Homebuilding Pty Ltd v Cappello (No 2)

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FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Homebuilding Pty Ltd v Cappello (No 2) [2023] FedCFamC2G 493  

File number(s): SYG 1827 of 2021
SYG 1828 of 2021
Judgment of: JUDGE CAMERON
Date of judgment: 16 June 2023
Catchwords: PRACTICE & PROCEDURE – COSTS – whether refusal of offers was unreasonable – whether proceeding brought for an improper purpose.   
Legislation:

Federal Circuit and Family Court of Australia Act 2021 (Cth) s 214

Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 13.01 div 13.2

Federal Court Rules 2011 (Cth) pt 40
Cases cited:

Calderbank v Calderbank [1975] 3 All ER 333

Cappello v Homebuilding Pty Ltd (formerly known as Hammond & Simonds NSW Pty Ltd) [2021] FCA 981

Homebuilding Pty Ltd v Cappello [2022] FedCFamC2G 576

Mariconte v Nobarnni [2020] FCA 1485

Martin v Carlisle [2008] NSWSC 1276

Nobarani v Mariconte [2021] FCAFC 96

Wills v Chief Executive Officer of the Australian Skills Quality Authority (Costs) [2022] FCAFC 43
Division: General
Number of paragraphs: 29
Date of last submissions: 19 December 2022
Date of Hearing: On the papers 
Place: Sydney
Solicitor for the Applicant: Adams & Partners Lawyers
Counsel for the Respondents: Mr N. Simone
Solicitor for the Respondents: Hall Partners

ORDERS

SYG 1827 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

HOMEBUILDING PTY LTD

Applicant
AND:

ROSARIO CAPPELLO

Respondent

order made by:

JUDGE CAMERON

DATE OF ORDER:

16 June 2023

THE COURT ORDERS THAT:

1.The parties pay their own costs of the proceeding.

2.The Registrar’s order for costs made on 21 December 2022 be set aside.

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

ORDERS

SYG 1828 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

HOMEBUILDING PTY LTD

Applicant
AND:

MARIA CAPPELLO

Respondent

order made by:

JUDGE CAMERON

DATE OF ORDER:

16 June 2023

THE COURT ORDERS THAT:

1.The parties pay their own costs of the proceeding.

2.The Registrar’s order for costs made on 21 December 2022 be set aside.

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

REASONS FOR JUDGMENT

JUDGE CAMERON

INTRODUCTION

  1. On 1 October 2021 the applicant, Homebuilding Pty Ltd (Homebuilding

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Details
Case
[2023] FedCFamC2G 493
Decision Date

CaseChat Overview and Summary

In the case of Homebuilding Pty Ltd v Cappello (No 2), the Federal Circuit and Family Court of Australia was tasked with determining the issue of costs between the parties. The proceedings were brought by Homebuilding against Mr and Mrs Cappello in an attempt to enforce a judgment debt. Mr and Mrs Cappello sought an order for indemnity costs from Homebuilding, arguing that the creditor's petitions for sequestration were an abuse of process. Homebuilding, on the other hand, opposed the application and sought an order for costs in their favour.

The court had to decide whether the creditor's petitions presented by Homebuilding were an abuse of process. The court examined the arguments put forward by both parties and considered the relevant legal principles. The court found that there was no evidence that Homebuilding acted improperly or with an ulterior motive when presenting the creditor's petitions. The court also noted that the time to ascertain whether a creditor's petition was an abuse of process was when it was presented, and in this case, both Mr and Mrs Cappello had committed acts of bankruptcy. Therefore, the presentation of the creditor's petitions did not amount to an abuse of process.

In light of the above, the court concluded that Homebuilding was not liable for indemnity costs to Mr and Mrs Cappello. Instead, the court ordered that each party bear their own costs from a certain date, and that Mr and Mrs Cappello pay Homebuilding's costs up to that date.

This decision highlights the importance of establishing a sufficient factual foundation when alleging an abuse of process. It also emphasises the court's discretion in awarding costs and the need for parties to consider all available remedies when seeking to enforce a judgment debt.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Division 13.2 of the Bankruptcy Rules does not apply in this case. Part 40 of the Federal Court Rules 2011 (Cth) is concerned with costs, including the taxation of costs.BACKGROUND FACTS On 31 August 2020, ie before the Bankruptcy Notice was issued, Homebuilding’s solicitors emailed Mr and Mrs Cappello requiring that the first instance judgment debt be paid immediately. On 2 September 2020 the parties exchanged the following emails: (a)at 9:15am Mr Cappello advised Homebuilding’s solicitors that a notice of intention to appeal had been filed and that a notice of appeal was being finalised. He sought 7 days’ notice of any intention by Homebuilding to enforce the first instance judgment; (b)at 9:22am Homebuilding’s solicitors advised Mr Cappello and his solicitors of their client’s intention to commence enforcement action the following day if the first instance judgment debt was not paid immediately; (c)at 11:13am Mr Cappello advised Homebuilding’s solicitors that he would seek a stay and would rely on his email on the question of costs; and(d)at 11:50am Homebuilding’s solicitors advised Mr Cappello and his solicitors that they might lodge a caveat against Mr and Mrs Cappello’s Haberfield properties if the judgment debt was not paid that day. As noted earlier, the Bankruptcy Notice issued on 22 April 2021. On 18 August 2021 Katzmann J dismissed Mr and Mrs Cappello’s application to set the Bankruptcy Notice aside and extended the time for compliance with it to 25 August 2021: Cappello v Homebuilding Pty Ltd (formerly known as Hammond & Simonds NSW Pty Ltd) [2021] FCA 981. On 23 August 2021 Homebuilding’s solicitors emailed a copy of the Bankruptcy Notice to Mr and Mrs Cappello’s solicitors and advised that if Mr and Mrs Cappello did not pay the appellate judgment debt of $50,097.32 by 25 August 2021 Homebuilding would initiate recovery action. Mr and Mrs Cappello failed to comply with the Bankruptcy Notice by 25 August 2021. On 1 October 2021 these proceedings were commenced. Mr and Mrs Cappello filed various affidavits deposing to their assets and liabilities which are detailed in the First Judgment.Settlement Offers Mr and Mrs Cappello made offers to settle these proceedings on the following terms and on the basis of the principles in Calderbank v Calderbank [1975] 3 All ER 333 (“Calderbank”):(a)on 9 December 2021: dismissal of the proceedings with no orders as to costs; and (b)on 18 January 2022: dismissal of the proceedings upon payment of the $50,097.32 judgment debt, interest and costs, as well as the costs of the Supreme Court Proceedings at first instance and on appeal. Homebuilding made its own Calderbank offers to settle these proceedings as follows:(a)on 24 January 2022: to, in broad terms, accept in settlement of these proceedings $247,729.11 (being the judgment debt of $50,097.32, interest of $4,514.44 and a total of $195,117.35 in respect of assessed costs of the Supreme Court Proceedings) plus $96,340.78 for as yet unassessed costs incurred in other proceedings including these; and(b)on 1 April 2022: to settle these proceedings and certain costs assessment proceedings in the Supreme Court of New South Wales on terms similar to those offered on 24 January 2022. SUBMISSIONSRespondents

Evidence

Evidence Before The Court

Homebuilding submitted that there was no special feature in this proceeding which would enliven the Court’s jurisdiction to set aside or dismiss the Bankruptcy Notice as an abuse of process. Homebuilding further submitted that it had legally and validly lodged the caveat against Mr and Mrs Cappello’s property in accordance with their building contract and the applicable legislation and it could not be relied on as a basis for making the indemnity costs order sought. EVIDENCE The parties filed affidavits setting out their costs of the proceedings.CONSIDERATIONAbuse of process In their submissions, the parties were focussed on the Bankruptcy Notice and whether it was in some way an abuse of process. That was an argument that, if it was not, should have been raised before Katzmann J who dismissed the application to set the Bankruptcy Notice aside. These proceedings, however, concern two creditor’s petitions for sequestration orders based on Mr and Mrs Cappello’s acts of bankruptcy. In Nobarani v Mariconte [2021] FCAFC 96 it was said, on appeal from Mariconte v Nobarani, that:32… The present weight of authority favours the view that the allegation of an abuse of process is a serious one which cannot be made without a sufficient factual foundation and the party alleging it bears a “heavy onus” in establishing its existence: Williams v Spautz [1992] HCA 34; 174 CLR 509 at 529; Prentice v Fewin Pty Ltd, in the matter of Prentice [2017] FCA 490 at [48]–[49] … ; Royal v Nazloomian at [37]. 33It is also not in doubt that the time at which to ascertain whether a bankruptcy notice is an abuse of process is the time when it is issued: Killoran v Duncan, in the matter of Killoran [1999] FCA 1574 at [13] … ; Royal v Nazloomian at [30].By analogy, the time at which to ascertain whether a creditor’s petition is an abuse of process, at least when the allegation is that it was brought for an improper purpose, is the time when it was presented. In circumstances where both Mr and Mrs Cappello had committed an act of bankruptcy, it is difficult to see how it could be concluded that the presentation of the creditor’s petitions amounted to an abuse of process. Once an act of bankruptcy had occurred it was open to any of Mr and Mrs Cappello’s creditors to rely on it to present a creditor’s petition and so the enforcement of the judgment debt by writs for the levy or property or by garnishee orders would not have been the “obvious orders” to seek in the circumstances. Further, there is no evidence that Homebuilding knew when it presented the creditor’s petitions that a sufficient reason existed for sequestration orders not to be made. Compelling evidence of solvency was not served until much later, when Mr Cappello provided a more comprehensive overview of his and Mrs Cappello’s financial positions than had previously been available. The matter is taken no further by the inclusion in Homebuilding’s settlement offers of references to sums owed to it by Mr and Mrs Cappello beyond the judgment debt. As Homebuilding pointed out, that particular door had been opened by Mr and Mrs Cappello themselves in their offer of 18 January 2022 and it seems that Homebuilding did no more than keep it open. It is also unsurprising that the parties might have wanted to resolve all issues at the same time, if possible. To the extent that the proceedings remained on foot beyond the point when it was reasonable to expect that sequestration orders would be made, costs are an adequate remedy.

Decision

Reasons for decision

Although the $50,097.32 judgment debt remained outstanding, on 19 July 2022 the creditor’s petitions were dismissed on the basis that Mr and Mrs Cappello were not insolvent: Homebuilding Pty Ltd v Cappello [2022] FedCFamC2G 576 (First Judgment). Mr and Mrs Cappello now seek orders that Homebuilding pay their costs of and incidental to these proceedings and do so on an indemnity basis. Homebuilding opposed that application and seeks orders that: (a)Mr and Mrs Cappello pay its costs of these proceedings up to and including 31 January 2022; and(b)each party bear their own costs from 31 January 2022.LEGISLATION & RULES The Federal Circuit and Family Court of Australia Act 2021 (Cth) relevantly provides: 214 Costs (1) This section does not apply to:(a) family law or child support proceedings; or (b) proceedings in relation to a matter arising under:(i) the Fair Work Act 2009; or (ii) section 14, 15 or 16 of the Public Interest Disclosure Act 2013.(2)The Federal Circuit and Family Court of Australia (Division 2) or a Judge has jurisdiction to award costs in all proceedings before the 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 Circuit and Family Court of Australia (Division 2) or Judge. The Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules) relevantly provide: 13.01 Basis for costs(1) 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 Part 40 of the Federal Court Rules 2011 unless the Court otherwise orders.(2) In making an order for costs, the Court may fix the amount of the costs.(3) If the Court fixes the amount of the costs, Part 40 of the Federal Court Rules 2011 does not apply to a bill of costs submitted for the costs, except for the issue of a certificate of taxation. Division 13.2 of the Bankruptcy Rules does not apply in this case. Part 40 of the Federal Court Rules 2011 (Cth) is concerned with costs, including the taxation of costs.BACKGROUND FACTS On 31 August 2020, ie before the Bankruptcy Notice was issued, Homebuilding’s solicitors emailed Mr and Mrs Cappello requiring that the first instance judgment debt be paid immediately. On 2 September 2020 the parties exchanged the following emails: (a)at 9:15am Mr Cappello advised Homebuilding’s solicitors that a notice of intention to appeal had been filed and that a notice of appeal was being finalised. He sought 7 days’ notice of any intention by Homebuilding to enforce the first instance judgment; (b)at 9:22am Homebuilding’s solicitors advised Mr Cappello and his solicitors of their client’s intention to commence enforcement action the following day if the first instance judgment debt was not paid immediately; (c)at 11:13am Mr Cappello advised Homebuilding’s solicitors that he would seek a stay and would rely on his email on the question of costs; and(d)at 11:50am Homebuilding’s solicitors advised Mr Cappello and his solicitors that they might lodge a caveat against Mr and Mrs Cappello’s Haberfield properties if the judgment debt was not paid that day.

Ratio Decidendi

Legal Principle Established

The parties filed affidavits setting out their costs of the proceedings.CONSIDERATIONAbuse of process In their submissions, the parties were focussed on the Bankruptcy Notice and whether it was in some way an abuse of process. That was an argument that, if it was not, should have been raised before Katzmann J who dismissed the application to set the Bankruptcy Notice aside. These proceedings, however, concern two creditor’s petitions for sequestration orders based on Mr and Mrs Cappello’s acts of bankruptcy. In Nobarani v Mariconte [2021] FCAFC 96 it was said, on appeal from Mariconte v Nobarani, that:32… The present weight of authority favours the view that the allegation of an abuse of process is a serious one which cannot be made without a sufficient factual foundation and the party alleging it bears a “heavy onus” in establishing its existence: Williams v Spautz [1992] HCA 34; 174 CLR 509 at 529; Prentice v Fewin Pty Ltd, in the matter of Prentice [2017] FCA 490 at [48]–[49] … ; Royal v Nazloomian at [37]. 33It is also not in doubt that the time at which to ascertain whether a bankruptcy notice is an abuse of process is the time when it is issued: Killoran v Duncan, in the matter of Killoran [1999] FCA 1574 at [13] … ; Royal v Nazloomian at [30].By analogy, the time at which to ascertain whether a creditor’s petition is an abuse of process, at least when the allegation is that it was brought for an improper purpose, is the time when it was presented. In circumstances where both Mr and Mrs Cappello had committed an act of bankruptcy, it is difficult to see how it could be concluded that the presentation of the creditor’s petitions amounted to an abuse of process. Once an act of bankruptcy had occurred it was open to any of Mr and Mrs Cappello’s creditors to rely on it to present a creditor’s petition and so the enforcement of the judgment debt by writs for the levy or property or by garnishee orders would not have been the “obvious orders” to seek in the circumstances. Further, there is no evidence that Homebuilding knew when it presented the creditor’s petitions that a sufficient reason existed for sequestration orders not to be made. Compelling evidence of solvency was not served until much later, when Mr Cappello provided a more comprehensive overview of his and Mrs Cappello’s financial positions than had previously been available. The matter is taken no further by the inclusion in Homebuilding’s settlement offers of references to sums owed to it by Mr and Mrs Cappello beyond the judgment debt. As Homebuilding pointed out, that particular door had been opened by Mr and Mrs Cappello themselves in their offer of 18 January 2022 and it seems that Homebuilding did no more than keep it open. It is also unsurprising that the parties might have wanted to resolve all issues at the same time, if possible. To the extent that the proceedings remained on foot beyond the point when it was reasonable to expect that sequestration orders would be made, costs are an adequate remedy.