Nida v Loebenstein (Trustee), in the matter of Nida (Bankrupt) (No 3)
[2025] FedCFamC2G 339
•8 April 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Nida v Loebenstein (Trustee), in the matter of Nida (Bankrupt) (No 3) [2025] FedCFamC2G 339
File number: MLG 297 of 2024 Judgment of: JUDGE FORBES Date of judgment: 8 April 2025 Catchwords: BANKRUPTCY – costs – where applicant bankrupt was wholly unsuccessful in her substantive application – where costs should follow the event – whether applicant should pay the Trustee’s costs on an indemnity basis – where applicant seeks that her costs be paid or respondents costs be taxed - where substantive application had no merit – where applicant made and persists with scandalous allegations – where all other parties had no option but to incur costs in opposing substantive application – circumstances warrant award of indemnity costs – scale costs claimed and awarded to second respondent and supporting creditor Legislation: Bankruptcy Act 1996 (Cth) s 33A, 43, 73, 149, 153B
Insolvency Practice Rules (Bankruptcy) 2016 (Cth) r 60-126, 75-175, 90-120
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 13.01
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules (Cth) r 11.01
Federal Court Rules 2011 (Cth) sch 3
Cases cited: Adsett v Berlouis and Others (1992) 37 FCR 201
Arcuri v Jones, in the matter of Arcuri [2003] FCA 68
Barrett Property Group Pty Ltd v Metricon Homes Pty Ltd (No 2) [2007] FCA 1823
Beach Petroleum NL v Johnson (No.2) [1995] FCR 119
Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179
Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Hamod v New South Wales(2002) 188 ALR 659
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301
Re John Philip Swain; Commissioner of Taxation v William Edward Andrew As Trustee of the Estate of John Philip Swain, Bartley and Cameron Thorburn [1995] FCA 1665
Lehrmann v Network Ten Pty Limited (Costs) [2024] FCA 486
Mandri v Nicholls as trustee for the bankrupt estate of Mandri [2017] FCCA 2728
Melbourne City Investments Pty Ltd v Treasury Wines Estates Ltd (No 2) [2017] FCAFC 116
Meshram v Bing Lee Electrics Pty Ltd [2024] FedCFamC2G
Nida v Loebenstein (Trustee), in the matter of Nida (Bankrupt) [2024] FedCFamC2G 942
Nida v Loebenstein (Trustee), in the matter of Nida (Bankrupt) (No 2) [2024] FedCFamC2G 1337
Oshlack v Richmond River Council (1998) 193 CLR 72
Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146
Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115
Roberts-Smith v Fairfax Media Publications Pty Limited (No 45) [2023] FCA 1474
Vaucluse Hospital Pty Ltd v Phillips & Anor [2006] FMCA 44
Division: Division 2 General Federal Law Number of paragraphs: 90 Date of hearing: 20 September 2024 Place: Melbourne The Applicant: In person Representative for the First Respondent: Mr Serong Solicitor for the First Respondent: Serong Legal Counsel for the Second Respondent: Ms Nambiar Solicitor for the Second Respondent: Australian Government Solicitor Counsel for the Petitioning Creditor: Mr Moon Solicitor for the Petitioning Creditor: BKA Practice Co Pty Ltd ORDERS
MLG 297 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ROONA NIDA
Applicant
AND: JOSEPH LOEBENSTEIN AS THE TRUSTEE OF THE BANKRUPT ESTATE OF ROONA NIDA
First Respondent
THE OFFICIAL RECEIVER
Second Respondent
BKA PRACTICE CO PTY LTD
Supporting Creditor
ORDER MADE BY:
JUDGE FORBES
DATE OF ORDER:
8 APRIL 2025
THE COURT ORDERS THAT:
1.Pursuant to rule 13.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021(Cth), the Applicant pay the First Respondent’s costs on an indemnity basis, fixed in the sum of $100,000.00.
2.Pursuant to rule 13.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) and the scale in schedule 3 of the Federal Court Rules 2011 (Cth), the Applicant pay the Second Respondent’s costs in the sum of $8,318.00.
3.Pursuant to rule 13.01 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 and the scale in schedule 3 of the Federal Court Rules 2011 (Cth), the Applicant pay the Supporting Creditor’s costs in the sum of $3,900.00.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE FORBES
INTRODUCTION
In Nida v Loebenstein (Trustee), in the matter of Nida (Bankrupt) (No 2) [2024] FedCFamC2G 1337 I gave reasons for dismissing an application commenced by the applicant bankrupt, Ms Roona Nida.
In the substantive application, which I heard on 20 September 2024, Ms Nida sought a number of orders, namely:
(a)an order pursuant to section 153B of the Bankruptcy Act 1996 (Cth) (Bankruptcy Act) for her bankruptcy to be annulled;
(b)an order pursuant to section 33A of the Bankruptcy Act for a Statement of Affairs she provided to the First Respondent (Trustee) in May 2022 to be deemed to have been lodged with the Official Receiver on 17 December 2020; and
(c)further or in the alternative, an order pursuant to section 73 of the Bankruptcy Act and rule 75-175 of the Insolvency Practice Rules (Bankruptcy) 2016 (Cth) (Rules) compelling the Trustee to convene a meeting of creditors to consider a proposal for a composition to satisfy her debts.
Ms Nida was entirely unsuccessful in her application. I found that none of the reasons advanced by Ms Nida in support of these orders had merit.
On the day I delivered judgment I made orders inviting the respondents and the petitioning creditor to make written submissions on the question of costs and afforded Ms Nida an opportunity to reply. All parties have now filed written submissions.
The respondents and the supporting creditor each seek an order that their costs of the proceeding be paid by Ms Nida. Each of those parties submit that there is no reason, in the circumstances of the case, to depart from the well-established principle that costs should follow the event[1].
[1] Oshlack v Richmond River Council (1998) 193 CLR 72 per McHugh J at [67]; see also Meshram v Bing Lee Electrics Pty Ltd [2024] FedCFamC2G 543 at [61]
The first respondent, Ms Nida’s Trustee in bankruptcy, submits that the applicant should pay his costs of the proceeding either:
(a)on an indemnity basis from the commencement of the proceeding ($114,235 incl GST)[2]; or
(b)on an indemnity basis from the commencement of the proceeding until the filing of the Further Amended Application filed on 9 August 2024 and thereafter on a party-party basis ($96,926 incl GST)[3]; or
(c)on a party-party basis from the commencement of the proceeding ($70,082 incl GST)[4].
[2] Spreadsheet annexed to the First Respondent's written submission on costs, “Claim 1”
[3] Spreadsheet annexed to the First Respondent's written submission on costs, “Claim 2”
[4] Spreadsheet annexed to the First Respondent's written submission on costs, “Claim 3”
The second respondent, the Official Receiver, submits that the applicant should pay their costs of the proceeding in accordance with the scale in schedule 3 of the Federal Court Rules 2011 (Cth) (Federal Court Rules) ($8,318 incl GST)[5].
[5] Schedule of Costs annexed to the Second Respondent’s Outline of Submissions on costs dated 20 December 2024
The supporting creditor, BKA Practice Co Pty Ltd (BKA), also submits that the applicant should pay its costs of the proceeding in accordance with schedule 3 of the Federal Court Rules and the National Guide to Counsel’s Fees ($3,900 incl GST)[6].
[6] Schedule of Costs annexed to the Petitioning Creditor’s (BKA) Outline of Submissions on costs dated 7 January 2025
Ms Nida opposes the applications. In a submission filed on 12 February 2025, Ms Nida argues, inter alia, that the trustee’s remuneration for its involvement in the proceedings should be capped at the maximum default amount under section 60-15 of the Insolvency Practice Schedule (Bankruptcy) ) to the Bankruptcy Act, that the Trustee should not be remunerated for the work performed by third parties and that the Trustee’s legal representative (Serong Legal) should be liable for the costs of the proceeding. Alternatively, Ms Nida submits that the costs of the Trustee and the costs of the Petitioning Creditor should be taxed.
For the reasons outlined below, I have decided that Ms Nida should be ordered to pay the costs of those who were involved in opposing the substantive application.
I am persuaded that the Trustee is entitled to his costs on an indemnity basis. In my view the application to the court lacked merit from the outset and this should have been apparent to the applicant. The conduct of the applicant prolonged the proceedings, involved the making of serious allegations of fraud, misrepresentation and breach of professional duty directed to a solicitor and subjected the Trustee and other parties to unnecessary cost and effort. Notwithstanding my reasons for rejecting her substantive application, Ms Nida continues to persist with her serious and scandalous allegations against the Trustee and his solicitor and relies on them as a basis for resisting their application for costs[7].
[7] See Written Submissions of Roona Nida dated 12 February 2025, page 4, Part C
An order for indemnity costs is not lightly made and it is not intended to punish Ms Nida. Rather, such an order should be properly reflective of the applicant’s responsibility to compensate the first respondent for the significant costs he was required to incur in resisting a meritless application[8]. So as to avoid the additional expense, delay and aggravation involved in protracted litigation which might arise out of a formal taxation if the Trustee’s schedule of costs is contested[9], I intend to fix the Trustee’s costs in a slightly lesser amount than that claimed.
[8] I note that the applicant not only pressed an application which failed, but at all material times she also pressed for an order for indemnity costs against the Trustee
[9] See Beach Petroleum NL v Johnson (No.2) [1995] FCR 119 at 120
The Official Receiver and the supporting creditor seek costs calculated in accordance with scale. In my view they have calculated those costs on a conservative basis and are entitled to the amounts claimed.
My reasons for making these orders follow.
RELEVANT BACKGROUND
Before considering the parties’ competing proposals regarding the payment of costs, it may be helpful to rehearse some of the relevant background to the substantive proceeding in this Court.
On 25 September 2018, the petitioning creditor BKA served a bankruptcy notice on Ms Nida, based on a default judgment which had been entered against her on 4 September 2018.
On 18 October 2018, Ms Nida initiated proceedings in the (then) Federal Circuit Court of Australia, seeking to have the bankruptcy notice set be aside. On 31 January 2019, that application was dismissed by the court and Ms Nida was deemed to have committed an act of bankruptcy on that day.
On 14 March 2019, BKA presented its creditor’s petition seeking an order for the sequestration of Ms Nida’s estate pursuant to section 43 of the Bankruptcy Act. After multiple adjournments over a period of 18 months, an order was made for the sequestration of Ms Nida’s estate on 3 December 2020.
Ms Nida claims that on 17 December 2020 she sent a Statement of Affairs to the Official Receiver and provided a copy of that document to the Trustee on or not long after that date. In my primary judgment, I found no evidence to substantiate this claim.
Ms Nida then commenced a process of unsuccessful litigation to have the sequestration order and her bankruptcy set aside. Ms Nida has sought to impugn the sequestration and bankruptcy on the basis that the underlying default judgment had been procured by fraudulent or misleading conduct on the part of BKA and its solicitors.
An application to review the sequestration order was dismissed by Judge A Kelly on 25 February 2021.
Judge Kelly’s decision to uphold the sequestration order was then appealed the Federal Court of Australia. Anderson J dismissed the application on 25 October 2022. The reasons for these decisions are discussed in some detail in my primary judgment.
In the meantime, on 27 May 2022 Ms Nida submitted to the Trustee a document dated 17 December 2020 which purported to be a copy of the Statement of Affairs she claimed to have filed with the Official Receiver in December 2020.
On 9 June 2022, the Trustee drew Ms Nida’s attention to the fact that the purported 2020 Statement of Affairs had been completed using a form which was not in existence in December 2020. I subsequently found that Ms Nida was not able to give an acceptable explanation for these events.
On 3 October 2023, more than 3 years after the act of bankruptcy, another Statement of Affairs was provided to the Trustee by the applicant’s then solicitors. A copy of that document was then sent to the Official Receiver and it was accepted for filing. The applicant’s period of bankruptcy is deemed to have commenced that day and will continue until 4 October 2026.
On 7 February 2024, the applicant lodged a proposal with the Trustee for a composition in satisfaction of her debts.
On 12 February 2024, the applicant sought orders and directions including a declaration that the proposal lodged with the Trustee on 7 February 2024 was a proposal by the applicant to her creditors for a composition of her debts for the purposes of section 73 of the Bankruptcy Act and an order that the Trustee convene and hold a meeting of creditors to consider the proposal. In relation to this application Ms Nida sought costs against the Trustee.
On 20 March 2024 Ms Nida corresponded with the Trustee seeking changes to the composition proposal lodged several weeks earlier.
On 8 May 2024, the applicant sought to vary her application. By an Amended Application Ms Nida sought a declaration that the composition proposal of 7 February 2024 be amended in accordance with her letter to the Trustee of 20 March 2024 and an order that the Trustee be required to convene and hold a meeting of creditors to consider the amended proposal. Notably, the Amended Application sought an order that the Trustee pay Ms Nida’s costs on an indemnity basis (alternatively a standard basis) and that the Trustee not be entitled to be reimbursed for those costs out of the applicant’s bankruptcy estate.
On 9 August 2024 the applicant sought and was granted leave to amend her application once again. On this occasion she sought leave to file and serve a Further Amended Application which sought the following relief:
(a)an order pursuant to section 153B of the Bankruptcy Act that the Applicant’s bankruptcy be annulled on the grounds that the sequestration order ought not to have been presented by the petitioning creditor based on an allegedly irregular default judgment;
(b)an order pursuant to section 33A in effect that the Applicant’s Statement of Affairs provided to the First Respondent in May 2022 be taken to have been lodged with the Official Receiver on 17 December 2020 and a further order that the Applicant be discharged from bankruptcy pursuant to section 149 of the Bankruptcy Act;
(c)a declaration that the proposal allegedly lodged on 9 August 2024 with the First Respondent is a proposal by the Applicant to her creditors for a composition in satisfaction of her debts for the purposes of section 73 of the Bankruptcy Act;
(d)further or alternatively, a declaration that the proposal lodged on 7 February 2024 with the First Respondent, amended in accordance with the proposal of 9 August 2024, is a proposal by the Applicant to her creditors for a composition in satisfaction of her debts for the purposes of section 73 of the Bankruptcy Act;
(e)an order that the First Respondent pay the Applicant’s costs on an indemnity basis; or
(f)alternatively on a standard basis and an order that the First Respondent’s liability for costs is personal and that the First Respondent is not entitled to be reimbursed his costs out of the Applicant’s bankrupt estate.
This Further Amended Application was the subject of case management orders which required the parties to file affidavit material and outlines of submissions prior to the hearing. Ms Nida filed and sought to rely upon a very significant body of materials including numerous affidavits and exhibited documents. As will be apparent from my primary judgment, large slabs of her affidavits comprised argument, opinion, scandalous allegations and other inadmissible material.
On 23 August 2024, Ms Nida filed an interlocutory application seeking leave pursuant to rule 11.01 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules (Cth) (FCFCOA Rules) to join the Official Receiver as a Second Respondent to the proceeding.
I promptly heard the interlocutory application on 6 September 2024. On that occasion, the Australian Government Solicitor appeared on behalf of the proposed Second Respondent. For the reasons given ex tempore and subsequently published in written form[10], I granted the applicant leave to join the Official Receiver and leave to make a further amendment to her Further Amended Application to clarify ground 3 of that application.
[10] Nida v Loebenstein (Trustee), in the matter of Nida (Bankrupt) [2024] FedCFamC2G 942
I heard the Further Amended Application on 20 September 2024. All parties opposing the application were represented by a solicitor advocate or counsel.
On 9 December 2024, I dismissed Ms Nida’s application and published my reasons for doing so.
APPLICABLE LEGAL PRINCIPLES
In the ordinary course, costs should follow the event[11].
[11] Oshlack v Richmond River Council (1998) 193 CLR 72; Meshram v Bing Lee Electrics Pty Ltd [2024] FedCFamC2G
Pursuant to rule 22 of the FCFCOA Rules, this Court may order costs and in doing so may set the amount, set the method by which the costs are calculated or refer the costs to taxation. The Court’s discretion to award costs is further refined by Division 13.1 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules) which provides:
13.01 Basis for Costs
(1)Subject to Division 13.2, a person who is entitled to costs in a proceeding to which the Bankruptcy Act applies is entitled to costs in accordance with Part 40 of the Federal Court Rules 2011 unless the Court otherwise orders.
(2)In making an order for costs, the Court may fix the amount of the costs.
(3)If the Court fixes the amount of costs, Part 40 of the Federal Court Rules 2011 does not apply to a bill of costs submitted for the costs, except for the issue of a certificate of taxation.
Division 13.2 of the Bankruptcy Rules makes provision in relation to the costs that may be charged by a legal practitioner for a creditor for work done in relation to a petition against the estate of a debtor. That Division provides that a legal practitioner may claim costs based on a short form bill. However, that Division does not apply in circumstances where the Court fixes the amount of costs.
It is well accepted that an order for costs lies within the discretion of the Court, unless otherwise prescribed by statute. Like any other discretion, that discretion must be exercised judicially.
In the ordinary course a successful party will be entitled to its costs on a party-party basis calculated in accordance with any applicable court scale. Such costs are not intended to fully indemnify a party in relation to the costs incurred in the proceeding.
Indemnity costs are an exception to the general rule. In Melbourne City Investments Pty Ltd v Treasury Wines Estates Ltd (No 2) [2017] FCAFC 116 at [5] the Full Court (Jagot, Yates and Murphy JJ) observed[12]:
In broad terms an order for indemnity costs requires that some special or unusual feature arises: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). Indemnity costs are not punitive but are designed for “compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales(2002) 188 ALR 659 at 665 (Gray J, with whom Carr and Goldberg JJ agreed). Such circumstances may include where allegations are made “which ought never to have been made”, where the case is “unduly prolonged by groundless contentions” (Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115 at [15], [17] (Davies J)), and where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (Woodward J)) or “persists in what should on proper consideration be seen to be a hopeless case” (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303 (French J)).
[12] see more recently Roberts-Smith v Fairfax Media Publications Pty Limited (No 45) [2023] FCA 1474 at [8] per Besanko J; Lehrmann v Network Ten Pty Limited (Costs) [2024] FCA 486 per Lee J
The Court will not make an order for indemnity costs unless there is some clear basis or some special or unusual feature in the case.
In Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 232 Sheppard J identified categories that may give rise to an award of indemnity costs. These categorises included:
(a)the making of allegations of fraud knowing them to be false;
(b)the making of irrelevant allegations of fraud;
(c)wilful disregard of known facts or clearly established law; and
(d)the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions
That said, the categories in respect of which departure from the usual rule are contained are not closed[13].
[13] Barrett Property Group Pty Ltd v Metricon Homes Pty Ltd (No 2) [2007] FCA 1823 per Gilmour J
First Respondent Trustee
For the reasons set out in his written Submission on Costs, the first respondent submits that the applicant should pay his costs on an indemnity basis. These reasons can be summarised as follows.
First, the Trustee submits that the manner in which the applicant conducted this proceeding materially contributed to the expenditure of unnecessary and wasteful costs by all respondents and the supporting creditor. The Trustee pointed to the following conduct of the applicant:
(a)the applicant sought to amend the relief she sought from the Court on two occasions. In particular, the second amendment had the effect of totally recharacterising the case against the First Respondent with regard to the relief sought under section 73 of the Bankruptcy Act. The Applicant in amending her Application on 9 August 2024 to remove reference to the substantive relief sought in her Application and Amended Application, has effectively conceded to the Court that the earlier applications were without proper foundation;
(b)the applicant unreasonably pressed her claim for relief under s 73 notwithstanding that the Trustee had corresponded with her about the inadequacy of proposals put by the applicant under s 73 of the Bankruptcy Act. The First Respondent and his lawyers went to considerable effort to apprise the Applicant of the inadequacy of her proposals as advanced from time to time, the requirements of the law in the context of both section 73 and Mandri v Nicholls as trustee for the bankrupt estate of Mandri [2017] FCCA 2728 and also attempted to assist the Applicant in presenting a proposal which may address the requirements of both section 73 and those of the First Respondent as Trustee of her bankrupt estate. The applicant should therefore be taken to have pressed a proposal for composition of her debts which she knew to be non-compliant and that she acted without regard to the costs and expense to the bankrupt estate;
(c)the applicant filed multiple long affidavits which contained argument, observations, opinion and a raft of inadmissible content. Furthermore, the content of the affidavits contained scandalous and unfounded allegations and assertions which proved irrelevant to the disposition of the proceeding as pleaded in the various iteration of her application. Much of the affidavit material filed prior to the 9 August 2024 Further Amended Application was rendered irrelevant by the amendment.
(d)the affidavit of solvency filed by the applicant was incapable of establishing solvency having regard to the other evidence filed by the applicant herself. The Court found the claim of solvency to be dubious. It was a wasted exercise and provided no assistance to the proper disposition of the matter;
(e)the Applicant filed further affidavits by persons claiming to be creditors entitled to prove in the bankrupt administration and attesting to their support for the composition proposal of 7 February 2024. The Applicant did not file with her Further Amended Application any further affidavits from these deponents attesting to their position on the later 9 August 2024 “proposal”;
(f)as found in the primary judgment, the applicant once again sought to collaterally attack the sequestration order and her bankruptcy by arguing that the default judgment in favour of the supporting creditor had been irregularly and improperly obtained. The applicant did this despite the fact she had previously sought an annulment of her bankruptcy by way of an order for review, a hearing before a single judge and then a hearing on appeal – all of which were unsuccessful, as were the related proceedings commenced by the applicant in the Supreme Court of Victoria. In circumstances where the applicant did not produce any new or cogent evidence, the Trustee submits that the applicant should have been aware that her application for relief under s 153B of the Bankruptcy Act was doomed to failure. However, by persisting with a futile attack on the default judgment, the Trustee and the supporting creditor were put to the cost and expense of yet again opposing the claim;
(g)the applicant unreasonably pressed a claim for orders in relation to the alleged filing of a Statement of Affairs and for an order discharging her from bankruptcy. The application was doomed to fail and it was unsurprisingly found to have been of no merit. This limb of the Further Amended Application led to an interlocutory application and hearing for the joinder of the Official Receiver. The primary judgment found that Ms Nida’s evidence on this issue was unconvincing. The Trustee submits that Ms Nida should have been aware that this limb of her Further Amended Application had no prospect of success. The Trustee had no option but to engage with the issue and incur the unnecessary costs of doing so.
Secondly, the Trustee highlights that I did not make any orders against the respondents, nor did I make any adverse findings against them. By contrast, I dismissed the applicant’s application in its entirety and found her evidence to be unpersuasive and unimpressive.
Third, the Trustee asserts that he was in no way responsible for the costs of the application or for prolonging the proceedings. Rather, the Trustee submits that there is evidence that he tried to assist in resolving various issues in dispute to avoid costs.
Finally, and overall, the Trustee submits that due to the lack of evidence presented by the applicant and the baseless claims she initiated, she has wasted the Court’s time and caused the respondents to incur unnecessary costs and expense.
Second respondent, the Official Receiver
The Official Receiver was joined as a party to these proceedings following an interlocutory application filed by the applicant. The applicant sought to join the Official Receiver to her claim, pursuant to section 33A of the Bankruptcy Act, for an order that a Statement of Affairs which she reasonably believe she had filed in December 2020 should be treated as having been filed at that time.
I allowed the application for joinder and gave ex tempore reasons for doing so, which were later published in Nida v Loebenstein (Trustee), in the matter of Nida (Bankrupt) [2024] FedCFamC2G 942. On that occasion I was persuaded, but only just, that the joinder of the Official Receiver might help inform the material questions relevant to the applicant’s claim under s 33A. It is instructive to revisit my reasoning at [4]-[10] of the ex tempore judgment:
[4]Mr Levine, who appeared on behalf of the applicant, contends that an issue before the court - particularly having regard to the relief sought in the proposed Order 3 of the application - is that a statement of affairs that the applicant reasonably believed she filed in December 2020 should be the subject of an order by this court that it was, in fact, filed at that time. The relief sought by the applicant seeks to engage section 33A of the Bankruptcy Act which gives the court a discretion in certain circumstances to order that a statement of affairs be treated as having been filed at a time before it was actually filed.
[5]The application for an order under section 33A will necessarily require the court to determine a number of matters which are currently disputed. The first of those matters is whether a statement of affairs was actually filed, or rather, whether the applicant believed that a statement of affairs had been filed with the Official Receiver. That will require consideration of evidence as to whether a 2020 document purporting to be a statement of affairs was or was not sent, in some manner, to the Official Receiver. Further, if so, the Court must determine whether it was considered and rejected as non-compliant. These are not questions that the court can currently determine on the evidence before it. The evidence presently before the court certainly suggests that these matters will be the subject of final submissions and possibly cross-examination at trial. But the evidence is not of a state where I can determine these issues now.
[6]The Court will also have to determine whether the applicant had a subjective belief about a document having been filed at an earlier time. And the court will also have to determine whether that subjective belief was objectively reasonable. These are all matters that section 33A requires the court to consider and determine. They are all matters, I might observe, which will fall to the applicant to prove. The applicant clearly bears the onus under section 33A.
[7] Having read the submissions of the respondent trustee and heard the oral submissions today from Mr Serong, my decision to join the Official Receiver was a very close thing. In my mind, questions remain about whether ultimately the Official Receiver will prove to be a necessary party to the proceeding. And the nature of relief, if any, sought against the Official Receiver is far from clear. That said, this is a longstanding and complicated matter which needs to be brought to trial without further delay.
[8]Sections 190 to 192 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) imposes an overarching purpose in the case management of civil proceedings. It is well known to all practitioners in the Court, that the overarching purpose is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and as efficiently as possible. In applying the overarching purpose to case management, the objectives of any orders I make must be the just determination of proceedings, the efficient use of judicial and administrative resources, the efficient disposal of the court's overall caseload, the disposal of proceedings in a timely manner, and the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
[9]The joinder of the Official Receiver to these proceedings - as has been conceded – will be relevant only to ground three of the further amended application. The Official Receiver does not actively oppose the application and has indicated that it will abide by the Courts discretion. It seems to me that joinder of the Official Receiver will very quickly and most efficiently bring to a head the issue of whether the Official Receiver did or did not receive the statement of affairs purported to have been filed in December 2020. And if so, whether the Official Receiver did anything about that.
[10]The Court could allow for the issue of subpoenas to deal with that issue. But it seems to me that the most efficient manner is to join the Official Receiver and allow the Official Receiver to put on evidence and to make submissions, if it sees fit, regarding the purported 17 December 2020 statement of affairs. It may well be that the role of the Official Receiver in this proceeding is short-lived once that evidence has been filed.
The Official Receiver was joined to the proceeding just two weeks before the final hearing on 20 September 2024, following the applicant’s interlocutory application. Pursuant to order 4 of the Court’s orders made on 6 September 2024, the Second Respondent was required to prepare and file evidence by 13 September 2024. The Official Receiver also briefed counsel to appear at the 20 September 2024 hearing.
As things turned out the involvement of the Official Receiver added nothing to the applicant’s case. Rather, the evidence of the Official Receiver exposed the implausibility of the applicant’s claim to have filed a Statement of Affairs in 2020. I found no substance at all to her claim for relief.
Ironically, the involvement of the Official Receiver did assist the Court to resolve the issues in dispute in an efficient manner. The Court did not make any findings of fact contrary to the evidence filed by the Second Respondent.
The Official Receiver, acting as a model litigant, did not oppose its joinder to the proceeding. Nor did the Official Receiver oppose any of the relief sought by the applicant. Nonetheless, the joinder of the Second Respondent resulted in it incurring costs which it would not have otherwise incurred. It was brought into these proceedings by the applicant at a late stage, presumably in the belief that the merit of her claim for relief under s 33A would be enhanced. That all came to nothing.
In the circumstances I am satisfied that the applicant should pay the Second Respondent’s costs of the proceeding. The schedule of costs in Annexure 1 to the Official Receiver’s written submissions dated 20 December 2024 calculate its costs at $8,318.00 (incl GST) in accordance with Schedule 3 of the Federal Court Rules. I accept the submission that those costs are been calculated on a conservative basis. An order will be made for the applicant to pay those costs.
Supporting Creditor, BKA
In a written submission filed on 6 January 2025, the supporting creditor seeks an order that the applicant pay the costs it necessarily incurred in participating in the proceedings. According to a schedule annexed to the written submissions, the supporting creditor only seeks the fees of Mr Edward Moon of counsel in the sum of $3,900.00 (incl GST).
In support of its application for costs, the supporting creditor also relies upon the well-established principle that costs should follow the event.
The supporting creditor submits that its involvement in the proceeding was necessary and inevitable consequence of the conduct of the applicant. On 28 August 2024 the applicant served a Notice to Creditors of Annulment Application, as she was required to do in seeking relief pursuant to s 153B of the Bankruptcy Act. In order to oppose that application, it was necessary for the supporting creditor to brief counsel to appear at the hearing on 20 September 2024.
The supporting creditor contends that in order to prepare for the hearing counsel was required to review 1,284 pages of material, confer with the creditor and draft an outline of submissions. None of this preparation was excessive and I am satisfied that it was all necessary and incurred as a direct consequence of the applicants conduct.
The primary judgment makes no adverse findings against the supporting creditor and no orders against it. Conversely, in running her case the applicant levelled repeated allegations of misrepresentation and unethical conduct by the supporting creditor and its legal representatives, none of which obtained any traction.
I see no reason why the applicant should not pay the supporting creditor’s costs of the proceeding. I accept that Mr Moon’s fees are fair and reasonable in the circumstances and that they were necessarily and reasonably incurred. The applicant will be ordered to pay those costs as claimed.
APPLICANT’S APPLICATION FOR COSTS
The applicant opposes the respondent’s application for costs. Rather, she seeks orders that:
(a)pursuant to rule 60-15 of the Rules, the First Respondent’s renumeration be determined based on the maximum default amount; and
(b)pursuant to rule 60-126 of the Rules, the First Respondent should not be paid concerning performance by third parties; and
(c)pursuant to rule 90-120 of the Rules, the First Respondent pay the costs for the proceedings; or
(d)alternatively, the First Respondent’s past and present costs be taxed and the after-tax quantum be disclosed to the applicant; and
(e)the Petitioning Creditor’s costs be taxed pursuant to orders of 31 January 2019 without further delay and the after-tax quantum be disclosed to the applicant.
In a written submission dated 12 February 2025, the applicant engages in a discourse which seeks to re-agitate issues I have already addressed in the substantive judgment. These issues concern whether the Petitioning Creditor misled the Magistrate’s Court in securing the underlying default judgment and whether the Trustee has acted in his self-interest and unreasonably by refusing to convene a creditor’s meeting. In relation to this latter point, the applicant also attempted to argue that the first respondent unnecessarily increased the parties’ legal fees by refusing to convene a creditor’s meeting. A discussion of these issues can be found in the substantive judgment and I see no basis to re-enliven them.
The applicant’s written submission is largely unstructured and peppered with explanatory footnotes and references to authority. Taken as a whole, the submission is difficult to comprehend and it does not clearly articulate why the first respondent should be ordered to pay her legal costs.
Nevertheless, the applicant has presented some arguments which warrant comment.
Foremost, the applicant submits that the Trustee initiated Supreme Court proceedings on 22 June 2023, before withdrawing their application in that court on 16 February 2024. The applicant says those proceedings were commenced by the Trustee without a proper basis and in its own self-interest. Upon withdrawal of its application, the Trustee requested and was granted a “no costs order”. The applicant submits that the first respondent, in requesting this order, unnecessarily and unfairly increased the applicant’s legal costs thereafter for no justified reason.
The applicant claims that the “facts” of this allegation are set out in the various affidavits she filed in support of her application. Based on those “facts” the applicant contends[14], inter alia, that the Trustee:
(a)has breached its overarching obligations to the Court;
(b)continued litigation for self-interest without having any evidence to support it;
(c)exposed other parties to significant legal cost and prevented them from recovering their costs;
(d)knowingly misused powers and disregarded laws;
(e)deliberately refused to communicate with clarity, thereby causing delays and increasing costs;
(f)made false declarations in affidavits;
(g)knowingly refused to protect the trust assets and falsely blamed the applicant;
(h)unreasonably prevented settlement of the petitioning creditors claim.
[14] Applicant’s written submission on costs dated 12 February 2024, page 4-5
The applicant claims that there is a long list of reasons why the Trustee should be held to account and be responsible for the payment of her legal costs. For example, the applicant argues that the Trustee’s opposition to an annulment application is not a legitimate justification for exposing the applicant to continuous litigation and her fights to prevent homelessness.
The applicant also raises number of technical arguments as to why the costs sought by the Trustee should be capped and/or contained only to those costs that are necessary and reasonable. As I comprehend her submissions, the gist of the applicant’s arguments are that the Trustee should not be entitled to recover costs which have not been honestly incurred, costs which have been incurred by the Trustee acting in its own self-interest and that any remuneration paid to the Trustee should only be for work performed in administering the debtor’s estate.
In support of her submissions which seek to contain the applicant’s costs, she relies on Division 60 of the Insolvency Practice Schedule (Bankruptcy) to the Bankruptcy Act and Division 60 of the Rules. These provisions set out the legislative framework for trustee remuneration.
The applicant also seeks to rely upon the Full Bench decision in Adsett v Berlouis and Others (1992) 37 FCR 201. The applicant submits that the proper sum payable to a Trustee should be determined by reference to the following principles, namely:
(a)the trustee must exercise judgement so as to save the estate unnecessary expenditure of money;
(b)the remuneration to which a trustee is entitled is to be just and proper all reasonable remuneration in all the circumstances for the work carried out by the trustee;
(c)the words “properly incurred” mean reasonably as well as honestly incurred;
(d)trustees ought not to be visited with personal loss on account of mere errors in judgement that full short of negligence or unreasonableness.
The applicant contends that expenditure is not reasonably and honestly incurred where a Trustee engages in litigation for self-interest. The applicant submits that a trustee who recklessly instigates litigation or incurs extravagant costs in unnecessary litigation should be personally liable for those costs. In support of the proposition that a trustee should be personally liable for costs when acting in his or her self-interest, rather than in the interests of the estate, the applicant relies on the decision of Wilcox J in Re John Philip Swain; Commissioner of Taxation v William Edward Andrew As Trustee of the Estate of John Philip Swain, Bartley and Cameron Thorburn [1995] FCA 1665.
In her written submission, the applicant also calls in aid the decision of Reithmuller FM (as he then was) in Vaucluse Hospital Pty Ltd v Phillips & Anor [2006] FMCA 44 for the propositions that:
(a)trustees should adopt a cautious approach in incurring costs in cases where the sequestration order relates to a relatively small debt;
(b)the scale of fees for bankruptcy work reflects the inherent risk that trustees might not recover all of their costs and remuneration in every bankruptcy.
Finally, the applicant cites the judgment of Lindgren J in Arcuri v Jones, in the matter of Arcuri [2003] FCA 68, it appears in support of an argument that where a trustee refuses to call a meeting of creditors to consider a proposal for composition of the bankrupt debts, the trustee is only entitled to its accrued remuneration for past work. Whilst it is far from clear, as I comprehend the applicant’s submission, she argues that a trustee’s refusal to conduct a meeting cannot be a proper basis for incurring future costs in litigation over that issue.
CONSIDERATION
In the end, Ms Nida’s substantive application proved to be a house of straw built on shifting sands which never had a hope of standing once subjected to judicial scrutiny. It was a house the applicant had built before only to see it dismantled by the Supreme Court of Victoria, this Court and the Federal Court. On this occasion the challenge to the sequestration of her estate and the bankruptcy were to a different design, but it proved to be of no more substance than previous attempts.
The Trustee, the Official Receiver and the supporting creditor were necessarily involved in the proceeding and properly put positions which opposed the orders and other relief sought by the applicant. They incurred significant costs in doing so, compounded by the way Ms Nida conducted the litigation. Her claim shifted over time, such that the first iteration of her application and much of the evidence filed in relation to it became irrelevant. She raised serious matters which went to the professional reputation of solicitors and counsel representing the Trustee and supporting creditor yet failed to come close to substantiating these allegations. The respondents had little option but to double down and incur costs of defending the application.
The applicant was wholly unsuccessful. The grounds advanced in her Further Amended Application all missed their target. I conceive of no reason why costs should not follow the event.
As previously mentioned, the applicant claims that the trustee should pay her costs or that the trustee’s costs should be capped and paid by the trustee personally rather than from the bankrupt estate. The applicant’s submissions, with respect, are misconceived and based on false premises. The applicant’s submissions also, to an extent, conflate the notions of trustee remuneration for the administration of the estate and the right to recover legal costs properly incurred by in litigation.
The applicant raises a litany of complaints about the conduct of the Trustee in the present proceedings and in the many other proceedings to which I have referred in the primary judgment. Her claim for costs is based on an overarching submission that the Trustee has knowingly and consistently “refused to comply with the applicable legislative provisions and legal principles” applicable to his appointment.
The legal principles articulated by the applicant relating to trustee remuneration and the requirement that trustees act reasonably and honestly are uncontroversial. It is accepted that personal liability for a trustee may follow where a trustee acts in his or her self-interest, recklessly or dishonestly. A trustee acting reasonably should of course be cautious in exercising its judgment when incurring costs, particularly in cases where the sequestration order is underpinned by a modest debt relative to the size of the estate.
However, while it can be accepted that the first respondent is subject to the obligations and duties imposed by the Bankruptcy Act, regulations and rules and that he is required to conduct himself prudently and honestly in the administration of the bankrupt estate, I am far from persuaded that he has failed to do so. The premise of the applicant’s allegations have not been established.
The difficulty for the applicant is that her complaints about the Trustee rise no higher than assertions and are unsubstantiated by any concrete findings. The applicant makes very serious allegations regarding the Trustee’s conduct and the professional conduct of his legal representatives. In the absence of evidence, they are not allegations the court should entertain. They are certainly not allegations which would persuade the court to order the successful parties to pay the costs of a wholly unsuccessful litigant.
Having regard to all the circumstances of this case, I am of the opinion that this a proper occasion for the Court to exercise its discretion to order indemnity costs in favour of the Trustee.
If the Official Receiver or the supporting creditor had sought costs on a similar basis I may have been inclined to make a similar order. But they have not and I accept their claims for the applicant to pay their costs calculated in accordance with the applicable Court scale.
While I consider the Trustee has a proper claim for indemnity costs, I am mindful that this costly litigation is likely to be prolonged further if the applicant contests the Trustees bill of costs through taxation. This will not serve the parties’ interests and is to be avoided.
The procedure for determining the quantum of costs for a successful party should not be delayed and should be as inexpensive and efficient as possible. Where practicable the Court should consider a lump sum costs order.
In Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146, the Full Court (Allsop CJ, Besanko and Middleton JJ) noted (at [20]):
There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality.
I am inclined in this case to exercise my discretion to make a lump sum costs order. I have had regard to the Trustee’s costs schedule and the amounts claimed therein. I am satisfied that subject to a modest discount, the claim for costs would comfortably fall within the range the Trustee would likely recover if taxed on an indemnity basis. In my view the Trustee’s claim should be reduced to $100,000.00 inclusive of GST and that I should order the applicant to pay those costs.
DISPOSITION
For the reasons set out above, I will make orders that the applicant pay the costs of the other parties pursuant to rule 13.01 of the Bankruptcy Rules as follows:
(a)the Applicant pay the First Respondent’s costs on an indemnity basis, fixed in the sum of $100,000.00.
(b)the Applicant pay the Second Respondent’s costs in the sum of $8,318.00 in accordance with the scale in schedule 3 of the Federal Court Rules 2011 (Cth).
(c)the Applicant pay the Supporting Creditor’s costs in the sum of $3,900.00 in accordance with the scale in schedule 3 of the Federal Court Rules 2011 (Cth).
I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Forbes. Associate:
Dated: 8 April 2025
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