Horne (in his capacity as trustee of the Bankrupt Estate of Narain) v Narain
[2017] FCCA 1190
•6 June 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HORNE (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NARAIN) v NARAIN | [2017] FCCA 1190 |
| Catchwords: BANKRUPTCY – Application for default judgment, interest and costs – claim for indemnity costs rejected. |
| Legislation: Bankruptcy Act 1966, ss.139P, 139ZA, 149, 153(2)(a) Federal Circuit Court Rules 2001 (Cth), r.13.07 |
| Cases cited: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 |
| Applicant: | STIRLING LINDLEY HORNE IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF RAVI NARAIN |
| Respondent: | RAVI NARAIN |
| File Number: | MLG 367 of 2017 |
| Judgment of: | Judge Wilson |
| Hearing date: | On the papers |
| Date of Last Submission: | 24 May 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 6 June 2017 |
REPRESENTATION
| Solicitors for the Applicant: | Smith Leonard Fahey Lawyers |
| Solicitors for the Respondent: | Robert James Lawyers |
ORDERS
Judgment is entered against the respondent for the sum of $72,167.65 plus interest of $1,680.62.
The respondent pay the applicant party/party costs in the sum of $6,896.16.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 367 of 2017
| STIRLING LINDLEY HORNE IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF RAVI NARAIN |
Applicant
And
| RAVI NARAIN |
Respondent
REASONS FOR JUDGMENT
Introduction
In this proceeding the applicant trustee in bankruptcy Stirling Lindley Horne (“the applicant”) sought default judgment, interest and costs against the respondent Ravi Narain (“the respondent”) in respect of income contributions.
Synopsis
In my judgment and for the reasons that follow, it is appropriate to make orders in accordance with the applicant’s application filed
23 February 2017.
Short factual narration
In support of his application, the applicant swore an affidavit on
23 February 2017. Relevantly distilled, the following matters arose from that affidavit –
a)a sequestration order was made against the respondent’s estate on 21 December 2007 and the applicant was appointed as the respondent’s trustee in bankruptcy;
b)
following the respondent’s provision of his statement of affairs in January 2008, the applicant determined that the respondent’s income was $150,000.00 for the period 21 December 2007 to
20 December 2008;
c)
on 24 November 2008 the respondent (then a bankrupt) was assessed for income contributions for the period between
1 December 2007 to 20 December 2008 in the sum of $23,935.80;
d)
on 24 November 2009, the respondent (then a bankrupt)
was assessed for income contributions for the period
21 December 2008 to 20 December 2009 in the sum of $24,404.04;
e)the respondent did not pay the total of those assessed amounts, namely $48,339.84;
f)the respondent was additionally assessed for income contributions for the period 21 December 2009 to 20 December 2010 in the sum of $23,827.81; and
g)the respondent did not pay the additional assessments, thereby making the total sum of $72,167.65.
On 23 January 2016, by operation of s.149 of the Bankruptcy Act1966 (Cth) (“the Act”), the respondent was discharged from his bankruptcy. By reason of the operation of s.153(2)(a) of the Act, the respondent’s discharge from his bankruptcy did not release him from his liability to pay the applicant the total of the three income assessments, namely $72,167.65.
In December 2012, when the respondent was represented by a solicitor, he took issue with certain calculations of the income assessments yet he did not pursue the point.
Then, in January 2017, the respondent communicated with the applicant’s solicitors contending that after speaking with his latest solicitor the applicant’s claim was “invalid and incorrect as the amounts claimed were not correct”.[1] The respondent did not pursue his contentions about the alleged invalidity of the assessments. The applicant pointed out in his affidavit that s.139ZA of the Act provided a mechanism for the respondent to review the applicant’s income assessments but no such review had been initiated by the respondent.
[1] Exhibit ‘SLH-12’ to the affidavit of Stirling Lindley Horne sworn 23 February 2017.
This proceeding came before me twice, once on 6 April 2017 and the second time on 15 May 2017. On 6 April 2017 the applicant was represented by his solicitor, Ms L McNicholas. The respondent was represented by his solicitor, Mr B Franklin. By consent, I ordered the respondent to file and serve his notice stating grounds of opposition and any affidavit in support by 4.00 p.m. on 8 May 2017. I adjourned this proceeding to 15 May 2017 and reserved costs.
The respondent did not file any material, whether by 8 May 2017 or at all.
On 15 May 2017 Ms McNicholas again appeared for the applicant.
Mr B Lodding, a solicitor who said he appeared as a courtesy to the court, told me he had no instructions from the respondent but nevertheless explained that the respondent and he had not been in contact. I told Mr Lodding, whose appearance I gratefully received, that it was appropriate to give the respondent two further days within which he could file his material if the respondent chose to do so.
I ordered as well that if the respondent failed to file material by
17 May 2017, the applicant was at liberty to file written submissions in support of his application for summary judgement. The respondent did not file anything on or prior to 4.00 p.m. on 17 May 2017. Hence,
the applicant filed written submissions in support of his application for summary judgment.[2]
[2] Applicant’s submissions filed 24 May 2017.
The power to order summary judgment
Relevantly to this application, r.13.07 of the Federal Circuit Court Rules2001 (Cth) (“the rules”) empowers the Federal Circuit Court of Australia to give judgment on the claim where there is evidence of the facts on which the claim is based and the opposing party has no answer to the claim.
Here, the applicant swore in detail to the existence of the claim in this case and of the facts on which the claim was based. In essence,
the claim was for the respondent to pay three assessments for income contributions to his bankrupt estate. The legislative basis for the claim was s.139P of the Act. The fact of the respondent’s discharge from bankruptcy did not alter the respondent’s liability to pay those income contributions. They totalled $72,167.65. The respondent, while initially complaining that the claim was invalid, offered no evidence against which his contentions could be measured. He was given an abundance of time to put his case. He chose not to do so.
In those circumstances, I am satisfied that the applicant’s claim has been proved and that the respondent has no answer to it. It is appropriate therefore to give default judgement in favour of the applicant for $72,167.65.
Interest
The applicant sought interest on the sum of $72,167.65 being 85 days at 10%. The first of those three dates was the date on which this proceeding was filed. The second date, 19 May 2017, seemed to correspond closely with the date immediately following the appearance on which I indicated I would entertain an application for the entry of default judgment. Both dates were appropriate. The rate of interest claimed also appeared in order. The applicant’s total interest sum claimed was $1,680.62. I am prepared to add that sum to the amount of $72,167.65.
Costs – indemnity or party/party?
The applicant’s primary position on costs was that the respondent should pay indemnity costs. Those amounted to $10,041.76 as opposed to the sum of party/party costs amounting to $6,896.16.
I am not willing to order costs on an indemnity basis. Let me explain why.
The genesis of modern learning, at least in the Federal jurisdiction,
in respect of indemnity costs is attributable to the decision of
Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd[3] (“Colgate-Palmolive”). That was an intellectual property case. Sheppard J addressed an award of costs on an indemnity basis. Relevantly, his Honour said that costs on an indemnity basis could be awarded –
a)where a party made allegations of fraud knowing them to be false or where that party made irrelevant allegations of fraud;
b)where evidence of misconduct existed causing loss of time to the court and the other parties;
c)whether the proceeding was commenced for some ulterior motive;
d)whether the proceeding was commenced or continued with wilful disregard of known facts or clearly established law;
e)where allegations were made that ought never to have been made;
f)where the proceeding was unduly prolonged by groundless contentions; and
g)where there was an imprudent refusal of an offer of compromise.
[3] (1993) 46 FCR 225.
Where an order for indemnity costs is made, it permits recovery of a larger component of costs than does an award of costs on a party/party basis. Based on the figures proffered by the applicant in this case,
an order of costs on an indemnity basis provided recovery of $10,041.76 as compared to recovery on a party/party basis of the sum of $6,896.16.
The decision in Colgate-Palmolive spawned a legion of decided cases since 1993. The number of cases that have addressed orders for indemnity costs is too vast to recount here and the facts of each case were too idiosyncratic to be relevant or applicable to the facts of this case. In large measure, there is no need to trace the development of the principle of the award of indemnity costs because any such award is usually triggered if the facts of a given case fall within one of the criteria set out in Colgate-Palmolive.
The nearest the applicant reached to one or more of Sheppard J’s distillations of the criteria for the award of indemnity costs was in paragraph 16(e) above and in paragraph 16(f) above. In other words,
could it be said that the respondent made allegations that ought never to have been made or could it be said that the proceeding was unduly prolonged by groundless contentions? In this context the respondent’s contentions that the assessments were invalid and were in the wrong amounts were relevant. True, the respondent made those contentions and he did not demonstrate the truth of his contentions. But were those contentions erroneous, such that they ought never to have been made?
Or did those erroneous contentions unduly prolong this litigation because they were groundless?
In my view the answer to those two questions is in the negative.
If true, the invalidity of the assessments or the error in the amounts in them would have provided a full or partial defence to the claims advanced by the applicant in this case. Yet the respondent made only the assertions. He did not prove the point about either the invalidity of the assessments or the amounts in them. To my mind, the respondent was given an abundance of opportunity to make good his contentions and he failed to do so. Those contentions seemed to me to drift into the category of unproved allegations rather than assuming the characterisation of groundless assertions that either never should be made or which unduly prolonged the case.
I am not persuaded that an indemnity costs order is appropriate. In those circumstances, I order costs at the lower rate, being party/party costs.
Judgment is hereby entered against the respondent for $72,167.65 plus interest of $1,680.62 plus party/party costs of $6,896.16.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Judge Wilson
Associate:
Date: 6 June 2017
6