Morton, R.W. v Official Receiver for the Bankruptcy District of the State of Victoria

[1995] FCA 598

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF
THE STATE OF VICTORIA
GENERAL DIVISION  VT 932 of 1994

RE:           ROBERT WILLIAM MORTON

Applicant

OFFICIAL RECEIVER FOR THE BANKRUPTCY DISTRICT OF
                   THE STATE OF VICTORIA

Respondent

Coram:    Olney J

Place:    Melbourne

Judgment: 28 July 1995

MINUTE OF ORDER

THE COURT ORDERS THAT:

The applicant's costs of and incidental to this proceeding be taxed in accordance with the scale of costs applicable to a defended proceeding in the General Division of the Federal Court and be paid by the respondent.

NOTE:Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules. 

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF
THE STATE OF VICTORIA
GENERAL DIVISION  VT 932 of 1994

RE:           ROBERT WILLIAM MORTON

Applicant

OFFICIAL RECEIVER FOR THE BANKRUPTCY DISTRICT OF
                   THE STATE OF VICTORIA

Respondent

Coram:    Olney J

Place:    Melbourne

Judgment: 28 July 1995

REASONS FOR JUDGMENT - COSTS

This matter involved an application made pursuant to s 155A of the Bankruptcy Act 1966 (the Act) for the extension of the term of the applicant's registration as a registered trustee under the Act. The respondent gave notice pursuant to s 155A(4) of the Act of his objection and the objection was referred to the Court pursuant to s 155A (5) for a direction to grant or refuse the application. The matter was heard on 26, 27 and 28 April 1995. At the end of the proceedings on 28 April 1995 I issued a direction to the Registrar to grant the application for extension. On 14 June 1995 I published my reasons.

Questions relating to the costs of the proceeding were canvassed by counsel for both parties in the course of argument however, on 28 April 1995 I reserved the question of costs for further consideration until after the publication of my reasons.   The submissions on costs are referred to in my reasons published on 14 June 1995.   On 14 June 1995 I gave directions to enable the parties to file further written submissions, which have since been received.

In my reasons I expressed the tentative conclusion that the respondent should pay the applicant's costs but left the matter open pending the parties' further submissions.

There is no question that the Court has power to make an order in relation to the costs of the proceeding, nor is there any doubt that such power is discretionary.   In the ordinary course of events an unsuccessful respondent could expect to be ordered to pay the applicant's costs unless the circumstances of the case dictated that the discretion should not be exercised in the applicant's favour.

Two issues have been raised by the submissions.  First, it is said on behalf of the respondent that the nature of the proceeding is such that the ordinary rule that costs follow the event should not apply;  and second, it is said for the applicant not only that he should have his costs but that they should be assessed on a solicitor and client basis rather than in accordance with the scale of costs payable in the Bankruptcy jurisdiction.

The respondent has referred to the decision in Re Campbell;  ex parte Official Trustee (1987) 13 FCR 326 and argues that the same reasoning should be applied in this case. In Re Campbell the Official Trustee was the trustee of the estate of a bankrupt and brought an application to defer the bankrupt's discharge under the then provisions of s 149 of the Act.   The application was dismissed and upon the bankrupt seeking an order for costs, Jenkinson J held that as the application had not been unreasonable, the bankrupt was not entitled to costs.  In his reasons his Honour referred to, but distinguished, the decision in Hunter v Official Receiver (1980) 50 FLR 168 in which the Full Court (Bowen CJ, Franki and Brennan JJ) said (at p 175):

A case consistent with the official receiver's submission is Huggins' case (1901) 1 S.R. (N.S.W.) 150 where no order was made against the official receiver, Cave J. observing that the official receiver was present "only in his official capacity". But that case cannot prevail over the only authority binding on this Court which deals with an order for payment of costs by the official receiver who failed as an active litigant in his opposition to an appeal. In Scott Fell v Lloyd (1911) 13 C.L.R. 230 Griffith C.J., with whom Barton J. agreed, expressed the principle: " ... when an Official Assignee becomes an active litigant he is exposed to the same risks as any other litigant" (at p 244). O'Connor J., although expressing no unfavourable view of the official assignee's conduct in opposing the appeal, said: "The view I take is that, having contested this matter, and having failed, he must be made subject to the penalty of paying costs just as any other unsuccessful litigant would be made subject". (at p 247)

I do not regard Campbell as an authority binding a single judge of this Court to the general proposition that an order for costs will only be made against the Official Receiver when acting in the performance of a statutory function under the Act when the Official Receiver has acted unreasonably.   Campbell should be regarded as an example of the exercise of a judicial discretion consistent with the general principle espoused by the High Court in Scott Fell v Lloyd and followed by the Full Court of this Court in Hunter.

In this case I am bound by the principle that "when the (Official Receiver) becomes an active litigant he is exposed to the same risks as any other litigant".

In my opinion the present proceedings between the applicant and the Official Receiver have all the hallmarks of litigation and there can be no question that the respondent was active in that litigation.  

My view that the proceedings have all the hallmarks of litigation is supported by the procedural steps involved in bringing the matter before the Court and the conduct of the proceedings in Court. I summarise briefly what occurred: The applicant sought an extension of his registration (s 155A (1)); the respondent gave notice objecting to the application (s 155A (4)) setting out the reasons for the objection (r 61D (2)); the applicant filed a notice of intention to dispute the objection (r 61D(3)(6)) setting out the reasons why the objection was disputed (r 61D (4)); the matter was referred to the Court for a direction under s 155A (5) (r 61D(5)); the issues raised by the objection and the applicant's notice were contested over 3 hearing days; each party produced affidavit evidence and the respective deponents were cross-examined at length; each party was represented by senior and junior counsel.

I have no hesitation in concluding that the role played by the respondent in this proceeding exposes him to the same risks as any other litigant, particularly the risk of being ordered to pay the costs of an applicant who has successfully resisted the effort to deny him an extension of the term of his registration as a trustee.

I am satisfied that the tentative view I expressed in my reasons of 14 June 1995 should be confirmed and that the respondent should be ordered to pay the applicant's costs of and incidental to his application for extension.

I turn now to deal with the applicant's submission that the costs should be assessed on an indemnity basis.

The foundation for the costs order to be made against the respondent is that the proceeding was in the nature of litigation in which the respondent was actively involved.   That being the case, the ordinary rules applicable to the awarding of costs in litigation should apply.

The applicant's written submission refers to various dicta dealing with the occasions when it is appropriate to consider awarding "solicitor and client" or "indemnity" costs.   It is unnecessary to repeat here what are well recognised principles.

I do not think that this is a case which had no chance of success.   Indeed, the applicant's success depended upon the Court making findings based upon his credibility.   Whilst a number of the issues raised by the objection could be classed as trivial there may be occasions when the multiplicity of proven but slight departures from accepted standards would warrant the Court upholding an objection.   It cannot be said either that the respondent persisted in a case which on proper consideration should have been seen as hopeless or that the case was "paper thin".   Until the evidence was all out and the applicant accepted as a credible witness, the respondent's case was at least arguable.

In the circumstances, I do not accede to the applicant's submission that costs be awarded on an indemnity basis.  In my opinion the proper order is that the costs be taxed in accordance with the scale of costs applicable to a defended proceeding in General Division of the Federal Court.

I certify that this and the preceding 5 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney

Associate:

Dated:

Heard:       26, 27 and 28 April 1995

Place:       Melbourne

Judgment:     28 April 1995

Reasons published:   14 June 1995

Judgment re costs:   28 July 1995

Appearances:  Mr D. Habersberger QC and Mr J.K. Chippindall (instructed by Corrs Chambers Westgarth) appeared for the applicant.

Mr G. Bigmore QC and Mr M.J. Galvin (instructed by J.M. Smith & Emmerton) appeared for the objector.