Maxim Security Group Pty Ltd (In Liq) v Robertson (No.2)

[2008] FMCA 71

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MAXIM SECURITY GROUP PTY LTD (IN LIQ) v ROBERTSON (No.2) [2008] FMCA 71

BANKRUPTCY – Indemnity costs.

Bankruptcy Act 1966, s.109

Applicant: MAXIM SECURITY GROUP PTY LTD (IN LIQUIDATION) (ACN 093 374 737)

Respondent: DULCIE GAYLE ROBERTSON

File number: MLG 1296 of 2004

Judgment of: McInnis FM

Hearing date: 24 January 2008

Delivered at: Melbourne

Delivered on: 24 January 2008

REPRESENTATION

Counsel for the Applicant Petitioning Creditor: Ms L. Kinda

Solicitor for the Applicant Petitioning Creditor: Consumer Law Action Centre

Counsel for the Respondent Debtor: Mr M.W. Sanger

Solicitor for the Respondent Debtor: MSB Lawyers

Counsel for the Trustees Mr C Charles

Solicitor for the Trustees Charles Fice

ORDERS

1. The Application for extension of time is refused.

2. The Application for Review filed 4 October 2007 be dismissed.

3. The costs of the Petitioning Creditor shall be paid on an indemnity basis to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules and to be paid out of the estate of the Bankrupt pursuant to the provisions of the Bankruptcy Act 1966, having the same priority as the Trustees' costs and expenses. 

NOTE:

The Trustees will discharge their duty pursuant to s.109 of the Bankruptcy Act 1966.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 1296 of 2004

MAXIM SECURITY GROUP PTY LTD (IN LIQUIDATION)
(ACN 093 374 737)

Applicant

And

DULCIE GAYLE ROBERTSON

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. In this matter there is a dispute in relation to the form of order the court should make concerning costs.  The court has already indicated to the parties that it would not make an order against the lawyers for the bankrupt personally. 

2. The issue now before the court is the form of order for costs, if any, to be made following the refusal of the court to grant an extension of time within which the bankrupt could rely upon an application to review the sequestration order and a further order of the court that the application for an extension of time be refused and the application for review be dismissed.

3. The petitioning creditor's counsel has sought an order for indemnity costs and that those costs be paid out of the estate of the bankrupt according to law and has otherwise sought an order that the petitioning creditor's costs be given the same priority of payment as those costs and expenses incurred in these proceedings by the trustees. 

4. It is noted at the outset that the trustees are content in these proceedings - appropriately, in my view - to rely upon the operation of section 109 of the Bankruptcy Act 1966 (the Bankruptcy Act).

5. It seems to me that it is sufficient that the court, whatever it decides, simply ensures that a notation is added to the order in the following terms, namely that the trustees will discharge their duty pursuant to section 109 of the Bankruptcy Act. That has the effect of protecting the trustees in relation to those costs and expenses incurred in these proceedings without the need for further order which would otherwise have the potential of restricting those costs to party‑party costs or subject the claim to the taxation processes of the court.

6. Clearly there are other avenues to pursue in relation to the reasonableness of trustees' expenses and costs under the Bankruptcy Act.

7. When considering an application for indemnity costs it is clear that the court has a discretion, and a discretion as to whether to award indemnity costs in the matter of this kind is a discretion which must be exercised according to law.

8. I accept, as submitted by counsel for the petitioning creditor, that relevant matters to be taken into account in the exercise of that discretion in a case of this kind include what might be described as the extraneous purpose of the late application for review and/or otherwise the conduct of the bankrupt throughout the course of the administration of the estate. 

9. In my view, the material reveals, to my satisfaction, sufficient evidence that this late application had, as at least one of the alternative purposes, what might be described as an extraneous purpose, leading to a result that all debts, including fees and expenses incurred by the trustees, would be defeated should the extension of time be granted. 

10. For reasons which are apparent in my substantive judgment, I have otherwise noted the conduct of the bankrupt, recited in the affidavit material relied upon by the trustees and to which I have referred in paragraph 29 of my judgment. 

11. The indemnity costs application has been strenuously resisted by counsel for the bankrupt and it has been submitted that in this case there are other factors which should mitigate against the granting of an indemnity costs order. 

12. Reference is made to the fundamental issue of the underlying debt and the possibility that issues concerning the underlying debt - now, I might note, which appears to be almost six to seven years' old - may be raised by way of a further application to the state Magistrates' Court.  Submissions were otherwise made in relation to what appears to be, on the face of it, reluctance on the part of the petitioning creditor and indeed the trustees who consider mediation of this matter. 

13. In my view, where there is material before the petitioning creditor and/or the trustees of the kind before the court on this occasion leading to a refusal to grant an extension of time to rely upon the application for review, I see no reason why further cost and expense should then be incurred in what would appear to be a somewhat futile exercise of mediation. 

14. I am not persuaded that the potential for other proceedings and the attempt to seek to set aside what is now a very old default judgment should otherwise be a factor that I should give any weight to in considering the exercise of my discretion in relation to the indemnity costs request by the petitioning creditor. 

15. I am satisfied, for the reasons given, that there has been evidence of what I have described as an extraneous purpose in these proceedings relied upon by the bankrupt and/or conduct by the bankrupt of the kind which I have already described which, taken either individually or collectively, provide a sufficient basis upon which the court should make an order for indemnity costs.  That, in my view, seems to be a fair and just outcome in these proceedings, particularly where I have made findings of the kind described earlier and referred to in the substantive judgment.

16. In my view, it is also appropriate in the circumstances that the petitioning creditor's costs order be given the same priority as the trustee's, having regard to the circumstances of the application and my findings.

17. In those circumstances, I will make the formal orders of the court. 

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate: 

Date:  24 January 2008