adopt. The fact it was not adopted led, in large measure, to costs being incurred which were unnecessary. On that basis there should be an order in the defendant's favour.
On publication of these reasons I will give the parties the opportunity to confer and perhaps agree a minute of orders. Those orders will need to reflect just what costs are awarded to the defendant by reference to particular hearings and particular affidavits. The costs of the application for the costs order should be paid by the plaintiff.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
Associate to Master Sanderson20 NOVEMBER 2019
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