OFFERMANS and Anor v Trusted Buzz Pty Ltd and Ors (No.2)

[2013] FCCA 1064

FEDERAL CIRCUIT COURT OF AUSTRALIA

OFFERMANS & ANOR v TRUSTED BUZZ PTY LTD & ORS (NO.2) [2013] FCCA 1064

Catchwords:
COSTS – Application for indemnity costs – ordered in part – otherwise standard costs.

Legislation:  

Bankruptcy Act 1966, ss.120, 121 & 139ZQ

Federal Court Rules 2011, rr.25 & 1.35

Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536

Applicant: DENNIS OFFERMANS & MICHAEL JOSEPH BRENNAN AS TRUSTEES IN BANKRUPTCY

First Respondent: TRUSTED BUZZ PTY LTD AS TRUSTEE FOR THE BUZZ TRUST

Second Respondents: DANNY JOSEPH BROSNAN & JOAN MARJORIE BROSNAN

File Number: BRG 984 of 2009

Judgment of: Judge Burnett

Hearing date: 17 July 2013

Date of Last Submission: 17 July 2013

Delivered at: Brisbane

Delivered on: 17 July 2013

REPRESENTATION

Counsel for the Applicant: Mr M. Jonsson

Solicitors for the Applicant: Macdonnells Law

Counsel for the Respondent: Mr M. Wilson

Solicitors for the Respondent: Cleary Hoare Solicitors

ORDERS

1. The First Respondent pay the Applicants’ costs of and incidental to the application (including reserved costs) to be assessed on the standard basis.

2. The Second Respondents pay the Applicants' costs of and incidental to the application (including reserved costs):

   (a)until 11am on 4 June 2013, to be assessed on the standard basis; and

   (b)from 11am on 4 June 2013, to be assessed on the indemnity basis.

3. The Respondents pay the Applicants' costs, of and incidental to today's appearance to be assessed.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT BRISBANE

BRG 984 of 2009

DENNIS OFFERMANS & MICHAEL JOSEPH BRENNAN AS TRUSTEES IN BANKRUPTCY

Applicant

And

TRUSTED BUZZ PTY LTD AS TRUSTEE FOR THE BUZZ TRUST

First Respondent

DANNY JOSEPH BROSNAN & JOAN MARJORIE BROSNAN

Second Respondents

REASONS FOR JUDGMENT

(Ex tempore Reasons)

1. At the conclusion of the trial I delivered reasons and directed the parties to attempt to settle orders, giving effect to my findings. The parties largely agree on the terms.  They give effect to the intent of my judgment, that being first that the bankrupt sell the property to the first respondent at an undervalue of at least $33,000.00 although more probably $35,000.00 given that the contract price agreed between the bankrupt and the first respondent reflected a market value of $250,000.00 and not the assessed value of $248,000.00. Nothing turns on that.

2. Second, in order for the first respondent to be permitted to retain the property it must pay the applicant the sum of $33,000.00 and that upon payment of that sum the transfer by the bankrupt to the first respondent could then be said to be at market value and thirdly, that the second respondent must pay to the applicant the sum of $98,000.00 representing the sums paid to them by the bankrupt which were declared void as against s.120 and s.121 of the Bankruptcy Act 1966 (Cth) (“the Act”). The draft orders provided by the parties amply reflect that intent, and also allow for the applicant’s interest entitlement in respect of moneys to which they are entitled.

3. The respondent’s counsel raised an issue with respect to the notices issued pursuant to s.139ZQ and costs as they were addressed in the draft orders. If I can deal with the question of the statutory notices first. The proceeding included a claim pursuant to the statutory notices that were issued pursuant to s.139ZQ of the Act. The matter appears to be one which was addressed in both arguments by counsel at the conclusion of the trial and judgment. The respondent contends however that the matter was resolved before trial, and that the applicant did not proceed in the proceeding in respect of them and accordingly seeks consequential costs orders in respect of costs it contends were thrown away.

4. I do not think that was the case. My notes at least indicate that the statutory claim was always alive with the applicant’s counsel noting in its opening that if its claim failed on the primary cause, that is, the s.120/s.121 claim then it would also fail with respect to its statutory notice claim. But by that I infer from my note that the applicant always intended to prosecute its action on the basis of the claim. However, what was resolved early in the proceeding concerned the issue of the value of the property which was a matter which was addressed in the statutory notices, but ultimately resolved with the applicant acceding to the valuation which was provided by Mr John Logan with a valuation which I note was significantly lower than the valuations which the applicant had procured. In any event, I am of the view that nothing turns on the statutory notice claims. 

5. The issues which were alive at trial under the s.120 and s.121 claims were always in issue in the statutory claim and that is the question of whether or not the transaction for void as against the trustee because of sale for no consideration or at under value. Nothing appears in the s.139ZQ notices to suggest that the basis for any of the three notices, extended beyond the facts which supported the underlying preference claim.

6. It follows in my view that even if the respondents are correct in their contention that the matter was abandoned, it cannot be properly said that the notices themselves have given rise to any other issue aside from the legal issue which would have resulted in there being unnecessary costs incurred for which they were be entitled to some compensation. But in any event, I am of the view that the orders proposed in respect of the statutory notices are appropriate orders, they having been alive at the trial.

7. The second matter concerns the matter of costs. The applicant seeks costs. Subject to matters which I will address in a moment it essentially seeks costs on the basis that costs ought follow the event and subject to one matter that the costs will be assessed on a standard basis. The respondents, however, as I have earlier noted, claim for costs thrown away in respect of the s.139ZQ notices. They also claim for costs against the second respondent from 21 February 2013, costs on the basis it contends that it received a judgment more favourable than the offer.

8. If I can deal first with the question of costs thrown away. I have earlier noted that I did not understand the notices claim to have been abandoned, but in any event, even if I am wrong on that the matter notice the claim was technical in the sense that that claim itself was simply one that gave rise to a basis for argument for relief.  It did not, in my view, require the prosecution of any particular or additional facts and it was more in the nature of a technical claim which did not add to the overall cost of the proceeding.

9. The facts in support of the notices were identical in both proceedings, save for one fact which concerned the differences in valuation. But as earlier noted that matter became a non-issue in the face of an acceptance of the unchallenged evidence of Mr Logan; that the value of the property was $248,000.00 and the contract itself being of a recorded amount of $250,000.00. As earlier noted, I do not think the s.139ZQ notices did materially add to the proceedings, such that even if the respondents are correct and the applicant did formally withdraw from relying upon them, that that matter would of itself borne upon the issue of costs. There is no reason that the respondent should have any costs for this matter, as if there were any additional costs they were de minimis in my view, having regard to the nature of the issues that were alive on the s.139ZQ notices.

10. The second matter concerns the question of the offers.  On 21 February 2013 the respondent made two offers to settle to the applicant. One was in respect of the first respondent’s proceeding, and the other in respect of the second respondent’s proceeding.

11. No question arises concerning the offer made to the second respondent. Plainly, the offer was not bettered and that matter requires no further consideration. 

12. However, the first respondent’s offer does give rise to some argument. The first respondent’s counsel says that its offer of 21 February 2013 did better the applicant’s outcome. The offer was expressed in these terms, that is, the first respondent offers to compromise this proceeding.  The offer is that the first respondent pay the sum of $35,000.00 including interest calculated at the standard rate in full and final settlement of the applicant’s claim against the first respondent. The costs are in addition to this offer.

13. The applicant succeeded in obtaining a judgment for $33,000.00.  However that sum does not include any allowance for interest.  When interest was calculated at approximately $11,500.00 over that period and has been allowed for in the draft order, such that when interest is aggregated with the judgment sum it would appear that the total sum to which the applicant is entitled from the first respondent is aggregated in the amount of about $44,500.00. It can be seen by reference to exhibit 6 that the increment of interest accruing between 21 February 2013 this year and judgment was minimal and certainly not sufficient to constitute an aggregated offer greater than the judgment sum when allowance is made for an appropriate discount of interest that would have accrued between those two dates. 

14. I am satisfied that the first respondent’s offer was not bettered by the Court orders. It follows the first respondent is not entitled to any particular consideration as it contended for under r.25 of the Federal Court Rules 2011. 

15. The applicant also offered or made offers to settle in respect of the proceedings. The first offer made by the applicant and was directed to the first respondent, and that was that the first respondent consent to the Court making an order that on the applicant’s undertaking to pay within 28 days of the date of the order a sum of $215,000.00 to the first respondent the Court would then make declarations and there would be a transfer. That may have been the outcome save that the first respondent succeeded in its submission for an order that it have an opportunity to pay to the applicant a sum representing the undervalue of the property.

16. That is certainly the intent of the orders made by the Court.  It was not clear from the applicant’s offer if such was in fact in contemplation, although in fairness the prospect of such a payment may not have been raised by the first respondent until very late. The material which is before me does not assist me in resolving that question. In any event, the offer itself, in its form, is not sufficiently clear to place the first respondent in the position of it being able to be said that it unreasonably refused to accept that offer in the terms contemplated in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536.

17. Plainly, if the offer had been expressed in terms or perhaps permitted the prospect of the first respondent paying to the applicants the difference representing the undervalue, the applicants offer would have had greater currency. Now, in my view the circumstances of this offer are not sufficiently strong to warrant exercise of the discretion in favour of the order for indemnity costs. 

18. So far as the second offer is concerned, the applicant forwarded an offer to the second respondents in these terms, that is, the second respondent pay to the applicants the sum of $45,000.00 including interest. This offer is in addition to costs. The offer directed by the applicant to the second respondent was plainly bettered.  As my judgment indicates this case was a relatively common garden preference claim dispute. Respectfully, the second respondent seems to have missed the point in this particular proceeding. The case itself, in my view, gave rise to no novel or unusual points of law and nor is the case one that could be characterised as having given rise to challenging issues of fact. The offer was plainly a reasonable offer and it seems, on its face, that the applicant offered to settle its claim for about half of that which it was entitled to. 

19. No doubt the cost of litigation and particularly the cost of taking the matter to trial from the date of offer of 31 May and its associated expense with the trial being conducted in Cairns and the necessary expense of having to take witnesses to Cairns for trial would have been weighty factors in the measuring of the sum that was proffered or that was offered. In my view there does appear to have been a prima facie unreasonable refusal. Rule 25.14(3) Federal Court Rules 2011 is relevant. Part 25 deals with offers to settle and in particular r.25.14(3) deals with costs where offers are not accepted. It provides:

    “(3)If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’s costs:

    (a) before 11.00 am on the second business day after the offer was served — on a party and party basis; and

    (b) after the time mentioned in paragraph (a) — on an indemnity basis.”

20. I have earlier observed that in my view, having regard to the terms of the offer that was proffered, it could not be said that the offer was unreasonable. Indeed in the circumstances, having regard to the issues at trial, it seems to me that the offer was indeed a very reasonable offer and that the respondent’s failure to accept the offer was, in my view, an unreasonable refusal. That reinforces or fortifies, in my view, the appropriateness of the relief which ordinarily ought follow under rule 25.14(3) notwithstanding the Court’s general discretion which is alive under rule 1.35. In my view the applicant should have its costs as against the second respondent from 11.00 am on the second business day after the offer was served and thereafter on an indemnity basis.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Judge Burnett

Date: 12 August 2013