Loftus v Clark (No.2) - [2003] FMCA 102

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LOFTUS v CLARK (No.2)

[2003] FMCA 102

PRACTICE & PROCEDURE – Costs – Respondent’s costs payable where leave to proceed granted to Applicant where opposition of trustee extended hearing time – 70% of costs of Respondent payable.

Applicant:

ANTHONY LOFTUS

Respondent:

GRAHAM J. CLARK (AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF MICHAEL LOFTUS)

File No:

MZ 1199 of 2002

Delivered on:

5 March 2003

Delivered at:

Melbourne

Hearing Date:

5 March 2003

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr C. Moshidis

Solicitors for the Applicant:

Noble Lawyers

Counsel for the Respondent:

Mr P. Duggan

Solicitors for the Respondent:

Madisons

ORDERS

That the applicant shall pay 70 per cent of the respondent's costs in accordance with the Federal Court scale, to be taxed in default of agreement pursuant to order 62 of the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 1199 of 2002

ANTHONY LOFTUS

Applicant

And

GRAHAM J. CLARK (AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF MICHAEL LOFTUS)

Respondent

REASONS FOR JUDGMENT

In this application I published reasons for a decision and indicated that subject to hearing further submissions from counsel, I propose making an order that pursuant to section 58(3)(b) of the Bankruptcy Act 1966, Anthony Loftus (the applicant), is granted leave nunc pro tunc to continue legal proceedings in County Court action number 5040 of 2001 against Graham J. Clark (the respondent) as trustee in bankruptcy of the estate of Michael Loftus up to and including the judgment of the said County Court proceedings.
Upon announcing that proposed order, I indicated to the representatives of the applicant and respondent that I would allow time for them to consider the precise form of the order and any other orders that may be sought. Both have agreed that the form of order as set out in my reasons for judgment would be appropriate in this application.
An issue has arisen in relation to the issue of costs. The applicant has submitted that having succeeded in obtaining an order in his favour, the court should make an order for costs, that is, that the respondent pay the applicant's costs.
My attention has been drawn to correspondence from the solicitors for the applicant to the respondent and in particular a letter dated 10 December 2002 whereby the applicant's solicitors indicate to the respondent solicitor's a willingness to settle this proceeding on terms that the parties consent to orders 1 and 2 set out in the application namely seeking a declaration that s.58(3)(b) does not apply and leave to proceed be granted and that there be no order as to costs.
I was also invited to consider earlier correspondence dated 27 November 2002 addressed directly to the respondent. That simply refers to service of the application upon the respondent and preparation of the material. It does refer to the applicant putting the respondent on notice that an order for costs would be sought personally against the trustee in the event that the matter succeeded. It has been therefore submitted on behalf of the applicant that at least up to 9 December 2002 an order should be made that the respondent pay the applicant's costs on a party/party basis and thereafter. I understand the submission, the costs should be awarded on an indemnity or solicitor/client basis, thereby effectively regarding the letter of 10 December 2002 as a Calderbank offer. The consequences which would flow from that Calderbank offer are similar to those consequences that would flow if there had been a formal offer of compromise.
It has been submitted that although the order now made by the court is not in the same form as the orders sought in the application or indeed the orders sought during the course of submissions, it is nevertheless an order favourable to the applicant and to that extent the applicant has been successful.
Counsel for the respondent has submitted that in fact an order should be made that the applicant pay the respondent's costs and that those costs be paid on a party/party basis. It is submitted that effectively the order of the court and the judgment of the court, rather than reflecting success for the applicant, essentially rejects a number of matters raised by the applicant and in particular the suggestion that there was no need for leave to be obtained, that section 58(3) of the Bankruptcy Act did not apply to the applicant and, in any event, the declaration has not been granted of the kind sought by the applicant.
Further, the respondent submits that the order now made is not of a kind similar to the order sought in the original application, nor is it a conditional order of a kind sought during the course of submissions. To that extent, it is submitted that there has not been success of a kind which would attract the normal operation of the principle that costs follow the event in favour of an applicant in this case.
It is further submitted by the respondent that in circumstances of this kind, although it is true that the application was not the subject of consent or agreement to the extent that it might be relevant from the respondent and that it was certainly not indicated to the court that the application was unopposed, that the opposition was opposition which was justifiable, particularly having regard to the findings I have made and in particular the finding that I have made that it is necessary for the applicant to seek and be granted leave in order to continue with the County Court proceedings.
By way of reply, it was submitted on behalf of the applicant that in this case the opposition on a number of levels has resulted in the hearing being somewhat longer than might otherwise have been the case, the issues therefore becoming, I infer, more complex and to that extent the costs incurred are the kind which may be said to be more significant than might otherwise be the case. In my view, the normal rule that costs follow the event in an application of this kind is of limited assistance.
As I have now found, it is necessary for the applicant to seek leave from the court to continue the County Court proceedings. The leave of the court is not a matter which can be subject to consent. To the extent that it is therefore a matter within the discretion of the court and, at best, it can be indicated by a trustee that such leave is not opposed, it is therefore still, in my view, upon the granting of leave, an order which effectively could be regarded as an indulgence to the party seeking that leave.
The requirement to seek leave is not a requirement imposed upon the applicant by the respondent. It is a requirement imposed by the legislation as interpreted by me, and that requirement is subject to this court being satisfied that in all the circumstances it is appropriate that leave be granted. I accept that it is true in the present case that the respondent vigorously argued that this was not a case where leave should be granted. Obviously, in general terms, to that extent, the submissions made for and on behalf of the respondent have been unsuccessful.
Doing the best I can on the material available to me, it is my view that in general circumstances of this kind where a party seeks leave and is granted that leave, the party obtains the benefit therefore of the court order and should not therefore also obtain the benefit of a cost order against the other party. In my view, applications of this kind are properly the subject of submissions for and on behalf of the trustee who has to act in the interests of the estate and creditors. Whilst the trustee has taken an active interest in the County Court proceedings, that does not, in my view, preclude the trustee from now seeking an order for costs.
I take into account, however, the matters raised by the applicant's representative and further take into account that there was certainly a significant amount of court time taken in relation to the issue of whether leave of any kind ought to be granted, and to that extent perhaps the hearing took longer than it might otherwise have taken and the costs to some extent have been halted. Fundamentally, however, it is my view that the law requires the applicant to seek leave. That leave has now been granted.
This is an application in which the trustee was entitled to participate before this court, and in the manner in which the case was conducted I can see no significant conduct on behalf of the respondent which would lead me to conclude that the respondent should pay costs. The only issue then is whether or not the applicant should pay costs. In my view, I have regard to the nature of the opposition to the leave being granted, I would in all the circumstances believe it is appropriate that there should be an order in favour of the respondent though the order should be limited to the extent of 70 per cent of the respondent's costs.

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 5 March 2003