Morris Finance Limited v Free [No 2]

[2016] NSWSC 1064

Supreme Court

New South Wales

Medium Neutral Citation:	Morris Finance Limited v Free [No 2] [2016] NSWSC 1064
Hearing dates:	On the papers
Date of orders:	02 August 2016
Decision date:	02 August 2016
Jurisdiction:	Equity
Before:	Darke J
Decision:	Order that the plaintiff pay the costs of the first, third and fourth defendants of the determination of the separate question
Catchwords:	COSTS – determination of separate question – general rule that costs follow event – whether departure from usual position warranted – whether order for indemnity costs appropriate – whether costs should be ordered to be paid forthwith
Legislation Cited:	Bankruptcy Act 1966 (Cth), s 58 Civil Procedure Act 2005 (NSW), s 98(1) Uniform Civil Procedure Rules 2005 (NSW), rr 28.2, 42.1
Cases Cited:	Morris Finance Limited v Free [2016] NSWSC 516
Category:	Costs
Parties:	Morris Finance Limited (Plaintiff) Stewart William Free, trustee of the property of Neil Warren Brown, a bankrupt (First Defendant) Official Trustee in Bankruptcy, trustee of the property of Caroline Elsie Brown, a bankrupt (Second Defendant) Neil Warren Brown (Third Defendant) Caroline Elsie Brown (Fourth Defendant) Holiday Coast Credit Union Limited (Fifth Defendant)
Representation:	Counsel: Mr C Yam (solicitor) (Plaintiff) Mr A Behman (solicitor) (First Defendant) Mr T Flaherty (Third and Fourth Defendants)   Solicitors: Smith Leonard Fahey (Plaintiff) CLH Lawyers (First Defendant) Guy Williams, City Attorneys (Third and Fourth Defendants)
File Number(s):	2015/330173
Publication restriction:	None

Judgment

1. On 15 April 2016 the Court answered a question that had been ordered pursuant to Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) r 28.2 to be determined separately and in advance of all other questions in the proceedings (see Morris Finance Limited v Free [2016] NSWSC 516).

2. The question was whether the plaintiff required the leave of the court (within the meaning of s 58 of the Bankruptcy Act 1966 (Cth)) to commence the proceeding or to take any fresh step in the proceeding. The question was answered “Yes”.

3. That was the answer propounded by the first, third and fourth defendants. The plaintiff submitted that the question should be answered “No”. None of the other parties took an active role in relation to the separate question.

4. The first, third and fourth defendants seek orders that the plaintiff pay their costs of the determination of the separate question. The plaintiff resists such orders, and submits that the costs of the determination of the separate question should be reserved or ordered to be costs in the cause.

5. Directions were made by the Court for the provision of written submissions concerning costs. Submissions have been received from all the relevant parties. In the absence of any suggestion that an oral hearing should occur on this issue, the Court will proceed to deal with it on the papers.

6. The third and fourth defendants simply submit that they were successful on the determination of the separate question and costs should follow the event.

7. The first defendant submitted that not only should costs follow the event, the plaintiff should pay his costs forthwith and on the indemnity basis. It was submitted that costs should be paid forthwith because the interlocutory decision dealt with a self-contained question concerning the ability of the plaintiff to bring the proceedings, quite separate from the issues raised in the proceedings themselves. It was further submitted that a “payable forthwith” order would be appropriate because there may be some delay in the finalisation of the proceedings, noting that the plaintiff intends to seek leave to appeal against the decision of the Court on the separate question and that the assets of the first defendant’s bankrupt estate should not be depleted in the meantime. The first defendant submitted that indemnity costs were warranted because the plaintiff had been afforded the opportunity to have the proceedings transferred to the Federal Court of Australia, where any question of leave under s 58(3) of the Bankruptcy Act could undoubtedly be dealt with, but instead chose to argue in this Court that no such leave was required.

8. The plaintiff submits that no order for costs should be made in favour of the third and fourth defendants, who are bankrupts, because there is no utility in making orders in their favour in circumstances where the benefit of the orders would be, and would remain, vested in their respective trustees in bankruptcy (the first and second defendants). In response to the submissions of the first defendant, the plaintiff pointed out that it was the third and fourth defendants who raised the issue of leave under s 58(3). The plaintiff submitted that there was no relevant misconduct that would justify an order for indemnity costs against it. It was submitted that it would be appropriate to order that the costs of the determination of the separate question be costs in the cause.

9. I do not accept that the plaintiff’s argument that no order for costs should be made in favour of the successful third and fourth defendants because it would lack utility. Even if a lack of utility might afford a ground to decline to award costs to those defendants, such choses in action may be subject to equitable liens or charges; even if they wholly vest in a trustee in bankruptcy, their enforcement may have an effect upon the bankruptcy. A lack of utility has not be shown. I consider that the appropriate order for costs as between the plaintiff and the third and fourth defendants is that the plaintiff pay the third and fourth defendants’ costs of the determination of the separate question. I see no good reason to depart from the usual position that costs follow the event (see UCPR r 42.1).

10. In my opinion a similar order should be made as between the plaintiff and the first defendant. Again, I do not discern any good reason to depart from the usual position. I do not think that the order should be made on an indemnity basis. It is true that the hearing of the separate question could have been avoided if the plaintiff had agreed that the proceedings should be transferred to the Federal Court. Nevertheless, I do not regard the plaintiff’s conduct as being so unreasonable that it should suffer an award of indemnity costs. Moreover, the arguments it advanced on the hearing of the separate question were in my view plainly arguable.

11. Neither do I think that the costs should be ordered to be paid forthwith. There is not likely to be a lengthy delay caused by the making of the application to the Court of Appeal. No evidence was adduced to suggest that any particular prejudice would be sustained if costs were not ordered to be paid forthwith.

12. The Court orders, pursuant to s 98(1) of the Civil Procedure Act 2005 (NSW), that the plaintiff pay the costs of the first, third and fourth defendants of the determination of the separate question.

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Decision last updated: 02 August 2016