FEDERAL COURT OF AUSTRALIA
Mitry Lawyers v Barnden [2014] FCA 918
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1653 of 2013
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: MITRY LAWYERS
AppellantAND: ANDREW BARNDEN
Respondent
JUDGE:
WIGNEY J
DATE OF ORDER:
26 AUGUST 2014
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The appeal be allowed.
2.Order 1 of the orders made by the Federal Circuit Court on 24 July 2013 be varied by deleting the words “and Mitry Lawyers are to jointly and severally”.
3.Order 2 of the orders made the Federal Circuit Court on 24 July 2013 be set aside.
4.Andrew James Barnden in his capacity as trustee of the bankrupt estate of George Tadrosse, pay the costs of the appellant, Mitry Lawyers, in relation to the Application in a Case filed 23 May 2013 in the Federal Circuit Court.
5.The respondent to pay the appellant’s costs of this appeal.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
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Details
- AGLC
- Mitry Lawyers v Barnden [2014] FCA 918
- Case
- [2014] FCA 918
- Decision Date
CaseChat Overview and Summary
The case of Mitry Lawyers v Barnden involved an appeal from the Federal Circuit Court of Australia concerning costs incurred during bankruptcy proceedings. The primary issue was whether the Federal Circuit Court judge erred in his discretion to award indemnity costs against the bankrupt's solicitors, Mitry Lawyers. The court found that the primary judge made several errors in his assessment and awarded of indemnity costs.
The court examined the basis on which the primary judge ordered Mitry Lawyers to pay the costs of the Trustee on an indemnity basis. The primary judge found that the bankrupt's solicitors had acted improperly by not fully informing the bankrupt about the litigation and its potential consequences, and by not reality testing the bankrupt's instructions. The primary judge concluded that, but for the lawyers' improper conduct, the litigation would not have been commenced and the Trustee would not have incurred the costs. The court found that the primary judge erred in his assessment of the bankrupt's language difficulties and in his conclusion that the litigation would not have been commenced but for the lawyers' improper conduct.
The court found that the primary judge erred in his consideration of the bankrupt's language difficulties. The court found that the primary judge's conclusion that the bankrupt had formidable language difficulties was not supported by the evidence. The court found that the primary judge erred in his conclusion that the litigation would not have been commenced but for the lawyers' improper conduct. The court found that the primary judge failed to consider whether the bankrupt would have commenced the litigation but for the lawyers' improper conduct. The court found that the primary judge failed to consider whether the bankrupt would have commenced the litigation if the lawyers had properly advised him about the consequences of his application.
The appeal was allowed. The orders made by the Federal Circuit Court on 24 July 2013 were varied and set aside. The Trustee was ordered to pay the costs of the appellant, Mitry Lawyers, in relation to the Application in a Case filed 23 May 2013 in the Federal Circuit Court. The respondent was ordered to pay the appellant’s costs of this appeal.
The court examined the basis on which the primary judge ordered Mitry Lawyers to pay the costs of the Trustee on an indemnity basis. The primary judge found that the bankrupt's solicitors had acted improperly by not fully informing the bankrupt about the litigation and its potential consequences, and by not reality testing the bankrupt's instructions. The primary judge concluded that, but for the lawyers' improper conduct, the litigation would not have been commenced and the Trustee would not have incurred the costs. The court found that the primary judge erred in his assessment of the bankrupt's language difficulties and in his conclusion that the litigation would not have been commenced but for the lawyers' improper conduct.
The court found that the primary judge erred in his consideration of the bankrupt's language difficulties. The court found that the primary judge's conclusion that the bankrupt had formidable language difficulties was not supported by the evidence. The court found that the primary judge erred in his conclusion that the litigation would not have been commenced but for the lawyers' improper conduct. The court found that the primary judge failed to consider whether the bankrupt would have commenced the litigation but for the lawyers' improper conduct. The court found that the primary judge failed to consider whether the bankrupt would have commenced the litigation if the lawyers had properly advised him about the consequences of his application.
The appeal was allowed. The orders made by the Federal Circuit Court on 24 July 2013 were varied and set aside. The Trustee was ordered to pay the costs of the appellant, Mitry Lawyers, in relation to the Application in a Case filed 23 May 2013 in the Federal Circuit Court. The respondent was ordered to pay the appellant’s costs of this appeal.
Orders
Orders of the court
1. The appeal be allowed.
2. Order 1 of the orders made by the Federal Circuit Court on 24 July 2013 be varied by deleting the words “and Mitry Lawyers are to jointly and severally”.
3. Order 2 of the orders made the Federal Circuit Court on 24 July 2013 be set aside.
4. Andrew James Barnden in his capacity as trustee of the bankrupt estate of George Tadrosse, pay the costs of the appellant, Mitry Lawyers, in relation to the Application in a Case filed 23 May 2013 in the Federal Circuit Court.
5. The respondent to pay the appellant’s costs of this appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
This appeal concerns bankruptcy proceedings that went awry in the Federal Circuit Court. The issue is whether orders made by the primary judge requiring the bankrupt’s lawyers to pay the cost of those proceedings on an indemnity basis should stand. For the reasons that follow they should not.Background In May 2012, Mr George Tadrosse was made bankrupt. Like many bankrupts he did not think that he should have been. Despite this, aside from entering into some discussions with his Trustee in bankruptcy, Mr Andrew Barnden (the Trustee), who is the respondent to this appeal, Mr Tadrosse did little about this. That was until the Trustee took steps to sell Mr Tadrosse’s house in March 2013. That spurred him into action. The auction was to take place on 23 March 2013. On 18 March 2013, Mr Tadrosse consulted Mitry Lawyers (Mitry), the appellants in this appeal. He spoke with an employed solicitor, Mr Yin. He told Mr Yin that he had to stop the sale of his house “no matter what”. Mr Yin took instructions and, after consulting his supervisor, Mr Rick Mitry, the principal of Mitry, Mr Yin briefed a barrister, Mr Tony Rogers. Mr Rogers was a barrister known to Mr Mitry. He had been a barrister for about 25 years. He was briefed to advise whether there was a basis to bring proceedings to stop the sale and, if so, to appear for Mr Tadrosse in the proceedings. The following day Mr Yin attended a conference with Mr Rogers. Mr Rogers gave advice in conference to Mr Yin. He advised that Mr Tadrosse had a “good case” against the Trustee for the annulment of the bankruptcy. Pending the determination of that claim, Mr Rogers advised that Mr Tadrosse could seek an injunction preventing the sale of his house. Mr Rogers was briefed to draft the originating process. Mr Yin met with Mr Tadrosse again the next day, 20 March 2013. This conference was also attended by Mr Tadrosse’s wife. It seems that this may have been because Mr Tadrosse was not completely fluent in English. The extent of that deficiency is a matter of some controversy. It is addressed in a little more detail later. In any event, Mrs Tadrosse assisted by interpreting during at least some parts of the conference. During the conference, Mr Yin apparently took more detailed instructions from Mr Tadrosse and prepared an affidavit for swearing by Mr Tadrosse. Before having Mr Tadrosse swear the affidavit, Mr Yin read out each paragraph and had Mrs Tadrosse interpret the paragraph to Mr Tadrosse in his first language, Arabic. Mr Yin also attended another conference with Mr Rogers later that day. This conference was also attended by Mr and Mrs Tadrosse. During this conference Mr Tadrosse provided further instructions to Mr Rogers (and Mr Yin) concerning the circumstances in which he was made bankrupt. There is no indication that Mr Tadrosse’s apparent English language difficulties hindered or compromised effective communications during this conference. It is not clear whether it was necessary for Mrs Tadrosse to assist by interpreting during this conference.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
As for whether this improper conduct caused costs to be incurred by the Trustee, his Honour again returned to Mr Tadrosse’s supposed language difficulties. He found that having regard to the language difficulties “the court does not accept the likelihood of the bankrupt having initiated any application on his own” (at Judgment [28]). His Honour concluded that, viewing the question of causation “realistically, not hypothetically”, “[b]ut for the lawyers’ improper conduct” the litigation would not have been commenced and the Trustee would not have incurred the costs he has (at Judgment [29]).Four errors that infect the costs decision Mitry contends that the primary judge made four errors in considering and arriving at the costs decision. Each will be considered in turn. Each has merit. Denial of procedural fairness Mitry contends that the Trustee and the court were obliged to give full and sufficient notice of the allegations that grounded the Trustee’s costs application. This it did not do. The only notice that was given was that the Trustee alleged that the conduct of Mr Yin was improper because he acted for Mr Tadrosse in proceedings that were doomed to fail, futile, had no prospects of success and no merit in law. Yet the primary judge found that Mr Yin’s conduct was improper on a different basis. The finding of improper conduct was based on the finding that Mr Yin did not fully inform Mr Tadrosse about the litigation and its potential consequences, and did not reality test Mr Tadrosse’s instructions. This, in turn, was based on a finding that there were “formidable language difficulties” that Mr Yin inappropriately dealt with by using Mrs Tadrosse, who was not a qualified interpreter and was not impartial. In his submissions, the Trustee implicitly accepted that he did not put Mitry on notice that he alleged that Mr Yin acted improperly because he failed to retain a qualified interpreter and failed to properly advise Mr Tadrosse about the consequences of his application. The Trustee submits, however, that this was because the fact that Mr Yin was aware of Mr Tadrosse’s language difficulties only became apparent on the day of the hearing. That was because Mitry’s file was not produced until the day of the hearing. Mr Yin was then cross-examined about his file note that recorded that Mr Tadrosse had language difficulties. The Trustee submits that Mitry did not seek an adjournment as a result of the cross-examination of Mr Yin. He also submits that the findings concerning Mr Tadrosse’s language difficulties and the use of Mrs Tadrosse as an interpreter were not determinative of the costs application. Mitry’s submission that there was a denial of procedural fairness because insufficient notice was given of the Trustee’s complaint has considerable force. The Trustee’s submissions have no merit and are rejected. There can be no doubt that the court was obliged to ensure that Mitry had full and sufficient notice of the basis of the complaint and sufficient opportunity to answer it: Lemoto at [92(e)] and [146]; r 21.07(5)(a). What was required was the specification of the allegation with particularity. That was not done here. The allegation made by the Trustee was put in narrow terms in the amended application. It was simply alleged that Mitry acted for Mr Tadrosse in a hopeless case. That was the only allegation that Mitry was given a fair opportunity to respond to.
Ratio Decidendi
Legal Principle Established
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