Genovese v BGC Construction Pty Ltd (No.2)
[2007] FMCA 601
•30 April 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GENOVESE v BGC CONSTRUCTION PTY LTD (No.2) | [2007] FMCA 601 |
| BANKRUPTCY – Application to set aside bankruptcy notice dismissed. COSTS – Indemnity costs – principles. PRACTICE AND PROCEDURE – Varying or setting aside earlier costs order – intention of the Court – consent of party favoured by earlier costs order. |
| Bankruptcy Act 1966 (Cth), ss.30 (1), 32 and 41(6A) Federal Court Rules, O.35 and 62 Federal Magistrates Act 1999 (Cth), ss.8,14,15, 79(2) and (3), 81, 86(b), (c) and (d) Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), rr.1.03(2), 13.01(1) Federal Magistrates Court Rules 2001 (Cth), rr.16.01 and 16.05 Federal Court of Australia Act 1976 (Cth), ss.5, 22, 23 and 43, Local Court Act 1904 (WA) |
| ASIC v Forge (2003) 133 FCR 487, [2003] FCAFC 274 Justice DA Ipp “Lawyers’ Duties to the Court” (1998) 114 LQR 63 |
| Applicant: | HERCOLE PIETRO GENOVESE |
| Respondent: | BGC CONSTRUCTION PTY LTD |
| File number: | PEG 121 of 2006 |
| Judgment of: | Lucev FM |
| Hearing date: | 15 March 2007 |
| Date of last submission: | 15 March 2007 |
| Delivered at: | Perth |
| Delivered on: | 30 April 2007 |
REPRESENTATION
| Applicant: | Mr H P Genovese in person |
| Counsel for the Respondent: | Mr A R Macpherson |
| Solicitors for the Respondent: | Hotchkin Hanly |
ORDERS
Under rule 16.05(2)(f) of the Federal Magistrate Court Rules (Cth) 2001, that Order (2) of the orders made by the Court on 29 January 2007 be set aside, and an order in terms of Order (2) of these orders be substituted therefore.
The Applicant pay the Respondent’s costs, including any reserved costs, if not agreed, to be taxed under the Federal Court Rules, on an indemnity basis.
The Applicant pay the Respondent’s costs of the Respondent’s indemnity costs application, if not agreed, to be taxed under the Federal Court Rules on a party-party basis.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 121 of 2006
| HERCOLE PIETRO GENOVESE |
Applicant
And
| BGC CONSTRUCTION PTY LTD |
Respondent
REASONS FOR JUDGMENT
Orders previously made
On 29 January 2007 in Genovese v BGC Construction Pty Ltd[1] this Court made the following orders:
(1)That the Applicant’s application to set aside the Bankruptcy Notice be dismissed.
(2)That the Applicant pay the Respondent’s costs, to be agreed, and if not agreed, taxed on the Federal Court scale under O.62.
(3)If the Respondent wishes to make an indemnity costs application it do so by 4.00 pm on 5 February 2007.
[1] [2007] FMCA 71 (“Genovese”)
The current indemnity costs application
The current application filed on 5 February 2007 is an application for indemnity costs by the Respondent in Genovese. The Court will continue to describe the parties as Applicant (Mr Genovese) and Respondent (BGC Construction Pty Ltd) for the purposes of these Reasons for Judgment, and use terms and descriptions the same as those used in Genovese.
Background to the current application
The matter arises from an Amended Application dated 17 July 2006 by the Applicant to set aside a Bankruptcy Notice dated 27 February 2006 (the original Application had been filed on 12 May 2006). Consistent with the history of litigation between the parties[2] there was considerable pre-hearing litigation activity in relation to the Amended Application.
[2] Which is lengthy: see for example Genovese v Homestyle Pty Ltd (2004) 187 FLR 13, [2004] FMCA 673; Genovese v BGC Construction Pty Ltd [2004] FMCA 850; Genovese v BGC Construction Pty Ltd (2005) 215 ALR 440, (2005) 3 ABC(NS) 163, [2005] FCA 215; Genovese v BGC Construction Pty Ltd [2006] FCA 105; Genovese v BGC Construction Pty Ltd [2006] FMCA 1507; Genovese.
The Amended Application claimed that:
“1.1 The bankruptcy notice is based on an invalid judgment and orders;
1.2 The applicant has instituted proceedings to set aside the judgment debt or orders in respect of which this bankruptcy notice has been issued;
1.3 The applicant submits the bankruptcy notice is based on a judgment obtained by fraud and invites the Court to go behind the judgment of the Local Court No PE 18423 of 2001;
1.4 The applicant submits the bankruptcy notice abuses and confronts the doctrine of res judicata;
1.5 The applicant submits the bankruptcy notice abuses and confronts several doctrines of estoppel;
1.6 The applicant submits the bankruptcy notice abuses and confronts the doctrine of approbation and reprobation;
1.7 The applicant submits the bankruptcy notice abuses and confronts the doctrine of privity of contract;
1.8 The applicant submits the bankruptcy notice is based on illegality.”
Grounds 1.3 to 1.8 were added by the 17 July 2006 amendment.
Various affidavits were sworn and filed by the Applicant in support of the Amended Application:
a)on 12 May 2006 (“Applicant’s First Affidavit”) of five pages plus five annexures totalling a further sixty-six pages;
b)on 26 June 2006 (“Applicant’s Second Affidavit”) of two pages plus two annexures being two previous affidavits sworn in other proceedings in July and August 2005 totalling a further 168 pages;
c)on 17 July 2006 (“Applicant’s Third Affidavit”) of eight pages plus eighteen annexures totalling a further 38 pages;
d)on 30 August 2006 (“Applicant’s Fourth Affidavit”) of seven pages plus seven annexures and two exhibits totalling a further eleven pages;
e)on 14 September 2006 (“Applicant’s Fifth Affidavit”) of four pages plus four annexures totalling a further eight pages;
f)on 20 November 2006 (“Applicant’s Contributory Affidavit”) of four pages.
The Applicant’s affidavit material totals 331 pages.
In answer to the Applicant’s affidavits the Respondent filed various affidavits, including the affidavits of:
a)Cheryl Lorraine Harrison, sworn 8 June 2006 (as to service); and
b)Andrew Ross Macpherson:
i)sworn 13 June 2006, of four pages plus eleven annexures totalling twenty-eight pages; and
ii)sworn 31 July 2006, of three pages plus seven annexures totalling fifty pages.
On 14 August 2006 the Applicant filed the Applicant’s list of Deponent’s to Affidavits Requested for Cross-examination indicating that Macpherson (who was the solicitor with the day-to-day conduct of the matter for the Respondent) was required for cross-examination by the Applicant (“Applicant’s Cross-Examination List”).
On 13 September 2006 the Respondent filed submissions concerning numerous objections to the Applicant’s affidavits.
Various interim matters were heard by the Court on 18, 19 and 20 September 2006. On 19 September 2006 the Court refused an application by the Applicant to transfer the proceedings to the Federal Court.[3] On 20 September 2006 the Court made orders that:
[3] Genovese v BGC Construction Pty Ltd [2006] FMCA 1507.
“(1) The Respondent’s application that Mr Macpherson not be made available for cross-examination on his affidavits filed in these proceedings be dismissed.
(2) Objections to admissibility of evidence be argued at the hearing.”
The orders made on 20 September 2006 were not the subject of published Reasons for Judgment.[4]
[4] But as to counsel and solicitors not appearing as a witness in proceedings in which they seek to appear in those roles, see Richardson v Leonard Cohen & Co [2007] FMCA 78 at footnote 19 per Lucev FM where the Court said “The practice of solicitor also appearing as counsel in circumstances where the solicitor/counsel has sworn an affidavit, or is likely to have to give evidence, is not one to be encouraged. The difficulties that may arise are many, and ought to be manifest” and referred to Sheahan & Le Poidevin Industries Pty Ltd v Northern Australian Land Agency Co Ltd & Ors (unreported, Supreme Court of South Australia, Perry J, 4 February 1993) at paras. 3-18 (“Sheahan No.1.”); Pittorino v Meynert & Ors [2001] WASC 245 at paras. 7-10 per Bredemeyer M; Justice DA Ipp “Lawyers’ Duties to the Court” (1998) 114 LQR 63 at 92. See also Morien v Johnston [2006] FMCA 1918 at para. 54 per Lucev FM; and Sheahan & Le Poidevin Industries Pty Ltd (in Liquidation) v Northern Australian Land and Agency Co Ltd & Ors (unreported, Full Court of Supreme Court of South Australia, 6 April 1994) at paras 36-43 per Olsson J, in which case the Full Court dismissed an appeal against the judgment in Sheahan No. 1.
What happened at and following the hearing of the set aside application on 28 and 29 September 2006 is set out in detail in Genovese.[5] In essence, on the first day of the hearing (28 September 2006) the Applicant (represented by Counsel) raised an argument:
“that judgments and orders made by the former Local Court of Western Australia (“Local Court”) not extracted before 2 May 2005 (“Transition Date”) (when the Local Court became the Magistrates Court of Western Australia (“Magistrates Court”)) cannot be relied upon in bankruptcy proceedings because any judgment or orders extracted after the Transition Date are judgments or orders of the Magistrates Court, not the Local Court. Further, the Applicant contends that a judgment or orders obtained from the Magistrates Court is not a judgment or orders of the “court” for the purposes of regulation 1.03(1) under the Bankruptcy Regulation 1996 (Cth) (“Bankruptcy Regulations”).”[6](“the Jurisdiction/Construction Point”)
The Jurisdiction/Construction Point was raised as a “preliminary point” and the only point that needed to be argued.[7] On the second day of hearing:
“the Applicant’s Counsel specifically “elected to rest the case on the submissions made”, subject to the filing of further written submissions in relation to the points on which the submissions had already been made. That election was made following an adjournment specifically granted for the purpose of considering whether the Applicant would make that election.”[8]
[5] Genovese at paras. 3 and 59-66 per Lucev FM.
[6] Genovese at para. 3 per Lucev FM.
[7] Genovese at para. 60 per Lucev FM.
[8] Genovese at para. 61 per Lucev FM.
The precise circumstances in which the election was made need to be set out in more details as a consequence of submissions made by the Applicant during the hearing of this application in which he suggested that whilst he trusted his Counsel’s judgment he might have done things differently, that the Court had a discretion to deal with the matter notwithstanding the election made (a submission not previously made), and that there may have been a “misunderstanding” with Counsel (about which there is no evidence).[9]
[9] Transcript, 15 March 2007, pp 13 and 19.
The Jurisdiction/Construction Point was argued on 28 September 2006 by the Applicant and Respondent. When submissions were complete the Court said:
“HIS HONOUR: Yes, all right. What I propose to do is adjourn these proceedings to 9 am tomorrow, if that is suitable to counsel. Being no objection, I will take it that it is, and deliver a judgment on this point then. Without any hint of pre-determination, gentlemen, can I say to you that you ought to be ready to run the case, if I decide it, against the applicant at that point in time. As I say, that is without any hint of pre-determination, but if I do decide the point against the applicant, I want the case to otherwise run. Unless there is anything further, we will adjourn until 9 am tomorrow.”[10]
[10] Transcript, 28 September 2006, p.17
When the matter resumed on 29 September 2006 the Court immediately said as follows:
“HIS HONOUR: Gentlemen, on a couple of occasions in the last fortnight in respect of three or four separate issues I’ve had to have determined issues overnight in respect of this matter, as those instructing you will probably know and you may well know. Regrettably in relation to the matter that was raised before me yesterday I’ve not been able to do that. Whilst I’m probably under no obligation to do so I do feel that I ought explain to you why. Yesterday the matter was argued by both counsel on the basis that the submissions that they were putting seemed to be self-evident. There was no reference to any authority or any of the definitional provisions in the former Local Court Act.”[11]
[11] Transcript, 28 September 2006, p.33. For some unexplained reason the Transcript jumps from p.17 (at the conclusion of 28 September 2006) to p.32 (at the commencement on 29 September 2006).
The Court went on to explain to Counsel for the parties the various provisions of the Local Court Act 1904 (WA) that were concerning it, and referred to certain authorities that had not been addressed by the parties. The matter then proceeded as follows with the Court saying:
“That gives rise to the question of what ought happen now, and subject to hearing counsel my view is this. Mr McIntosh, you are going to have to make an election as to whether you rest your case on the basis of what you have presently argued, and if you decide to do that I will give both parties the opportunity to make further written submissions having regard to what I've said this morning so that at least I'm satisfied that both parties have, so fully as they can, put the matter properly before me. If you choose not to rest your case solely on the argument that you've run we will proceed and deal with the remainder of the matters and I will decide the issue that was argued yesterday and the substantive matters in the one decision, and if I decide for you on the matter that you argued yesterday I will in any event decide the bankruptcy matters in case the matter goes on appeal, as I suspect it might, so that there can be no doubt about what my view would be if I'm - if I, for example, decide for you on the point and I'm wrong about that, so there would then be a decision effectively in respect to the bankruptcy matters.
Now, do either of you have anything to say about what I've just said? I should say to you, Mr McIntosh, that if you want some time, 10 or 15 minutes, to talk to Mr Genovese about whether or not you want to make that election - I assume that's a matter you may well have discussed overnight in any event, but if you want some further time given what I've just said I'm happy to adjourn for 10 or 15 minutes to allow you to make a final decision on that.
MR McINTOSH: Your Honour, yes, I do need that time. Also, there's a legal authority I want to read which would help me decide whether to - to make that election. I would like to read that authority first and then make my election after I've read that authority, so I might need half an hour at most. I don't think it will be any more than half an hour, but I might need half an hour. I'd also like to discuss the matter with my learned colleagues.
I have briefly discussed the matter with them already about this point that may be raised, but I don't think it will be any more than half an hour at maximum.
HIS HONOUR: All right. Mr Thomson, do you have anything to say?
MR THOMSON: No, I'm happy to have an adjournment. As I understand it, the options are - the first option is for the single issue to be decided and there might be further written submissions, the other option is for everything to be argued and then you give one decision with all issues decided.
HIS HONOUR: That's it, and in that context, I mean, obviously I'd give you the opportunity to make further written submissions on this issue in any event, this issue that was argued yesterday, so, yes, Mr McIntosh makes an election to either run with what he's run with and the matter is determined on that basis, or he says: no, we will argue it all.
MR THOMSON: Yes.
HIS HONOUR: All right. Well, if that's the case then I will adjourn until 10.25.
ADJOURNED [9.55am]
RESUMED [10.25am]
HIS HONOUR: Mr McIntosh?
MR McINTOSH: Your Honour, my client has elected to rest the case on the submissions he's made, and my learned colleague and I have agreed that - subject to the court's approval that I will file submissions by Wednesday, 11 October, if Wednesday is 11 October.[12](emphasis added)
[12] Transcript, 29 September 2006, pp.34-35.
The Court thereafter made orders concerning the filing of submissions and costs.
The election by the Applicant’s Counsel effectively abandoned grounds 1.3-1.8 of the Amended Application dealing with the issues of:
a)fraud;
b)res judicata;
c)estoppel;
d)approbation and reprobation;
e)privity; and
f)illegality.
What was left was an Achillean point, narrow but fatal to the Bankruptcy Notice if correct, which required only the Bankruptcy Notice and the impugned orders of the Magistrates Court of Western Australia attached thereto to be before the Court. The Bankruptcy Notice and orders total 21 pages.
On the Jurisdiction/Construction Point the Applicant’s Outline of Submissions which had been filed on 22 September 2006 (six days before the commencement of the hearing) said this:
“In support of the bankruptcy notice (“the notice”) the Respondent has annexed 4 documents described as General Order form 25 purporting to emanate from the Magistrates Court of Western Australia all of which are dated 3 January 2006, and having reference to case number 18423 of 2001”[13]
and no more. The remainder of the five page Outline dealt with other grounds.
[13] Applicant’s Outline of Submissions to the Application to Set Aside Bankruptcy Notice, filed 22 September 2006, para. 2-1.
The Jurisdiction/Construction Point is however made in detail, in a number of the Applicant’s Affidavits, namely:
a)Applicant’s First Affidavit at paras 12 and 20; and
b)Applicant’s Fourth Affidavit at paras 19-21.
The Respondent’s Outline of Submissions filed on 26 September 2006 dealt with the Jurisdiction/Construction Point in detail over nineteen paragraphs and almost four pages of the Outline.[14] The remainder of the sixteen page Outline dealt with other grounds, that is, those that were abandoned at hearing.
[14] Respondent’s Outline of Submissions to the Application to Set Aside Bankruptcy Notice, filed 26 September 2006, paras. 35-53.
On the first day of hearing (28 September 2006) the Applicant handed up an Applicant’s Outline of Submissions in Reply, dealing with the Jurisdiction/Construction Point over four pages and fourteen paragraphs.
Following the hearing the Applicant filed further submissions on 24 October 2006, pursuant to orders made at the hearing on 29 September 2006 (albeit thirteen days late). The Respondent filed its further submissions on 3 November 2006. The Court then made further orders (on 10 November 2006) to allow the parties to file submissions on, and only submissions on, the judgment of the District Court of Western Australia in Proposch v Anne French Investments Pty Ltd.[15]
[15] Proposch v Anne French Investments Pty Ltd [2006] WADC 47 (“Proposch”).
What the Applicant then did is again set out in detail in Genovese.[16] Suffice to say that contrary to the orders of the Court the Applicant (now self-represented) filed the Applicant’s Contributory Affidavit, which the Court ruled inadmissible because it:
a)was not filed in compliance with any order of the Court;
b)went further than what the orders on 10 November 2006 required; and
c)sought to lead evidence about the authority of an officer of the Magistrates Court to sign the judgment or orders extracted on 3 January 2006, a matter which was not argued, not the subject of evidence and beyond the scope of the case on which the Applicant elected to rest his case.[17]
The Court further found that “the evidence sought to be lead appears to be entirely hearsay, and would, in any event, be inadmissible.”[18]
[16] Genovese at paras. 62-66 per Lucev FM.
[17] Genovese at para. 62 per Lucev FM.
[18] Genovese at para. 63 per Lucev FM.
In relation to the submission actually made by the Applicant concerning Proposch the Court found that it went:
“further than the orders of the Court required. Again, additional matters are raised (eg. as to the “Alleged Orders”, their signing and a matter said to be res judicata) beyond the scope of the argument upon which the Applicant through Counsel, specifically elected to rest his case. The Court has not had regard to the submissions, other than in respect to the Proposch matter.”[19]
and that if the additional matters raised were to be raised:
“they ought to have been raised by Counsel at hearing on 28 and 29 September 2006, and appropriate evidence led, and submissions made, at that time.”[20]
[19] Genovese at para. 64 per Lucev FM.
[20] Genovese at para. 65 per Lucev FM.
The Court was critical of the Applicant’s conduct in this regard, saying that:
“It is not appropriate, a considered election having been made by Counsel, to raise different issues and evidence in circumstances where there was no application to the Court to do so, no leave of the Court to do so, and where the issue (namely, the Proposch decision) on which further submissions only had been sought, was a very narrow one, within the scope of the election made. In the Court’s view the Applicant, not having applied to do otherwise, is bound by its conduct in the case, and specifically the considered election made, through Counsel. The Applicant cannot now raise these further issues.”[21]
[21] Genovese at para. 66 per Lucev FM.
The Respondent filed further submissions dealing, perforce, with the matters raised by the Applicant, but objecting to the admission of the Applicant’s Contributory Affidavit.
Applicant’s objection to jurisdiction
The Applicant objects to the Court considering the issue of indemnity costs on the basis that the Court has already made orders dismissing the application, and as to costs, in its 29 January 2007 Orders. That is, the Applicant appears to assert that the Court does not have jurisdiction to entertain the indemnity costs application because the proceedings have been concluded by the giving of a final judgment.
The jurisdiction and power of the Federal Court to order costs when proceedings have been concluded by the giving of a final judgment was discussed in Caboolture Park Shopping Centre Pty Ltd [in Liq] v White Industries (Qld) Pty Ltd (“Caboolture Park”). [22] The Full Court of the Federal Court referred to s.43 of the Federal Court of Australia Act 1976 (Cth) (“FC Act”) as conferring on the Federal Court “a broad jurisdiction to award costs in “all proceedings before the Court”.[23]
[22] (1993) 45 FCR 224; (1993) 117 ALR 253 (“Caboolture Park”).
[23] Caboolture Park FCR at 229 per Lee, Hill and Cooper JJ, ALR 258 per Lee, Hill and Cooper JJ.
For material purposes s.43(1) and (2) of the FC Act is the same as s.79(2) and (3) of the Federal Magistrates Act 1999 (Cth) (“FM Act”). Because common law courts have no jurisdiction to award costs absent statutory prescription, the Full Court noted that s.43 of the FC Act complemented the jurisdiction obtained by the Federal Court as a court of equity (under s.5 of the FC Act), and that the Federal Court exercises federal jurisdiction in awarding costs in a proceeding duly invoked in that court.[24]
[24] Caboolture Park FCR at 229 per Lee, Hill and Cooper JJ, ALR 258 per Lee, Hill and Cooper JJ.
Like the Federal Court, this Court is also established as a court of equity, under s.8(3) of the FM Act, and exercises federal jurisdiction in awarding costs in a proceeding duly invoked by this Court. Like the jurisdiction of the Federal Court concerning costs, the jurisdiction of this Court:
“has not been narrowly defined by Parliament and the Court is able to make such order for payment of costs as may be required for the just disposal of all proceedings brought before it.”[25]
[25] Caboolture Park FCR at 229 per Lee, Hill and Cooper JJ, ALR 258 per Lee, Hill and Cooper JJ.
Having referred to the expansive definition of “proceeding” in s.4 of the FC Act, the Full Court of the Federal Court in Caboolture Park went on to say:
“The context of the Act provides no indication that the words defining the grant of jurisdiction in s.43 of the Act have a temporal meaning which limits the jurisdiction conferred to a jurisdiction which terminates when a judgment has been pronounced and extracted in the proceeding that has invoked the jurisdiction. There is no cause for such a meaning to be implied. First, such a construction would provide less than the jurisdiction traditionally exercised by superior courts of record. Second, the jurisdiction conferred by s.43 is a separate jurisdiction dealing with the liability for the costs of proceedings conducted in the Court in the exercise of other jurisdiction of the Court. (See s.26 of the Judiciary Act 1903 for the conferral of a similar jurisdiction on the High Court in respect of "matters" brought before that Court.) The clear intent of Parliament is to provide sufficient jurisdiction and adequate powers to enable the Court to quiet the controversies exposed in the proceedings brought before it and to better exercise its jurisdiction. The grant of jurisdiction in s.43 of the Act in all proceedings before the Court is a jurisdiction that is invoked by the commencement of proceedings and the manner of exercise of the jurisdiction is governed by ss.22 and 23 and the common law.
No doubt, an implied grant of all necessary powers is attached to the conferral or vesting of jurisdiction but ss.22 and 23 of the Act state expressly that the Federal Court has the following powers:
“22. The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided.
23. The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate."
There is nothing in ss.22 or 23 of the Act to indicate an intention of the Parliament to circumscribe the power of the Federal Court. Indeed, the terms of s.22 of the Act contemplate the Court exercising its jurisdiction with the benefit of the widest of powers: ….
What s.43 requires is that the jurisdiction to order costs be one limited to costs relating to a proceeding. In other words, there is no jurisdiction to order costs at large. There has to be or have been, within the Court's jurisdiction, instituted a proceeding. It is irrelevant, subject to the application of common law principles discussed later, that judgment has been given and entered.”[26]
[26] Caboolture Park FCR 230-231 per Lee, Hill and Cooper JJ, ALR at 259-260 per Lee, Hill and Cooper JJ.
Sections 22 and 23 of the FC Act are mirrored (minor formatting differences aside) in ss.14 and 15 of the FM Act. Jurisdiction thus established the Full Court of the Federal Court went on to deal with the “powers available” in the exercise of jurisdiction to be found in the common law and the laws of the Commonwealth.[27]
[27] Caboolture Park FCR at 234 per Lee, Hill and Cooper JJ, ALR at 263 per Lee, Hill and Cooper JJ.
In Caboolture Park, O.35 r.7 of the Federal Court Rules, which sets out the exceptions to the general rule that a court will not vary or set aside judgments and orders, was not relevant.[28] Order 35 r.7 of the Federal Court Rules is mirrored by r.16.05 of the Federal Magistrates Court Rules 2001 (Cth) (“FMC Rules”).
[28] Caboolture Park FCR at 234 per Lee, Hill and Cooper JJ, ALR at 264 per Lee, Hill and Cooper JJ.
In Caboolture Park the Full Court of the Federal Court went on to consider the power of the courts to make supplemental orders where the circumstances make it necessary to do, finding that “in an appropriate case a supplemental order may be made after judgment is entered”.[29] Critical to the jurisdiction to issue a supplemental order is that the application not be one to vary or alter the initial order.
[29] Caboolture Park FCR at 234 per Lee, Hill and Cooper JJ, ALR at 264 per Lee, Hill and Cooper JJ.
The Full Court of the Federal Court in Caboolture Park ultimately held that the Federal Court had power to order that the solicitors of an unsuccessful litigant pay the costs of the successful litigant, and that the solicitors payment of costs (on an indemnity basis) would operate to discharge the unsuccessful litigants liability, but would not vary or alter the Federal Court’s previous orders (imposing liability on the unsuccessful litigant). The order against the solicitors was therefore a valid supplemental order.
It is against the background of the law concerning varying or setting aside as set out in Caboolture Park that this Court’s power to now make an indemnity costs order must be determined.
Jurisdiction and power to award costs in this Court
The Court’s power to award costs in general federal law proceedings (that is, not family law or child support proceedings) is set out in s.79 (2) and (3) of the FM Act, as follows:
“(2) The Federal Magistrates Court or a Federal Magistrate has jurisdiction to award costs in all proceedings before the Federal Magistrates Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
(3) Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Magistrates Court or Federal Magistrate.”
Section 81 of the FM Act provides for the making of Rules of Court, and s.86 of the FM Act provides for the making of Rules of Court with respect to costs, and in particular:
“(b)the costs of proceedings in the Federal Magistrates Court; and
(c)the fees to be charged by practitioners practising in the Federal Magistrates Court for the work done by them in relation to proceedings in the Federal Magistrates Court and the taxation of their bills of costs, either as between party and party or as between solicitor and client; and
(d)the kinds of proceedings or circumstances in which each party is required to bear his or her own costs.”
In relation to bankruptcy proceedings the Court has made particular provision with respect to costs in rule 13.01(1) of the Federal Magistrates Court (Bankruptcy) Rules 2006 (“FMC Bankruptcy Rules”) as follows:
“ Subject to Division 13.2, a person who is entitled to costs in a proceeding to which the Bankruptcy Act applies is entitled to costs in accordance with Order 62 of the Federal Court Rules unless the Court otherwise orders.”
Order 62 of the Federal Court Rules does not need to be set out, but does not deal expressly with the question of indemnity costs. That does not mean there is no power to order indemnity costs, that power arising by reason of ss.5, 23 and 43 of the FC Act in the Federal Court and ss.8, 15 and 79 o the FM Act in this Court.[30]
[30] Caboolture Park FCR 229-231 per Lee, Hill and Cooper JJ, ALR 255-260 per Lee, Hill and Cooper JJ; Colgate-Palmolive Company & Anor v Cussens Pty Ltd (1993) 46 FCR 225 AT 228 per Sheppard J (“Colgate-Palmolive”).
The FMC Bankruptcy Rules also provide that the FMC Rules apply “so far as they are not inconsistent with these [FMC Bankruptcy] Rules, to a proceeding to which the Bankruptcy Act applies.”[31] The present application for indemnity costs is a proceeding “in connection with” the Amended Application. That is, the Amended Application to set aside the Bankruptcy Notice, that being a proceeding under s.41(6A) of the Bankruptcy Act, 1966 (Cth) ("Bankruptcy Act”), or s.30(1) of the Bankruptcy Act[32] is so “close as to be inseparable”,[33] having a “relationship” each to the other,[34] or part of “an unbroken series of steps culminating in”[35] a possible indemnity costs order, so as to be “in connection with” the proceeding under the Bankruptcy Act. Therefore, FMC Rules can apply so far as they are not inconsistent with FMC Bankruptcy Rules, because the indemnity costs application is a “proceeding”, and a proceeding to which the Bankruptcy Act applies and in respect of which costs orders may be made by the Court by reason of s.32 of the Bankruptcy Act (when read in conjunction with the FM Act and FMC Rules).
[31] FMC Rules 1.03(2).
[32] ASIC v Forge (2003) 133 FCR 487 at 492 per Emmett J; [2003] FCAFC 274 at paras 25-26 per Emmett J.
[33] The Queen v Moore & Ors, Ex parte Federated Miscellaneous Workers Union of Australia (1978) 140 CLR 470 at 477 per Jacobs J (“Moore”).
[34] The Queen v Isaac & Ors; Ex Parte Transport Workers Union of Australia (1985) 159 CLR 323 at 333 per Gibbs CJ (“Isaac”).
[35] Isaac at 346 per Wilson J.
In relation to judgments and orders r.16.01 of the FMC Rules provides as follows:
“The Court may, at any stage in a proceeding on the application of a party, give any judgment or make any order even if the claim was not made in an originating process.”
and r.16.05 provides that:
“(1) The Court may vary or set aside its judgment or order before it has been entered.
(2) The Court may vary or set aside its judgment or order after it has been entered if:
(a) the order is made in the absence of a party; or
(b) the order is obtained by fraud; or
(c) the order is interlocutory; or
(d) the order is an injunction or for the appointment of a receiver; or
(e) the order does not reflect the intention of the Court; or
(f) the party in whose favour the order is made consents.
(3) This rule does not affect the power of the Court to vary or terminate the operation of an order by a further order.”
There is nothing in rr.16.01 and 16.05 of the FMC Rules which is inconsistent with r.13.01 of the FMC Bankruptcy Rules. Rather rr.16.01 and 16.05 of the FMC Rules facilitate the varying or setting aside of a judgment or order in appropriate circumstances prescribed by r.16.05, and there is nothing to prevent the making of an indemnity costs order in such circumstances.
Appropriate circumstances prescribed by rule 16.05
Rule 16.05(2)(f) of the FMC Rules provides that a judgment or order may be set aside if the party in whose favour the order was made consents. The Respondent, in whose favour the existing costs order was made clearly consents to that order being varied or set aside (if the Court is otherwise persuaded to do so), and has exercised the option provided by the existing orders to make an application for indemnity costs, and argued that the Court ought make an indemnity costs order in its favour. This conduct indicates the Respondent’s consent to the varying or setting aside of the existing costs order.
The circumstances here are to be distinguished from those in Caboolture Park. In Caboolture Park the equivalent of FMC Rules r.16.05(2)(f) was not applicable. The Court has jurisdiction and power to deal with the indemnity costs application. The only question that remains is whether this is an appropriate case in which to order indemnity costs.
Indemnity costs – issues from the cases
In determining whether to award indemnity costs the Court has a very wide discretion, to be exercised judicially.[36] What is an appropriate costs or indemnity costs order depends on the circumstances of the case.[37] The normal practice, not to be lightly departed from, is to provide for costs to be on a party – party basis.[38] Nevertheless, there are certain issues to which the Court will give consideration, and have to weigh, when determining whether to make, and the extent of, an indemnity costs order, which should only be made where the issues establish special or unusual circumstances warranting an indemnity costs order.[39] Those issues include:
[36] PCRZ Investments Pty Ltd v National Golf Holdings [2002] VSCA 24 at para 32 per Chernov JA (“PCRZ Investments”) applied in D’Souza v Pattison [2007] FMCA 116 at para 24 per McInnis FM; Bhagat v Global Custodians Ltd [2002] FCA 223 at para 60 per O’Loughlin, Whitlam and Marshall JJ (“Bhagat”); Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397 at 401 per Woodward J (“Fountain Selected Meats”).
[37] PCRZ Investments at para 32 per Chernov JA; Colgate-Palmolive at 227 per Sheppard J.
[38] Colgate-Palmolive at 230 and 233 per Sheppard J; Davids Holdings Pty Ltd v Coles Myer Limited & Ors (1995) ATPR 41-383 at 40, 298 per Drummond J (“Davids Holdings”).
[39] Fountain Selected Meats at 400 per Woodward J; Colgate Palmolive at 233 per Sheppard J; Davids Holdings at 40, 298 per Drummond J.
a)whether a party should have known that there was no prospect of success in the case; [40]
[40] Fountain Selected Meats at 401 per Woodward J; Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, 3 May 1991) at 8 per French J. (“Tetijo Holdings”)
b)where a party alleges fraud or forgery, knowing the accusation to be false, or irrelevant to the issues;[41]
[41] Australian Guarantee Corporation Ltd v De Jager (1984) VR 483 (“De Jager”); Fountain Selected Meats at 401 per Woodward J.
c)where a party precipitately punctuates proceedings by resiling from a previously adhered to view;[42]
[42] Bass Coast Shire Council v King [1977] 2 VR 5 at 28-30 per Winneke P.
d)where a party acts in a high handed manner;[43]
[43] De Jager at 502 per Tadgell J; Fountain Selected Meats at 401 per Woodward J.
e)whether the party against whom indemnity costs is sought is a self-represented litigant, and whether the self-represented litigant ought escape the consequences of indemnity costs;[44]
[44] Bhagat at para 57 per O’Loughlin, Whitlam and Marshall JJ.
f)where a party proceeds “vexatiously” that is “without sufficient grounds for the purpose of causing trouble or annoyance”;[45]
[45] Fountain Selected Meats at 400 per Woodward J, citing the Shorter Oxford Dictionary definition of “vexatious”.
g)where a party proceeds for no good purpose at all due to inertia and carelessness;[46]
h)where a party persists in the making of allegations which ought not have been made, or in undue prolongation of groundless contentions;[47]
i)where a party’s conduct causes loss of time to the Court, and to other parties;[48]
j)where a party imprudently refuses an offer to compromise;[49]
k)whether the award of indemnity costs is sought against a contemnor;[50] and
l)having regard to the objects of:
i)encouraging savings of private costs and avoidance of inherent risks, delays and uncertainties of litigation;
ii)saving public cost necessarily incurred in litigation which events demonstrate to have been unnecessary; and
iii)indemnifying one party where the real cause and occasion of the litigation is the attitude adopted by the other party.[51]
[46] Fountain Selected Meats at 400 per Woodward J.
[47] Colgate-Palmolive at 233 per Sheppard J.
[48] Ugly Tribe Co Pty Ltd v Sikola & Ors [2001] VSC 189 at para 7 per Harper J.
[49] Colgate-Palmolive at 233-234 per Sheppard J (and cases there cited).
[50] Colgate-Palmolive at 234 per Sheppard J.
[51] Rouse v Shepherd [No 2] (1994) 35 NSWLR 277 at 279 and 281 per Badgery-Parker J.
The discretion is not so circumscribed that an indemnity costs order “may only be made against an ethically or morally delinquent party”.[52] The discretionary categories are not closed, and “other elements of litigatious of misconduct may be relevant”.[53]
[52] Botany Municipal Council v Secretary, Department of Arts, Sport, Environment, Tourism & Territories (1992) 34 FCR 412 at 415 per Gummow J.
[53] Tetijo Holdings at 8 per French J.
Analysis
This matter could have been argued on the Jurisdiction/Construction Point at any time from when the Application was first filed on 12 May 2006. It could have been programmed for a short hearing on the point by the Court and would have required the tender (presumably by consent) of the Bankruptcy Notice and its attachments (21 pages in total). Rather, the entire matter has been got ready for hearing (at least by the Respondent), and, at the last moment, all grounds but the Jurisdiction/Construction Point have been abandoned.
As a consequence, of the manner in which the Applicant ran this matter, the Respondent:
a)has had to read and deal with more than 300 pages of affidavit material;
b)has had to prepare responsive affidavit material;
c)has engaged in substantial preparation to get up the entire matter for a listed two day hearing;
d)briefed counsel, because of the filing of the Applicant’s Cross-Examination List indicating that Respondent’s solicitor with the day to day conduct of the matter was sought to be cross-examined (which he was not);
e)has had to deal with various interim matters (for example, the application to transfer the proceedings to the Federal Court) with which it may not have had to deal, or which might have been dealt with differently, if the Jurisdiction/Construction Point alone had been clearly articulated, singled out and identified as either a preliminary point, or the only point, to be argued;
f)has had to prepare to respond to a significant variety of legal issues raised by the Applicant, including the issues abandoned, namely:
i)fraud;
ii)res judicata;
iii)estoppel;
iv)approbation and reprobation;
v)privity; and
vi)illegality; and
g)further deal with arguments abandoned but raised again by the Applicant’s Contributory Affidavit, all of which Affidavit was ultimately ruled inadmissible.[54]
[54] See generally the Affidavit of Andrew Ross Macpherson, sworn 5 February 2007, in support of the Respondent’s indemnity costs application, and upon which there was no cross-examination.
In the Court’s view, special circumstances do exist to warrant ordering indemnity costs in this case. They are:
a)the abandonment, at the last minute, with little or no notice, of all but one of the grounds on which the case was to be argued, and which had previously been adhered to;
b)that allegations of fraud and illegality, were made and were part of the grounds abandoned, indicating to the Court that the allegations were false, or at best, irrelevant, to the issues to be determined;
c)that the Applicant persisted with the making of allegations, thereby unduly prolonging the proceedings, on the basis of contentions which, given their abandonment (by Counsel representing the Applicant) were clearly untenable, then only to raise some of these allegations again in the Applicant’s Contributory Affidavits;
d)that most of the interim steps in the litigation, prior to the actual hearing of the Amended Application, were probably unnecessary, or rendered so, by the Applicant’s last minute abandonment of all but the Jurisdiction/Construction Point; and
e)the Applicant’s conduct of the litigation caused loss of time to the Court, as well as the Respondent.
Conclusion
Having regard to the matters set out above, the Court considers that an indemnity costs order in favour of the Respondent is appropriate in the circumstances of this case. Under Rule 16.05(2)(f) of the FMC Rules, the Court will set aside Order (2) of its orders of 29 January 2007, and substitute therefore an order that the Applicant pay the Respondent’s costs, including any reserved costs, if not agreed, to be taxed under the Federal Court Rules on an indemnity basis. The Applicant should also pay the Respondent’s costs of this indemnity costs application, but on a party-party basis.
I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: M Hewitt
Date: 30 April 2007
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