Jakimowicz v Jacks
[2016] FCCA 1347
•2 June 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| JAKIMOWICZ v JACKS | [2016] FCCA 1347 |
| Catchwords: BANKRUPTCY – Costs – orders made by consent dismissing the proceedings – no real prospect of success – costs order made under s.32 of the Bankruptcy Act 1966 – taxed and paid with priority – s.109(1)(a) Bankruptcy Act 1966. |
| Legislation: Bankruptcy Act 1966, ss.32, 40(1)(g), 41(7), 55, 88, 109(1)(a), 116(3) |
| Cases cited: Bent v Gough (1992) 35 FCR 204, 108 ALR 131 Jacks v Jakimowicz [2014] VSCA 120 Jacks v Jakimowicz [2015] VCC 1067 |
| Applicant: | PATRICIA ANNE JAKIMOWICZ |
| Respondent: | JOHN MICHAEL JACKS |
| File Number: | MLG 500 of 2015 |
| Judgment of: | Judge Hartnett |
| Hearing date: | 1 April 2016 |
| Date of Last Submission: | 14 April 2016 |
| Delivered at: | Geelong |
| Delivered on: | 2 June 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Isles |
| Solicitors for the Applicant: | Stephen Byrne |
| Counsel for the Respondent: | Mr Egan |
| Solicitors for the Respondent: | Thomas Egan & Associates |
ORDERS
The costs of the Respondent be taxed and be paid from the bankrupt estate of the Applicant as a priority payment pursuant to s.109(1)(a) of the Bankruptcy Act 1966 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 500 of 2015
| PATRICIA ANNE JAKIMOWICZ |
Applicant
And
| JOHN MICHAEL JACKS |
Respondent
REASONS FOR JUDGMENT
History
By orders made on 1 April 2016, the Court ordered all extant applications in this proceeding be dismissed. The Court further ordered that the Respondent file and serve within seven days of the making of the order written submissions as to costs and, within seven days thereafter, the Applicant file and serve written submissions in reply. That was because the Respondent foreshadowed a costs order application.
The Respondent, Mr Jacks, seeks an order for costs as follows:-
“a) the Respondent’s costs of and incidental to the application including reserved costs be paid out of the estate of the bankrupt Applicant;
b) the Respondent’s costs be taxed by the registrar on an indemnity basis;
c) alternatively, be taxed on a solicitor-and-client basis.”
The Applicant opposes the orders which are sought by the Respondent. The Applicant seeks now an order that there be no order as to costs. The Applicant brought the proceedings to an end by filing a debtor’s petition and becoming a bankrupt.
The Court’s power to award costs is a discretionary power and set out in s.32 of the Bankruptcy Act 1966 (Cth) (‘the Act’) which is as follows:-
“The Court may, in any proceeding before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit.”
The proceedings were a Form 2 application filed on 13 March 2015 in the bankruptcy jurisdiction of the Court wherein the Applicant sought an order that, pursuant to s.40(1)(g) of the Act, bankruptcy notice BN178649, issued 16 February 2015, which was served on 22 February 2015, be set aside, together with an order for costs. As an interim order sought by the Applicant, she sought pursuant to s.41(7) of the Act, that the time for compliance with the bankruptcy notice be extended up to and include 15 September 2015.
By order of Registrar Burns on 13 March 2015, the Court ordered that the time for compliance with the bankruptcy notice be extended until 4.30 pm on 7 April 2015. Thereafter, on 7 April 2015, Registrar Burns ordered that the time for compliance with the bankruptcy notice be extended until further order of the Court.
The bankruptcy notice was founded on an order of the Supreme Court of Victoria Costs Court fixing costs of $54,000 to be paid by the Applicant to the Respondent, following a successful appeal by the Respondent in the Supreme Court of Victoria Court of Appeal wherein judgment was given on 17 June 2014.
On 5 June 2015, Mr Egan, solicitor for the Respondent, caused to be lodged on Mr Jacks’ behalf, an application to the Appeal Costs Board seeking payment of the sum of $50,000 in circumstances where the Applicant had not paid to the Respondent any sum and had failed to make such an application in reliance on an appeal costs certificate granted by the Court of Appeal on 17 June 2014 in proceeding SAPCI/2011 0129.[1] That application relied relevantly on an affidavit sworn by Stephen Peter Byrne, Solicitor for the Applicant, sworn 13 March 2015 in this proceeding, deposing that the Applicant had no capacity to pay the costs of $54,000 ordered to be paid to the Respondent in respect of the Supreme Court of Victoria Court of Appeal proceeding.
[1] Jacks v Jakimowicz [2014] VSCA 120.
The Applicant’s application in this proceeding, to set aside the bankruptcy notice served upon her on 22 February 2015, was originally premised on the proposition that the Applicant had a counter-claim in ongoing County Court proceedings of $335,374.14, a sum which exceeded the value of the bankruptcy notice. The counter-claim was in the alternative and represented moneys allegedly expended by the Applicant for the benefit of the Respondent.
Upon remittal, the trial of the Respondent’s claim and the Applicant’s counter claim referred to in the preceding paragraph was heard by Judge Kennedy commencing on 15 July 2015. On 15 August 2015 her Honour handed down reasons for judgment.[2] Her Honour concluded there be judgment for the Respondent against the Applicant in the amount of $270,771.42 and that the Applicant’s counter claim be dismissed.
[2] Jacks v Jakimowicz [2015] VCC 1067.
On 8 September 2015 following receipt of written submissions on the question of interest, her Honour issued further written reasons and made orders, including that:-
1. There be judgment for the plaintiff against the defendant in the sum of $270,771.42 together with interest of $142,914.80.
…
4. The Registrar of Titles is ordered pursuant to section 90(3) of the Transfer of Land Act 1958 to remove caveat No AH 019774C from Certificate of Title Vol. 10573 Fol. 546.
5. The defendant pay the plaintiff’s costs of and incidental to this proceeding, including all reserved costs, up to 5 October 2014 on a party/party basis and from 6 October 2014 on a standard basis, with such costs to be taxed in default of agreement.
6. The counterclaim is otherwise dismissed.
…”
The application in this proceeding, nevertheless, remained on foot in the circumstances of an application for leave to appeal from Judge Kennedy’s orders to the Supreme Court of Victoria Court of Appeal which was commenced by the Applicant in or about 15 October 2015. The dismissal of the counter-claim was not appealed, rather the County Court’s jurisdiction to make the orders that it did, was challenged in the context of s.116(3) of the Act.
The Applicant thereafter contended in these proceedings before the Court, that the prospect of an order for costs in the appeal in favour of the Applicant in the proceeding commenced October 2015 was, of itself, a sufficient basis for the extension of the time for compliance with the bankruptcy notice.
Consideration
The application for leave to appeal and the appeal was heard on 27 November 2015. The Court of Appeal handed down its decision on 17 March 2016. The application for leave to appeal was dismissed in reasons given on 17 March 2016 by their Honours, Warren CJ, Tate and Ferguson JJA. The application was said to have “no real prospect of success”.[3]
[3] Jakimowicz v Jacks [2016] VSCA 42, [32] - [33].
The Applicant has not paid, and the Respondent has not received, any other monies in respect of the judgment debt of $54,000, save for the sum of $45,000 paid to the Respondent by the Appeals Cost Board upon the Respondent’s application to the Board (see paragraph 8 herein). Thus the amount of the debt referred to in the bankruptcy notice remaining owing after that payment out is $9,139.81. The Applicant, in fact, made her own application to the Appeal Costs Board on 9 June 2015. There is no evidence before the Court as to whether any award was made to the Applicant consequent upon her own application to the Appeals Cost Board.
In support of the application for an extension of time to comply with the bankruptcy notice was filed an affidavit by the Solicitor for the Applicant, Mr Stephen Byrne, sworn 13 March 2015. The Respondent filed affidavits sworn by Mr Thomas Francis Egan, Solicitor for the Respondent, sworn on 2 April 2015 and 2 December 2015 and Linda Anne Hemphill sworn 6 April 2015.
The Respondent argues in his submission as to costs that the relative strength of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law is relevant to the question the Court is required to consider. Section 32 is drawn in the widest possible terms and there is no reason to believe that it was intended to cut down the conferral of power to award costs (Bent v Gough (1992) 35 FCR 204, 108 ALR 131).
In 1991 the Respondent was injured at work and on 20 December 1995 he received a workers’ compensation payment. At about that time the Respondent entered into an agreement with the Applicant to buy her and her then partner’s real property situate at Preston in the State of Victoria for the sum of $170,000. The Respondent had available to him the monies acquired by him from his compensation payout. The Respondent moved into the Preston property with his mother by Christmas Day 1995. The legal title to the Preston property was however not transferred to him.
The Respondent made various requests for the legal title to be transferred. On 30 August 2000, he lodged a caveat against the title to the Preston property, claiming an interest as purchaser pursuant to an agreement made on or about 12 December 1995. On 22 September 2000, the Respondent commenced County Court proceedings seeking a declaration the Preston property was held on trust for him, and orders that the Applicant do all things necessary to transfer the legal estate and title. At some point in time being after Christmas Day 1995, and whilst the Preston property was not registered to the Respondent, the Applicant and her partner borrowed $200,000 from Suncorp-Metway Limited and secured the loan by a mortgage of land registered against the title to the Preston property.
On 17 April 2001, the Applicant and her then partner were registered as joint proprietors of a property at Willowmavin, near Chintin, which was purchased for the sum of $136,000. At the time of its purchase the Willowmavin property was unencumbered. The Applicant used the funds borrowed from Suncorp-Metway Limited (Suncorp) and secured against the Preston property to purchase the Willowmavin property. At a mediation held in earlier County Court proceedings on 29 August 2002, the Respondent, the Applicant and her partner signed terms of settlement and a declaration of trust. Under the terms of settlement, the Applicant and other party agreed to pay the Respondent $200,000 within 12 months, and declared that they held the Preston property on trust for Mr Jacks to the extent of their net equity. Further that they would perform and comply with the terms of the mortgage and ultimately discharge the mortgage. The Applicant and her then partner did not comply with their obligations under the Suncorp mortgage and, therefore, the terms of settlement or the deed of trust. In October 2007, Suncorp evicted Mr Jacks from the Preston property. He was made bankrupt by his Solicitor when he could not pay his legal fees.
In March 2011, Mr Jacks commenced a second County Court proceeding against the Applicant seeking damages for breach of the deed of trust and/or terms of settlement and declarations. By a writ filed in the County Court of Victoria on 31 March 2011, the Respondent commenced a proceeding against the Applicant concerning a series of real estate transactions, including properties at 18 Hawker Avenue, Preston, and 275 Tantaraboo Road, Willowmavin via Kilmore. The Respondent claimed that moneys paid to him in December 1995 as compensation for workplace injury were traceable into rights he had with respect to the properties.
By summons filed in the County Court on 24 June 2011, the Applicant sought an order dismissing, alternatively permanently staying the proceeding, on the ground that Mr Jacks was an undischarged bankrupt and therefore did not have standing to commence the proceeding. That matter proceeded before Lacava J on 2 November 2011.[4] His Honour determined to stay the proceedings and ordered costs against Mr Jacks. Mr Jacks successfully, as referred to earlier, appealed against those orders.
[4] Jakimowciz v Jacks (Unreported, County Court of Victoria, Judge Lacava, 15 August 2011).
The Applicant has now presented a petition pursuant to s.55 of the Act. The debtor’s petition was accepted on 1 April 2016. Michael Carrafa, Registered Trustee in Bankruptcy, has been appointed. Under s.88 of the Act, the costs orders sought by the Respondent if made now, after the date of the bankruptcy, will be taken into account in her bankruptcy.
The Applicant submits in the circumstances described herein it would be unreasonable to award costs that would impact on genuine creditors of the bankrupt, claiming the actions of the Respondent in bringing the bankruptcy notice based on the first Court of Appeal judgment was unreasonable. To award costs in favour of the Respondent, it is submitted, would be to reward the Respondent for the unreasonableness of his position in issuing a bankruptcy notice and in opposing the application for extension of time which was granted and therefore successful. The Court notes that the Respondent is himself a genuine creditor of the Applicant in large sum and that the actions of the Applicant have caused him great hardship and poverty.
Counsel for the Applicant submits that the Applicant has a net equity in the property she owns of about $220,000 and that there are more than $1,000,000 in debts, comprising the judgment debt, the Respondent’s costs of the proceedings, debts to family members, unpaid legal costs to the Applicant’s Solicitors and costs of bankruptcy.
The actions of the Respondent were not unreasonable. The Applicant should have complied with the bankruptcy notice served on her on 13 March 2015 and chose not to do so. On 1 April 2016, she presented her own petition. The Respondent has been obliged to spend time and incur cost caused by the Applicant in effect delaying these proceedings in circumstances where the Applicant was otherwise litigating a case with no real prospect of success.
The application to set aside the bankruptcy notice was dismissed and whilst both parties ultimately sought that order there was on the facts of the case no other order that could have been made.
The Court does not propose to make an order for indemnity costs or solicitor/client costs. Rather, the Court will make an order for usual party/party costs in the exercise of its discretion to be taxed and paid as a priority payment in the Applicant’s bankrupt estate.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Hartnett
Associate:
Date: 2 June 2016
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