Mahoney v CP White of HLB Mann Judd (No.2)
[2005] FMCA 1578
•28 October 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MAHONEY v CP WHITE OF HLB MANN JUDD (No.2) | [2005] FMCA 1578 |
| BANKRUPTCY – Application for costs – where the applicant brought urgent proceedings challenging the decision of the trustee of the bankrupt applicant’s estate – where there was a complete failure of the applicant’s solicitor to file affidavit evidence of bankrupt. PRACTICE & PROCEDURE – Whether or not an order for costs should be made pursuant to rule 21.07 of the Federal Magistrates Court Rules 2001 – whether or not the failure of the applicant solicitor to put file sufficient affidavit evidence and/or to give due consideration to relevant law in the circumstances constitutes “improper conduct or the misconduct” in accordance with the Rules – responsibility of lawyer when making urgent applications. |
| Federal Magistrates Court Rules 2001, Rule 21.07 Bankruptcy Act 1966 (Cth), s.178 |
| Mahoney v CP White HLB Mann Judd [2005] FMCA 1389 Taylor v CGU Insurance Ltd [2005] FMCA 1073 Re Hicks; Ex parte Lamb (1993) 217 ALR 195 |
| Applicant: | ROSS MAHONEY |
| Respondent: | CP WHITE OF HLB MANN JUDD |
| File Number: | MLG 1147 of 2005 |
| Judgment of: | McInnis FM |
| Hearing date: | 15 September 2005 |
| Delivered at: | Melbourne |
| Delivered on: | 28 October 2005 |
REPRESENTATION
| Solicitor for the Applicant: | Mr G. Webster |
| Solicitors for the Applicant: | Grant Webster |
| Solicitor for the Respondent: | Ms C. Dwyer |
| Solicitors for the Respondent: | Wisewoulds |
ORDERS
Pursuant to Rule 21.07 of the Federal Magistrates Court Rules 2001, Grant Webster, lawyer for the applicant, shall pay the respondents costs fixed in the sum of $1,466.50 within 14 days of the date of this order.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1147 of 2005
| ROSS MAHONEY |
Applicant
And
| CP WHITE OF HLB MANN JUDD |
Respondent
REASONS FOR JUDGMENT
In this matter the court made orders on 15 September 2005 and delivered an ex tempore decision (see Mahoney v CP White HLB Mann Judd [2005] FMCA 1389). In that decision an application pursuant to s.178 of the Bankruptcy Act 1966 (Cth) (“the Act”) was dismissed an orders were made that the issue of costs be the subject of written submissions. The respondent solicitors had indicated that the court should make a costs order against the applicant’s lawyer.
The parties were given an opportunity to provide written submissions in relation to the costs issue.
Before considering the submissions made by the parties it is relevant to note that in the court’s ex tempore decision referred to earlier in this judgment clear conclusions were reached concerning what I can only describe as the inadequacy of the material provided for and on behalf of the applicant. This included the failure to provide any affidavit material of the applicant with reliance instead placed upon an affidavit of the applicant’s wife. Further no attempt was made to seek a decision from the trustee on an earlier date which would have avoided the apparent urgency of this application. The affidavit material ultimately relied upon was described by the court as “hopelessly inadequate”.
The respondent filed submissions on 21 and 23 September 2005 and although the submissions appear similar I assume for present purposes it was attended that the court should rely upon the latter of the two submissions in fairness that is a reasonable conclusion given that the applicant’s solicitor filed submissions dated 27 September 2005 in reply to the respondent’s 23 September 2005 submissions.
The respondent relied upon rule 21.07 of the Federal Magistrate Court Rules 2001 which relevantly provides as follows;-
Order for costs against lawyer
(1) The Court or a Registrar may make an order for costs against a lawyer if the lawyer, or an employee or agent of the lawyer, has caused costs:
(a) to be incurred by a party or another person; or
(b) to be thrown away;
because of undue delay, negligence, improper conduct or other misconduct or default.
(b) that the lawyer pay the costs, or part of the costs incurred by the other person; or
(c) that the lawyer pay to the party or other person the costs, or part of the costs, that the party has been ordered to pay to the other person.
It was submitted by the respondent’s that the costs of the application should be borne by the lawyer for the applicant rather than costs being paid from the bankrupt estate which would disadvantage the creditors of the estate. Reliance was placed what is claimed to be “improper conduct or other [mis]conduct” on the part of the applicant’s lawyer based on the following;-
(a)The material which was relied upon by the Applicant was inadequate because at the very least, an Affidavit should have been made by the Applicant, and therefore there was no proper evidence before the court in support of the Application.
(b)The Application made by the Applicant was unfounded because there had been no “decision or omission” by the Respondents and therefore there was no power of the Court to review under section 178 of the Act. Whilst there may have been an “act” of the Respondents which could have been reviewed by the Court under section 178, it was submitted that given the courts finding that the letter was simply a request in writing for further information to be provided by the Application and therefore was not characterised as an “act” upon which an application could be made to the Court under section 179.
(c)The application issued by the applicant was unreasonably initiated by the applicant and had little or no prospect of success…
The respondent referred to a decision of this court in the matter of Taylor v CGU Insurance Ltd [2005] FMCA 1073 where the court dealt with the application of rule 21.07 of the Rules. It was submitted that in this instance there was a clear “dereliction of duty” on the part of the applicant lawyer while lodging an application with the court without sufficient evidence to support the application in the first place. The mere fact that an affidavit was not filed by the applicant himself in support of the application, it was argued is the first “indicator of ‘improper conduct’ pursuant to rule 21.07”. Reliance was placed upon the decision of White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 in support of the respondent’s submission that the applicant had instituted and pursued the application which had no reasonable prospects of success.
The respondent otherwise referred to the chronology of events which was set out in the earlier judgment of the court. It was argued that if the applicant’s lawyer had given proper consideration to documentation which was being sought by the respondents in order to assess the applicant’s request to travel overseas then the application would not have been necessary. The respondent’s itemised costs and argue the sum of $1, 466.50 should be allowed.
The applicant’s written submissions in reply argue that there is no case for awarding costs against a lawyer pursuant to rule 21.07 merely on the basis of a particular view taken by the courts. It was argued that what needs to be shown is “that the view urged by the lawyer in question was in fact unreasonable”. In the submissions reference is made a number of matters purportedly supporting the conclusion the lawyer acted reasonably. Those matters relate to factual issues some of which appear to be in affidavit material. It is not necessary to set out those matters save that I conclude that the factual issues do not in my view relevantly address the question of reasonableness or indeed provide any inadequate response to the submissions made for and on behalf of the respondents.
Notwithstanding the courts decision in this matter the applicants sought to argue that there was “an open and reasonable view that the trustee had in fact made and conveyed a decision not to permit the applicant to travel”. Reference was made to evidence concerning a phone call between the trustee and the applicant’s wife and a conclusion drawn as a result of that alleged phone call, not admitted by the trustee. The conclusion reached was that an adverse decision would be made by the trustee in relation to the applicant’s a request to travel. In those circumstances it was argued that it was reasonable for the lawyer to believe that the trustee in seeking information prior to making a decision regarding the applicant’s travel should have limited the inquiry to matters relative to that travel. Reference was made to other information sought by the trustee which as I understand it was argued and included other items relating to a statement of affairs, books and records, an interview and what was described the applicant solicitor as an open ended “opportunity to assess income contributions”.
It was otherwise argued that this was not a case where the applicant’s lawyer engaged in any improper conduct or any misconduct but “simply made a necessary application in an attempt to resolve a family’s crisis”.
Reasoning
In my view applying the authorities with which reference to has been made by the respondent’s solicitor. I am satisfied that in the exercise of the courts discretion that it is appropriate to make an order against the lawyer for the applicant personally in relation to costs.
As I indicated in my earlier substantive judgment the material was “hopelessly inadequate”. I accept the submissions made on behalf of the respondent that in this instance the court, whilst theoretically acknowledging that a letter might constitute an “act” of a kind which would attract the courts jurisdiction pursuant to s.178 of the Act, concluded that on a proper reading of that correspondence that relevant letter was no more than a request for further information to enable the trustee to properly discharge the trustee’s duties pursuant to the Act in considering the request the of the bankrupt to travel.
A substantial part of the submissions made for an on behalf of the applicant in opposition to an order for costs being paid by the applicant’s lawyer related to the family circumstances of the bankrupt. Whilst those circumstances are clearly of significance to the applicant, that does not of itself relieve a lawyer of the responsibility of instituting proceedings only after due and proper consideration of all options available. Once proceedings are instituted then it is incumbent upon lawyers to ensure that appropriate and relevant affidavit material is prepared in support of an application. Where a bankrupt seeks to characterise a letter requesting information as an act of a kind that would attract the courts jurisdiction pursuant to s.178 of the Act, and to then seek to challenge that act, then it is difficult to conceive that a lawyer acting responsibility would not at the very least would file and serve an affidavit deposed to by the applicant himself.
Further, on a proper analysis of the letter in question, it is again difficult to see how it could be characterised as anything other than a request for information. The mere fact that an assertion is made that a telephone conversation occurred where reference was made to the prospects of a request for travel being met in the short term time frame does not of itself mean that a concluded view has been reached in the absence of certain information. Clearly the information required to be considered includes the genuineness of the visit, the likelihood of return to Australia as promised and whether the visit would hamper the administration of the estate. So much is clear from the decision of Heerey J in ReHicks;Ex parte Lamb (1993) 217 ALR 195. However in considering those issues referred to in the applicant’s submissions I do not accept as submitted by the applicant that other matters raised in the trustee’s letter were not at the very least indirectly relevant to those issues. The requests for earnings, statement of affairs, books and records and arranging an interview in order to provide an opportunity to assess income contributions are clearly relevant to any decision to be made in relation to proposed travel. Bankrupts cannot simply seek permission from the court to travel without affidavit evidence and without attending to what might be regarded as basic and fundamental requests made for and on behalf of the trustee in the discharge of the trustee’s duty, pursuant to the Act in the interests of creditors. A lawyer acting for an applicant in these circumstances should readily appreciate that the letter in this instance was no more than a request by the trustee to enable the trustee to make a decision in a proper and normal manner the discharge of the trustee’s duties under the Act.
Hence in my view the failure to make a proper assessment according to law of the prospects of success of this application and bringing the application on before the court as a matter of urgency together with the complete failure to provide any or any adequate affidavit material is sufficient to constitute what I would regard as “improper conduct or other misconduct” for the purpose of rule 21.07. Having made that finding it follows in my view that in this instance the court should make the orders requested by the respondents that the applicant’s lawyer pay the costs in the amount claimed. I further find and accept that in the exercise of my discretion prejudice may arise to creditors if the court were to merely make an order that those costs be paid out of the bankrupt estate.
In making urgent application’s seeking to review of a decision of a trustee under s.178 of the Act lawyers acting for parties must realise that that it is a significant application that must be properly considered and supported by appropriate affidavit evidence. In this instance there has been a failure to both properly consider the law in relation to the matter and, in my view, a complete failure to file and serve appropriate affidavit evidence in support of the application.
It follows for the reasons given that the orders sought by the respondent should be made. In my view having considered the quantum of the amount claimed as itemised in the submissions made for and on behalf of the respondents I am satisfied that in the exercise of the courts discretion it is appropriate to fix the costs in the sum of $1,466.50 which appears to me to be a fair and reasonable sum.
Accordingly the order of the court will be as follows:
Pursuant to Rule 21.07 of the Federal Magistrates Court Rules 2001, Grant Webster, lawyer for the applicant, shall pay the respondents costs fixed in the sum of $1,466.50 within 14 days of the date of this order.
I certify that the preceding (19) nineteen paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 28 October 2005
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