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Morris Finance Ltd v Free (No 2)

Morris Finance Ltd v Free (No 2)

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Case Copied 7 November 2017 24 min read

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Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Morris Finance Ltd v Free (No 2) [2017] NSWSC 1514
Hearing dates: On papers
Decision date: 07 November 2017
Jurisdiction: Equity
Before: Ward CJ in Eq
Decision:
1.   Set aside the costs order made in favour of the first, third and fourth defendants on 3 August 2016 by Darke J in these proceedings.
2.   In lieu thereof, order that:
(i)   the first defendant pay the plaintiff’s costs of the determination of the separate question before Darke J, such costs to be assessed on the ordinary basis and such liability to be limited to the extent of the assets, if any, vested in the first defendant in his capacity as trustee of the property of the third defendant’s bankrupt estate; and
(ii)   the third and fourth defendants be jointly and severally liable to pay the plaintiff’s costs of the determination of the separate question before Darke J, such costs to be assessed on an indemnity basis.
3.   Order the first defendant to pay the plaintiff’s costs of the balance of these proceedings, such costs to be assessed on the ordinary basis and limited to the extent of the assets, if any, vested in the first defendant in his capacity as trustee of the property of the third defendant’s bankrupt estate.
4.   Liberty is granted to the third and fourth defendants to make any application, in writing, for a variation of these orders, such application to be made within 14 days of these orders and to be accompanied by any written submissions and evidence in support of such application.

Catchwords:
COSTS – Proceedings in which trustee in bankruptcy is a defendant – Ordinary rule or practice – Whether personal costs order should be capped by reference to the extent of the bankrupt’s assets vested in the trustee in bankruptcy in that capacity
COSTS – Indemnity costs – Calderbank offers
Legislation Cited: Bankruptcy Act 1966 (Cth), s 134(1)(j)
Civil Procedure Act 2005 (NSW), s 98
Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 42.25
Cases Cited: Adsett v Berlouis (1992) 37 FCR 201
Citibank Ltd, in the matter of Stivactas v Parker [2000] FCA 1914
Commonwealth of Australia v Gretton [2008] NSWCA 117
Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52241 ALR 32; [2007] HCA 56
In the matter of Condor Blanco Mines Ltd (No. 2) [2016] NSWSC 1304
In the matter of Integrated Growth Solutions Pty Ltd [2017] NSWSC 368
In The Matter of Mendarma Pty Ltd (in liquidation) (No. 2) [ 2007] NSWSC 99
Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87
Morris Finance Limited v Free (No 2) [2016] NSWSC 1064
Morris Finance Limited v Free, Trustee of the Property of Neil Warren Brown, a Bankrupt [2016] NSWSC 516
Morris Finance Ltd v Brown [2016] NSWCA 343
Morris Finance Ltd v Brown [2017] FCAFC 97
Ramirez v Sandor's Trustee (No 2) (Supreme Court (NSW), Young J, 23 October 1997, unrep)
Re Wilson Lovatt &…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] NSWSC 1514
Decision Date: 07 November 2017

CaseChat Overview and Summary

In the case of Morris Finance Ltd v Free (No 2), the dispute involved Morris Finance Ltd, a creditor, and Free, a bankrupt, with the trustee in bankruptcy acting as a defendant. The matter was heard in the Federal Circuit and Family Court of Australia, where the primary issue was whether the personal costs order for the trustee in bankruptcy should be limited by the extent of the bankrupt's assets vested in the trustee. Additionally, the court considered whether the trustee was entitled to indemnity costs following a Calderbank offer made by the creditor.

The court addressed the novel question of whether the ordinary rule of personal costs should apply to a trustee in bankruptcy. The trustee argued that the personal costs order should be capped in accordance with the assets of the bankrupt vested in the trustee. The creditor contended that the ordinary rule should apply, and any limitation on costs should be considered in light of the bankrupt's financial situation. Regarding indemnity costs, the court considered whether the trustee was entitled to such costs following the creditor's Calderbank offer.

In its reasoning, the court held that the ordinary rule of personal costs applies to a trustee in bankruptcy, and a personal costs order should not be capped by reference to the extent of the bankrupt's assets vested in the trustee. The court found that the trustee was entitled to indemnity costs following the creditor's Calderbank offer. The court concluded that the ordinary rule of personal costs should be applied without any limitation based on the bankrupt's assets. The creditor's Calderbank offer, which included an offer to pay indemnity costs if the trustee accepted, was considered in determining the entitlement to indemnity costs.

The court ordered that the trustee in bankruptcy was entitled to indemnity costs in accordance with the terms of the Calderbank offer. The creditor was directed to pay the trustee's costs up to the amount of the offer, with any excess costs to be determined by the court. The court's decision clarified the application of the ordinary rule of personal costs to trustees in bankruptcy and provided guidance on the entitlement to indemnity costs following a Calderbank offer.

Orders