Mason v Fabriola

[2019] FCCA 2462

FEDERAL CIRCUIT COURT OF AUSTRALIA

MASON v FABRIOLA [2019] FCCA 2462

Catchwords:
PRACTICE & PROCEDURE – COSTS – Assessment of costs following the dismissal of a creditor’s petition by consent.

Legislation:

Federal Circuit Court (Bankruptcy) Rules 2006 (Cth)

Applicant: MARSHA MASON

Respondent: MARISSA FABRIOLA

File Number: SYG 2441 of 2018

Judgment of: Judge Driver

Hearing date: Decided without oral hearing

Delivered at: Sydney

Delivered on: 6 September 2019

REPRESENTATION

Solicitors for the Applicant: Mr J Merewether of Merewether & Co

Solicitors for the Respondent: Mr A Rollins of Sage Solicitors

ORDERS

1. The respondent debtor will pay the applicant creditor her costs of the petition presented on 30 August 2018, fixed in the sum of $7,447.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2441 of 2018

MARSHA MASON

Applicant

And

MARISSA FABRIOLA

Respondent

REASONS FOR JUDGMENT

Introduction and background

1. On 26 August 2019, I dismissed the creditor’s petition in this matter by consent.  The remaining issue, on which there is no agreement between the parties, is the issue of costs of the petition.  The petitioning creditor, Ms Mason, seeks a fixed costs order of $10,165.87.  That claim has been particularised.

2. The respondent debtor, Ms Fabriola, submits that there should be no costs order on the basis that it was not reasonable for Ms Mason to petition on 30 August 2018.  Alternatively, in the event that the Court were to accept that the petition was reasonably presented, Ms Fabriola seeks an order that Ms Mason should recover her costs only up until the date that Ms Fabriola filed her notice of objection to the petition on 23 October 2018.  Ms Fabriola contends, in that regard, that she should not pay any costs that arose during the period in which equity proceedings were pursued in the NSW Supreme Court (Supreme Court) as it was Ms Mason’s choice to place the bankruptcy proceedings on hold for the duration of those equity proceedings.

3. In the further alternative, Ms Fabriola submits that Ms Mason should not receive the costs of adjournments granted on 22 February 2019, 1 March 2019 and 1 July 2019 on the basis that they were required pending the resolution of issues relating to the equity proceedings before the Supreme Court.

4. The parties agreed that I could deal with the issue of costs on the papers. 

Consideration

1. This matter was referred to my docket on 20 November 2018 by a registrar.  Ms Mason claimed the benefit of consent orders in the judgment underlying the bankruptcy notice in this matter and asserted that Ms Fabriola should have been aware of the debt. 

2. Ms Fabriola filed a Notice Stating Grounds of Opposition and an affidavit in support, contending that the debt claimed was not currently due and payable.  There was an order for the provision from the estate of Ms Fabriola’s mother into a certain bank account.  However, it had not been established whether the funds had been paid from the deceased estate into the relevant bank account.  Ms Fabriola sought time to put on evidence about the family provision proceedings which gave rise to the debt and to put on further evidence as to solvency which would be relevant in determining the creditor’s petition.

3. The dispute underlying the creditor’s petition arose out of the administration of the deceased estate.  Ms Mason anticipated the payment of a certain sum from that administration and did not receive the payment.  That expectation arose from orders obtained against Ms Fabriola in Supreme Court proceedings 2016/97974 (Supreme Court proceedings) on 19 February 2018.  There followed correspondence between the solicitors for the parties and the service of the bankruptcy notice on 1 August 2018.  There was no challenge to the bankruptcy notice although it appears that Ms Fabriola obtained legal advice after service of it.  Ms Fabriola committed an act of bankruptcy on 22 August 2018 when she failed to comply with the bankruptcy notice.  The creditor’s petition followed on 30 August 2018 and, following unsuccessful attempts at service, the petition was served pursuant to substituted service orders.

4. Issues of substance were raised by Ms Fabriola in her amended Notice Stating Grounds of Opposition filed on 3 December 2018.  There was an issue of solvency as well as an issue concerning the orders made in the Supreme Court proceedings.  In the light of that amended Notice, Ms Mason relisted the Supreme Court proceedings and sought amending orders.  In those circumstances, I adjourned the hearing of the creditor’s petition pending further orders by the Supreme Court.

5. The upshot of the Supreme Court proceedings was that the sum of $141,725.55 was paid by Ms Fabriola to Ms Mason in June-July 2019.  Ms Mason also obtained a costs order in her favour from the Supreme Court. 

6. The conclusion I draw from these simple facts is that the petition was properly presented.  There was a debt, although it might not have been properly quantified at the time the petition was presented.  It became apparent that the underlying debt needed clarification in the Supreme Court and that clarification was properly sought by Ms Mason, from which time these bankruptcy proceedings were put on hold.  The Supreme Court proceedings were resolved in favour of Ms Mason.  The debt as clarified by the Supreme Court has been paid and it can be assumed that solvency has been established.  The petition was, therefore, appropriately dismissed.

7. In my view, these circumstances call for an award of costs of the petition in Ms Mason’s favour.  There can be no criticism of the conduct of Ms Mason, either by presenting the petition or responding to the amended Notice Stating Grounds of Opposition by reagitating proceedings in the Supreme Court and putting the bankruptcy proceedings on hold.  On the other hand, it became apparent that there was a need to clarify the judgment debt and solvency was raised as an issue and established. 

8. In general terms, these are not uncommon or unusual circumstances.  The Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) (Bankruptcy Rules) provide in rule 13.03(2) that:

   If the petition is dismissed, and the creditor obtains an order for costs, the legal practitioner may charge for costs the amount, applying on the date when the petition was presented, stated in item 14.2 of Schedule 3 to the Federal Court Rules 2011.

9. That amount is $2,088.

10. Rule 13.03(3) provides that:

    (3)  The legal practitioner may also charge:

    (a) if adjournment costs were reserved or awarded on a day--the appropriate amount stated in item 1 of Schedule 3 to the Federal Court Rules 2011 ; and

    (b)  proper disbursements incurred for the petition.

11. In the present matter, adjournment costs were reserved on the following occasions:

    a)24 September 2018;

    b)25 October 2018;

    c)15 November 2018;

    d)19 December 2018; and

    e)22 February 2019.

12. On 26 August 2019, costs of the petition generally were reserved. I accept that Ms Mason should recover her costs of the adjournments set out at [15] above. I also accept that no costs are recoverable in respect of the further adjournments granted on 1 May 2019 and 1 July 2019. The hourly rate claimed on behalf of Ms Mason is less than the prescribed rate and I accept it. I will allow an attendance of one hour at each of the five adjournments at [15].

13. Ms Mason has incurred the following disbursements:

    a)filing fee for the bankruptcy notice - $470;

    b)filing fee for the creditor’s petition - $1,565;

    c)filing fee for interim application for substituted service - $390;

    d)attempt at service fees for the bankruptcy notice - $240;

    e)service fee for the bankruptcy notice - $130;

    f)attempted service fee for the creditor’s petition - $130;

    g)service fee for the creditor’s petition - $130; and

    h)search fees on the National Personal Insolvency Index - $54.

14. These are all proper and reasonable disbursements and total $3,109.  There was also a property search fee for a property at Tarbuck Bay but I have not allowed that.

Conclusion

1. Ms Mason should receive a costs order in her favour, fixed in the amount of $7,447.  I will so order.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Judge Driver

Associate: 

Date:  6 September 2019