FEDERAL COURT OF AUSTRALIA
Lowbeer v De Varda [2018] FCAFC 115
Appeal from: Lowbeer v De Varda and Lowbeer v Tov-Lev [2017] FCCA 1658 File number(s): NSD 1359 of 2017
NSD 1360 of 2017Judge(s): REEVES, FARRELL AND COLVIN JJ Date of judgment: 24 July 2018 Catchwords: BANKRUPTCY AND INSOLVENCY - appeal from Federal Circuit Court dismissing creditor's petitions based on certificates of taxation and costs order made in favour of petitioning creditor against the respondents - where primary judge found in truth and reality no debt due and payable because costs had been incurred by third party - principles to be applied when court invited to go behind a judgment to determine whether in truth and reality there was a debt behind the judgment relied upon as basis for petition - whether a costs agreement existed between petitioning creditor and solicitor acting in proceedings where costs order obtained - no factual error in finding by primary judge - appeals dismissed
EQUITY - where primary judge rejected claim that third party paid costs in recognition of an obligation to indemnify petitioning creditor - consideration of matters required to establish a right of subrogation - whether payment by third party of costs discharged obligation to indemnify petitioning creditors - no error by primary judge
Legislation: Bankruptcy Act 1966 (Cth) ss 43(1), 52
Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) r 4.06(2)
Cases cited: Abigroup Ltd v Abignano (1992) 39 FCR 74
Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495
Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221
Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833
Ernst & Young (Reg) v Tynski Pty Limited (2003) 47 ACSR 433; [2003] FCAFC 233
Francis v Eggleston Mitchell Lawyers Pty Ltd [2014] FCACF 18
Gerrard Cassegrain & Co Pty Ltd v Cassegrain (2013) 87 NSWLR 284; [2013] NSWCA 453
Halliday v High Performance Personnel Pty Ltd (in liq) (formerly Sacs Group Pty Ltd) (1993) 113 ALR 637
In re a Debtor [1929] 1 Ch 125
Linsley v Petrie [1998] 1 VR 427
Marsh v Baxter[No 2] [2016] WASCA 51
Midland Banking Co v Chambers (1869) LR 4 Ch App 398
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- Lowbeer v De Varda [2018] FCAFC 115
- Case
- [2018] FCAFC 115
- Decision Date
CaseChat Overview and Summary
The court found no factual error in the primary judge's finding that Mr Lowbeer had not been paid by the Congregation. It also found no error in the primary judge's rejection of the claim that the third party had paid the costs in recognition of an obligation to indemnify Mr Lowbeer. The court concluded that it had not been demonstrated that the decision by the Federal Circuit Court was in error.
The appeals were dismissed. Mr De Varda was ordered to pay Mr Lowbeer's costs of the appeal, confined to those costs which may be recovered by a litigant in person, with liberty to apply within 14 days to vary the order as to costs.
Orders
Orders of the court
1. The appeal be dismissed.
2. The appellant do pay the respondents’ costs of the appeal, confined to those costs which may be recovered by a litigant in person.
3. There be liberty to apply within 14 days to vary the order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
For the following reasons, it has not been demonstrated that the decision by the Federal Circuit Court was in error. The appeals should be dismissed.Previous sequestration proceedings There have been two sequestration proceedings involving the present parties. Prior to the petition that was dismissed by the primary judge (the subject of the present appeal), there were earlier proceedings in 2013 in which sequestration orders were made against Rabbi Tov-Lev and Mr De Varda. Those proceedings were based upon an unpaid costs order in proceedings in the Supreme Court of New South Wales. In those Supreme Court proceedings, Rabbi Tov‑Lev, Mr De Varda and David Cliffe were among the unsuccessful plaintiffs in claims against the directors of the Congregation and Mr Lowbeer (its auditor). A costs order was made in Mr Lowbeer's favour. It was assessed in an amount of $48,212.62 and the assessment was entered as a judgment of the Supreme Court on 24 April 2013. Based on their failure to comply with the costs order of the Supreme Court, Mr Lowbeer filed three creditor’s petitions. Sequestration orders were made against Rabbi Tov‑Lev, Mr De Varda and Mr Cliffe on 20 December 2013: Lowbeer v Tov‑Lev [2013] FCCA 1813. Rabbi Tov‑Lev, Mr De Varda and Mr Cliffe appealed that decision and applied to have the sequestration orders annulled. That appeal and the application were dismissed by Rares J and the 2014 costs order was made: Tov-Lev v Lowbeer (No 2) [2014] FCA 379. On the appeal, Rares J noted that in opposing the petitions, Rabbi Tov‑Lev and Mr De Varda claimed, amongst other things, that Mr Lowbeer had been paid his costs by the Congregation so that the debt arising from the Supreme Court costs order had been satisfied: at [37]. Rares J considered an exchange of emails between Mr Neumann (on behalf of the Congregation) and Mr Lowbeer in relation to payment of Mr Lowbeer’s defence costs in the Supreme Court proceedings. Some of the emails were copied to Mr Austin of Austin Legal who had been the solicitor for the Congregation (but not Mr Lowbeer) in those proceedings. At [50]-[51] Rares J made the following findings concerning the payment of the costs the subject of the order made in favour of Mr Lowbeer by the Supreme Court:Mr Lowbeer then tendered correspondence entered into between himself and Mr Neumann in early May 2013. Mr Lowbeer wrote, in an email of 2 May 2013, that he was very disappointed that the old board had not sent a cheque for the whole of the legal costs that Caunt and Lowbeer had incurred, having previously been advised that the old board had approved full payment of those costs. He inquired whether Mr Neumann would give Mr Austin instructions to commence bankruptcy proceedings since no one had responded to letters of demand for the payment of the 2013 costs order sent to “everyone (except the Rabbi ???) [sic]” so that the appellants could be made bankrupt as soon as possible. Mr Neumann responded the next day saying that he had not been able to get consensus without a face to face board meeting, other than to pay the difference between the party/party and solicitor/client costs, being $13,635.12. He observed that, since Mr Austin was acting for Mr Lowbeer in the enforcement of the 2013 costs order and the time given in the letters of demand had expired, Mr Lowbeer could instruct Mr Austin to commence bankruptcy proceedings against such persons as Mr Lowbeer chose to sue, whom he said should include Mr de Varda and Mr Cliffe. Mr Neumann wrote that Mr Lowbeer could then look to the company for the costs that had not been recovered and that Mr Austin would be put in the funds necessary for issuing and serving bankruptcy notices. On 6 May 2013, Mr Lowbeer responded, voicing his disappointment, but accepting the interim payment. He noted that Caunt and Lowbeer did not have any cost agreement with Mr Austin, and sought confirmation that the company would cover the costs of recovery from all the people that his company decided to sue.Mr Lowbeer gave evidence that he had not been paid any money, and that Caunt and Lowbeer had only received the $13,635.12 in respect of the costs. He understood that Caunt and Lowbeer, from which he had retired in mid-2011, had incurred all of the legal costs the subject of the assessment under which the 2013 costs order had been assessed. I accept Mr Lowbeer’s evidence.