Morris Finance Ltd v Hodges

[2019] FCCA 325

FEDERAL CIRCUIT COURT OF AUSTRALIA

MORRIS FINANCE LTD v HODGES [2019] FCCA 325

Catchwords:
BANKRUPTCY – Costs.

Legislation:

Bankruptcy Act 1966 (Cth), s.301

Applicant: MORRIS FINANCE LTD

Respondent: DARRELL RAYMOND HODGES

File Number: MLG 225 of 2016

Judgment of: Judge Jarrett

Hearing date: 21 January 2019

Date of Last Submission: 21 January 2019

Delivered at: Brisbane

Delivered on: 21 January 2019

REPRESENTATION

Counsel for the Applicant: Mr Webster

Solicitors for the Applicant: Smith Leonard Fahey

Solicitors for the Respondent: Dale & Fallu

THE COURT DECLARES THAT

1. The applicant lawfully terminated the Commercial Lease Agreement between the applicant and the respondent dated 24 September, 2015.

2. The applicant lawfully repossessed a used 2010 Kenworth T908 6x4 prime mover registration number 967RGI, the subject of the lease agreement.

THE COURT ORDERS THAT

1. The applicant pay the respondent’s costs of and incidental to these proceedings to be agreed between the parties and failing agreement to be taxed on a solicitor and own client basis.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

MLG 225 of 2016

MORRIS FINANCE LIMITED

Applicant

And

DARRELL RAYMOND HODGES

Respondent

REASONS FOR JUDGMENT

1. The only outstanding issue in this matter is a question of costs.  The proceedings came to this Court because the applicant commenced them pursuant to an undertaking given by the applicant to the Financial Services Ombudsman.  The form of the undertaking is set out in the outline of submissions filed by the respondent on 30 November, 2018.  The form of the undertaking was that the applicant would pay the respondent’s costs and disbursements, if not otherwise agreed, on a solicitor and own client basis of the proceedings at first instance, those that were to be instituted, and any subsequent appeal proceedings commenced by the client.  There was also an undertaking to make interim payments on account of such costs and disbursements.

2. These proceedings were instituted by the present applicant. In them, the issues involved the proper construction of s.301 of the Bankruptcy Act 1966 (Cth) and whether in the circumstances of the case a particular clause in a finance agreement between the applicant and the first respondent was caught by s.301 and therefore void. There was also another issue about whether the applicant had an entitlement to terminate the relevant contract between it and the first respondent by reason of material non-disclosure by the first respondent when the contract was made.

3. The first point was the significant point in the case.  The second was a subsidiary point raised by the applicant in the event that it failed on the first point.  As matters turned out, it failed on the first point but succeeded on the second.  Despite the undertaking to pay all of the costs of the proceedings at first instance, the applicant now says that there ought to be either no order for costs or an order for costs which is limited in some particular way by reference to the test case or that there should be some bifurcation of the proceedings into the test case and what is described in the submissions as the material falsity case.

4. To the extent that it is said that there ought to be no order for costs in these proceedings, it is argued that the Court should be comfortable in knowing that the applicant intends to honour its undertaking given to the Financial Services Ombudsman to pay the applicant’s costs and disbursements of these proceedings.  But as the argument made clear, there will be some attempt to persuade whomever it is that deals with those costs in whatever forum they might be dealt with, that there only ought to be costs in respect of what is described as the “test case” rather than the case which was ultimately framed by the applicant.

5. I take all of those matters into account.  I also take into account that the agreement that has now been terminated between the applicant and the first respondent provided for the first respondent to pay the applicant’s costs of any default in any subsequent proceedings that occurred as a result of that default. 

6. It is also relevant to note that when these proceedings were initially commenced against the first respondent, the applicant, for reasons that I have described in separate reasons for judgment delivered some time ago now, opposed the first respondent even participating in these proceedings.  That says something about the attitude of the applicant to the proceedings and what might be inferred from the applicant’s attitude if the matter was left in the hands of the Financial Services Ombudsman on the question of costs. 

7. In my view, having regard to the undertaking as one of the relevant considerations but not the only one and having regard to the success that the first respondent had on the primary issue that was litigated in these proceedings, it is appropriate that the applicant pay the first respondent’s costs of these proceedings, as it has undertaken to do so, on a solicitor and own client basis.  The order should extend to the whole of the proceedings, not just part of it. 

8. Accordingly, I order that the applicant pay the first respondent’s costs of and incidental to these proceedings to be agreed between the parties and, failing agreement, to be assessed on a solicitor and own client basis.  So that it is clear, because there is an order for assessment, that means that the assessment will be carried out in accordance with the scale of costs that applies under the Federal Court Rules 2011.

I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Judge Jarrett

Associate:  

Date:  13 February 2019