In the Matter of Moustafa El Moustafa Cobbs Hill (Tas) Meat Supplies Pty Ltd v Moustafa El Moustafa

[1998] FCA 880

FEDERAL COURT OF AUSTRALIA

COSTS - indemnity costs - no point of principle.

Federal Court of Australia Act 1976 (Cth), s 43

Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225, applied

IN THE MATTER OF MOUSTAFA EL MOUSTAFA
A DEBTOR

COBBS HILL (TASMANIA) MEAT SUPPLIES PTY LTD (IN LIQUIDATION) (ACN 071 384 686) and ROBERTS LIMITED (ACN 009 475 647) and THE INSPECTOR GENERAL IN BANKRUPTCY v MOUSTAFA EL MOUSTAFA and DAVID HENRY SCOTT (AS TRUSTEE OF THE COMPOSITION) and P FINKELSTEIN

MARSHALL J
MELBOURNE
29 MAY 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 7537  of   1998

IN THE MATTER OF : MOUSTAFA EL MOUSTAFA
A DEBTOR

BETWEEN:	COBBS HILL (TASMANIA) MEAT SUPPLIES PTY LTD (IN LIQUIDATION) (ACN 071 384 686), ROBERTS LIMITED (ACN 009 475 647) FIRST APPLICANTS
THE INSPECTOR GENERAL IN BANKRUPTCY SECOND APPLICANT
AND:	MOUSTAFA EL MOUSTAFA, DAVID HENRY SCOTT (AS TRUSTEE OF THE COMPOSITION) FIRST RESPONDENTS
P FINKELSTEIN SECOND RESPONDENT
JUDGE:	MARSHALL J
DATE OF ORDER:	29 MAY 1998
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The second respondent pay the applicants’ costs on a solicitor-client basis, including reserved costs, if any.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 7537  of  1998

IN THE MATTER OF : MOUSTAFA EL MOUSTAFA
A DEBTOR

BETWEEN:	COBBS HILL (TASMANIA) MEAT SUPPLIES PTY LTD (IN LIQUIDATION) (ACN 071 384 686), ROBERTS LIMITED (ACN 009 475 647) FIRST APPLICANTS
THE INSPECTOR GENERAL IN BANKRUPTCY SECOND APPLICANT
AND:	MOUSTAFA EL MOUSTAFA , DAVID HENRY SCOTT (AS TRUSTEE OF THE COMPOSITION) FIRST RESPONDENTS
P FINKELSTEIN SECOND RESPONDENT

JUDGE:	MARSHALL J
DATE:	29 MAY 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

The Court has a very wide discretion pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth) on the question of costs and I do not see any reason why costs should not follow the event in this case. The real issues for determination are whether indemnity costs should be ordered and secondly, whether the position of the Inspector General in Bankruptcy (“the Inspector General”) should be treated differently to the position of the other applicants. As to that latter issue, it is my view that the case was one where the Inspector General was clearly added as a party and not as an intervener and should be treated as such. The policy submissions made by him, especially regarding the role of a solicitor as a controlling trustee in the context of relatively new legislation, were important ones to be made. I do not believe that the conduct of the matter involving the Inspector General led to the case being prolonged. I see no good reason why the Inspector General should not have his costs.

In my view, costs should be paid on a solicitor-client basis.  This matter was vigorously defended by the controlling trustee prior to his submissions in reply.  At that stage, in my view, he realised his position was hopeless.  It is my view that he should, with reasonable diligence, have come to that view prior to the trial.  In this respect, it is also my view that there has been a wilful disregard of known facts and clearly established law which, as Mr Bigmore submitted, led the controlling trustee to defend the indefensible.  As is clear from my ex tempore reasons for judgment today, in support of the orders made without opposition on 14 May 1998, the controlling trustee mistook his role and took on the role of a partisan person seeking to advance the interests of the debtor.

Although some explanation was sought to be made of the document appearing at page 319 of the appeal book in Mr Finkelstein’s submissions, there is no evidence before me which contradicts the evidence in Mr Kerridge’s affidavit that the material contained in that file note indicated Mr Finkelstein’s state of mind at the time.  That letter or memorandum is indicative of an approach whereby Mr Kerridge and Mr Finkelstein combined to ensure that the best was done by the debtor in respect to the meeting without regard to the interests of creditors, in particular the first applicants in this proceeding.

That frame of mind by Mr Finkelstein and the approach he gave to the problem made him, in my view, blinkered in respect to the real issues and that is to analyse, on the basis of a clear and concise and unprejudiced mind, the proper position of Cobbs Hill on the one hand and to be more thoroughly investigative in relation to what I have described, in my previous ex tempore judgment, as the “beyond belief” situations with respect to the Ivanopoulos’ claim  and the Awad mortgage.  In my view, these factors support an indication that this matter is out of the ordinary and in the context of Shepherd J’s judgment in Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225:

... wilful disregard of known facts or clearly established law ... [and] the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions ...

It seems to me quite clear that with due diligence and bringing a truly independent mind to bear on the question of the Cobbs Hill entitlement, the Awad mortgage and the Ivanopoulos’ claim, Mr Finkelstein would not have persisted in defending the matter until his submissions until the very last, that is, in reply on the final day of the hearing. 

The order of the Court in this matter in respect of costs, in addition to the orders already made, is that the second respondent pay the applicants’ costs on a solicitor-client basis, including reserved costs, if any. 

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall

Associate:

Dated:            29 May 1998

Counsel for the First Applicants:	Mr G Bigmore QC with Mr P Fary
Solicitor for the First Applicants:	J M Smith & Emmerton
Counsel for the Second Applicant:	Mr D Hyde
Solicitor for Second Applicant:	J M Smith & Emmerton
Counsel for the Second Respondent:	Mr S Glacken
Solicitor for the Second Respondent:	FLA Partners
Date of Hearing:	29 May 1998
Date of Judgment:	29 May 1998 (ex tempore)