Ogle v Smits & Ors

[2009] HCATrans 97

[2009] HCATrans 097

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B29 of 2008

B e t w e e n -

DONALD GORDON OGLE

Applicant

and

LEONARDUS GERARDUS SMITS

First Respondent

TENDERIS PTY LTD

Second Respondent

MORETON BAY REGIONAL COUNCIL (FORMERLY PINE RIVERS SHIRE COUNCIL)

Third Respondent

Summons

KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 6 MAY 2009, AT 10.10 AM

Copyright in the High Court of Australia

MR C.D. COULSEN:   May it please the Court, I appear for Leonardus Gerardus Smits, who is the first respondent in the substantive application, and Tendiris Pty Ltd, which is the second respondent.  Those two parties are the applicants on the summons.  (instructed by Morgan Conley Solicitors)

HER HONOUR:   Thank you.  We will refer to them as the applicants for this morning.

MR A.J. GREINKE:   May it please the Court, I appear for Cranston McEachern Solicitors who are the respondents to the application.  (instructed by Cranston McEachern Lawyers & Attorneys)

HER HONOUR:   Is there anyone representing Mr Ogle himself?

MR GREINKE:   Not this morning, your Honour.  To the extent I can assist the Court in regards to Mr Ogle, I will do so, but otherwise he does not wish to be heard.

HER HONOUR:   Yes.  Are you pressing for orders against Mr Ogle himself?

MR COULSEN:   Yes, your Honour, but only up to the date of his sequestration order.

HER HONOUR:   Yes, I gathered that.  You are relying on a summons which was filed on 14 April and two affidavits of Mr Hamilton.  Is that correct?

MR COULSEN:   Yes, your Honour.

HER HONOUR:   The first was sworn on 14 April and the second on the 27th, I think?

MR COULSEN:   Yes, your Honour.

HER HONOUR:   Thank you.  Mr Greinke, you rely upon the affidavit of Mr Deed sworn 30 April?

MR GREINKE:   That is correct, your Honour.

HER HONOUR:   That is the material, gentlemen?

MR COULSEN:   Yes, your Honour.

HER HONOUR:   You may take it I have read the material and I have read your submissions.

MR COULSEN:   Your Honour, I have a short reply outline which deals with a matter arising from Mr Deed’s affidavit which I will hand up.  I will also hand up a bundle of authorities, your Honour.  Your Honour, the reply does raise a different issue to that raised in the original outline. 

HER HONOUR:   Mr Coulsen, am I correct in the aspects of chronology of events in that the letter of 7 October written by Cranston McEachern to your instructing solicitors was the one which asserted that the right of action was not property invested in the trustee?

MR COULSEN:   Yes, that is so, your Honour.

HER HONOUR: But curiously also agreed that the proceedings were stayed under section 60(2) which may have been regarded as somewhat confusing?

MR COULSEN:   Your Honour, the affidavit of Mr Deed, which is addressed in the reply outline, says that during the period between 3 October, which was the date of the sequestration order, and what I will call the election day, which was 3 November, notwithstanding the letter of 7 October asserting that this is not an issue of vested property ‑ ‑ ‑

HER HONOUR:   They were dealing with the trustee’s election.

MR COULSEN:   Trying to get the election made on the basis of support from a third party to keep the action going.

HER HONOUR:   Yes, I understand.  They were dealing with the trustee and trying to persuade the trustee to make an election in their favour.

MR COULSEN:   So our real complaint, your Honour, is that once the election date passed and the solicitors continued on the path that was asserted in the letter of 7 October and, indeed, filed a reply and kept the matter moving in which the applicants to the summons had to respond ‑ ‑ ‑

HER HONOUR:   Well, before they filed a reply there are a few steps.  There is also the consideration that it is a question of what your instructing solicitors should have understood to be the state of the law and what steps they ought to have taken as well. 

MR COULSEN:   With respect, your Honour, we say we wrote to the Registry pointing out, firstly, the sequestration order ‑ ‑ ‑

HER HONOUR:   Yes, you gave notice which – yes, I understand that.  You also wrote and obtained an extension of time within which to put the submissions in.  That was done on 8 October, I believe.

MR COULSEN:   It might have been a little ‑ ‑ ‑

HER HONOUR:   Earlier?  That was the date the Registrar’s directions were made.

MR COULSEN:   Your Honour, I have 6 October in my notes, but certainly it was around that time.

HER HONOUR:   All right.  So the sequestration order is made.  Your solicitors give notice to the trustee.

MR COULSEN:   To the trustee, yes.

HER HONOUR:   They write applying for an extension of time to the Deputy Registrar in the High Court within which to put their written submissions on and suggest that should be after 3 November, which is the time for election.  Then Cranston McEachern write asserting this rather curious notion of a right of action not being vested in the trustee.  The Deputy Registrar accedes to the directions.  The time for an election passes and your solicitors proceed to file the argument which they have obtained an extension for.  Do I understand at that point that the written submissions that they filed on 10 November amount to the principal costs in this period?  Is that the principal focus of the costs thrown away?

MR COULSEN:   Yes, your Honour.

HER HONOUR:   When were they undertaken?  The written submissions would have been, I imagine, commenced some time previously?

MR COULSEN:   Yes.  Your Honour, if I can put it in this contrast.  What we say is that if, as quickly as practicable after the election day, the solicitors had have filed a notice of discontinuance or gave some indication the matter would not be proceeding, there is roughly a week’s work, the last week before the outline has to go in, when most of the outline is done.

HER HONOUR: But you see, Mr Coulsen, there are two matters that arise here, I think. The first is what your solicitors should have understood to be the state of the law themselves. Section 60(2) is fairly plain. It says the action is stayed. Then subsection (3) says if there is no election it is deemed abandoned. You do not need the act of another party to tell you these things.

MR COULSEN:   With respect, your Honour, the correspondence going from my solicitors to the Registrar of the Court pointed out, yes, this is how the sections operate, but if we did not otherwise comply with directions my side would be in default.  Now, there may have been a deemed abandonment by operation of the Bankruptcy Act, but there was still a live court file.

HER HONOUR:   I understand that the filing of the argument may have been by way of acceptance that you are obliged to follow the directions of the Court, but your solicitors sought and obtained an extension to do that.  There seems to have been some view that that was a course that they still had to undertake and I do not understand them to have ever put to the Deputy Registrar that the terms of subsections (2) and (3) operated in their own terms and stayed all proceedings in any court.  The argument about this was not put on until your solicitors filed an amended argument on 10 December.

MR COULSEN: Your Honour, conversely, while, yes, there was a stay by operation of section 60(2), my solicitors did ask for the extension to allow what I will call the election period to expire before the filing.

HER HONOUR:   When no election was made, they could have at that point said, “The matter is deemed to be abandoned and we do not think it is necessary to take this any further”, raise the point and – I mean, they did finally say that.  They wrote that in a letter of 1 December, but then they appear to have not really taken that firm point.

MR COULSEN:   With respect, your Honour, there is the deemed abandonment by operation of the Bankruptcy Act.  Then there is, what is the practical effect of that on the court file?  As I understand it, this action has not been deemed abandoned in the Court.  There has been no order dismissing ‑ ‑ ‑

HER HONOUR:   But it is up to your solicitors to raise with the Registrar that here is a legal issue about whether or not the matter is deemed abandoned.  That is what the Bankruptcy Act says.

MR COULSEN:   Yes, they say, your Honour, and that is ‑ ‑ ‑

HER HONOUR:   My point is that they could have but did not do it until a bit later on and in this meantime costs are incurred.  You see, the other problem with this is, even though you can say that matters were proceeding in the court and you were abiding by directions, that does not link it causally to Cranston McEachern’s action, does it?

MR COULSEN: Your Honour, what we say is that up until the election date, Cranston McEachern is protesting to us that it is not vested property; section 60(2) does not have operation.

HER HONOUR:   No, they did not say that.

MR COULSEN:   Sorry, it is vested property and ‑ ‑ ‑

HER HONOUR: But they agree that section 60(2) affects the stay and they do not say anything about denying that if the election is not made, section 60(3) would not take effect.

MR COULSEN:   Your Honour, it is not until Christmas Eve that that point is conceded by Cranston McEachern, 24 December.  They then say ‑ ‑ ‑

HER HONOUR:   That is on instructions.  In this period they are acting for their client attempting to have the trustee elect, for part of this period in any event.  That is what they are doing.

MR COULSEN:   That is up until the election date, your Honour.

HER HONOUR:   Your submissions would seem to deny their client the right to seek advice about this.

MR COULSEN:   No, your Honour, we are not putting it like that in any way.  What we say is, up until the election date, that is fine.  Cranston McEachern are entitled to say as a matter of law this is not vested property, but to cover the bases, we will go and talk to the trustee and see what we can do.  That is not what we really have a complaint about if that is all there was.  What happens when the election date passes is that it is not until 24 December that it is conceded in writing ‑ ‑ ‑

HER HONOUR:   What costs are incurred in the period between 3 November and 24 December apart from some correspondence?  You have correctly identified for me that the major item in relation to these proceedings, not the Planning and Environment Court proceedings ‑ ‑ ‑

MR COULSEN:   No, that is so, your Honour.

HER HONOUR:   - - - were the written submissions filed in the court.

MR COULSEN:   Your Honour, I would have to get my instructing solicitor to look through the bill which is in the material to ‑ ‑ ‑

HER HONOUR:   I cannot imagine it is a large part.  It is some correspondence.

MR COULSEN:   Your Honour, I do not know the items on the bill well enough to answer, but as a general proposition, your Honour, that ‑ ‑ ‑

HER HONOUR:   It would be interesting to know, particularly since there are some figures here given about how much it has cost to bring this application, how much we are really talking about because I take it that the large figures thrown around refer in some part to the Planning and Environment Court, the effects on costs there.  I do not understand written submissions to cost $40,000 or $50,000.

MR COULSEN:   Your Honour, I would have to ask my instructing solicitor to do a quick summary through the bill, but my understanding was the figures which are in the material were only in respect to the leave application.  So what is in there does not include anything that has arisen from the Supreme Court orders, because, your Honour, the outlines cover a great many issues.  It is what at first blush starts out as a practice issue in respect to planning and environment appeals.  It also pulls in quite fundamental questions about what is property and what is the nature of property and whether that property can be dealt with and what also then becomes is, is that property vested property or otherwise?  So in that sense it is not simply a practice issue about joinder of parties because that can only be determined on some analysis, especially on Mr Greinke’s case on the application for special leave.  It requires a question of property.

HER HONOUR:   Am I misunderstanding it to say that there are two periods in relation to costs that really affect Cranston McEachern?  One is the costs involved in the written argument which was filed on 10 November and the second is the costs of not filing a notice of discontinuance after 24 December.  They are the two principal areas?  I am struggling to understand why it is said that Cranston McEachern personally, as distinct from their client, ought to have done something in the period from 3 November to 24 December.  Why was it Cranston McEachern’s personal obligation as solicitors to do something?

MR COULSEN:   Your Honour, because given the history of the matter and that during that time the legal representatives were well versed in what the relevant issues were ‑ ‑ ‑

HER HONOUR:   Both sides knew what the issues were.

MR COULSEN:   That is so, your Honour, and, indeed, our side wrote to the Registry saying extend time periods to allow the election period to expire.  Knowing all of that, and then knowing on 3 November that no election is being made, then on 10 November, so a week – sorry, I want to get this right, your Honour.

HER HONOUR:   You file your argument knowing ‑ ‑ ‑

MR COULSEN:   We file our argument.

HER HONOUR:   In knowledge of the law and then they file their reply in knowledge of the law.  On 10 December you raise issues about abandonment in an amended argument.

MR COULSEN:   That is so, yes.

HER HONOUR:   You could have done that on 4 November.  You could have done it on 3 November.  You could have asked the Registrar not to require you to put in written submissions until the question of abandonment was resolved.

MR COULSEN:   Sorry, your Honour.

HER HONOUR:   You are not able to tell me at this moment just what costs you say Cranston McEachern are responsible for or to identify at least the major aspect of the costs, which is the written summary of argument?

MR COULSEN:   Your Honour, what we say is that given the position of the solicitors immediately prior to the election day on 3 November, we say that given the state of the law, given the facts in these circumstances, Cranston McEachern should have known that some immediate action was required and that there was no need to allow the proceeding to go any further because by law it was deemed abandoned.

HER HONOUR:   You mean they should make a concession without instructions from their client?  If the law was that clear, you should simply have taken action yourself.

MR COULSEN:   Well, that is why we are here now, your Honour, because we have put them on notice that if it proceeded, we would be seeking costs.  As it currently stands, there is no order in the Court determining this application.

HER HONOUR:   But you need not have pressed them for a notice of discontinuance.  Section 60(3) had the effect that the action was deemed abandoned.  That only had to be brought properly to the attention of the Registrar and, if necessary, written submissions put before the Court.

MR COULSEN:   Well, your Honour, that was done.

HER HONOUR:   In which case you may well have got costs if they had resisted it.

MR COULSEN:   Your Honour, we are here now some five months later ‑ ‑ ‑

HER HONOUR:   Yes, with additional costs having been ‑ ‑ ‑

MR COULSEN:   Your Honour, there still is no order for the dismissal or discontinuance of the application.

HER HONOUR:   They cannot file them without instructions, I take it, and they probably cannot file them without consent.  But from 24 December it was plain that no steps were going to be taken in prosecution of the proceedings.

MR COULSEN:   But, your Honour, no step was taken to end the proceedings and in that circumstance ‑ ‑ ‑

HER HONOUR:   But you have to distinguish between them and their client and you have to say why they had to do it when it is a matter upon which you act upon instructions.  They cannot do it on behalf of their client without instructions.  It would be improper.  The matter could have come before the Court for about a 30 second hearing on the deemed abandonment and have the Court, if necessary, if the Registrar could not have attended to it, make an order dismissing the proceedings.  I take it that there was need for an order in this respect because of the Planning and Environment Court proceedings, is that correct?  Is that the reason that we are looking for the final piece of paper to discontinue the proceedings?  Why did you need a notice of discontinuance?

MR COULSEN:   Your Honour, without a notice of discontinuance it would be difficult for us to say that, well, we do not have to comply with any more court orders.  Now, the correspondence from the Registry in respect to deemed abandonment under the Rules, as opposed to the Act, because of the failure to lodge the appeal books, is only the subject of correspondence now.  With respect, your Honour, it would be quite arrogant of us simply to say that after 3 November we do not have to comply with any more directions and that is the end of it.

HER HONOUR:   No, but you could have brought the question of the deemed abandonment as a matter before this Court in relation to the special leave application.  If they had disputed the deemed abandonment, it could have brought it all to a head straightaway, brought it before this Court and if the Deputy Registrar was not prepared to deal with it or thought that it

ought to be referred to a Judge, it could have been promptly referred to a Judge.  They may have taken a different view.  But what seems to have happened is that correspondence overtook it and demands were made and costs were incurred.  You did not have to wait for a notice of discontinuance.  You could have taken the initiative.  When I say you, your instructing solicitors could have taken the initiative.

MR COULSEN:   Your Honour, those issues are raised in the amended outline, so it has always been a live issue here, but without us taking some step, it seemed there was never going to be any resolution or any finalisation of the application before the Court for special leave.

HER HONOUR:   Yes. 

MR COULSEN:   I cannot take the issue any further, your Honour.

HER HONOUR:   No, Mr Coulsen.  Could you just remind me, against Mr Ogle, if you are not successful in your order for costs against the solicitors after 6 October – you are only seeking costs in any event against Mr Ogle up to the time of sequestration, are you not?

MR COULSEN:   Your Honour, the answer to that would – let me think this through just quickly, your Honour.  I am thinking about the effect of the sequestration order and whether an order could be made in respect to costs incurred after that date.

HER HONOUR:   Well, in any event, I suppose, he is only on notice of an application seeking costs against him up to 6 October.

MR COULSEN:   That is so, your Honour.  We only seek an order up to there, your Honour, because the reality would be that the order could not be enforced past that date anyway and we could only prove up until the date of sequestration, your Honour.  That would seem to be the analysis of it.

HER HONOUR:   Thank you, Mr Coulsen.

MR COULSEN:   Thank you, your Honour.

HER HONOUR:   Mr Greinke.

MR GREINKE: Yes, your Honour. The first contention for my client is that the approach the solicitors took is consonant with the state of the law as it was known to them and should have been known to the applicants in this case. In respect of both the vesting question and also the section 60(2) question which they admitted in correspondence, even if the first contention was incorrect for some reason, the second was admitted openly in correspondence and even if that was an error on the part of their advice to Mr Ogle in respect of the vesting question, that ultimately should not have affected any of the costs in the proceeding because the 60(2) issue was openly admitted and the action was approached on that basis.

In terms of the elements of the costs after what is called the election date, Mr Deed’s evidence is to the effect that what was sought by terms of advice to Mr Ogle was whether there was another way to keep the action in this Court alive. The two options that were explored by advice from Mr Ogle were, one, making further representations to the trustee and, two, bringing a potential appeal for the failure of the trustee under section 178 of the Bankruptcy Act.

Now, if either of those two options had been pressed and been successful either in reversing the minds of the trustees or convincing the Federal Court to reverse that decision for other grounds, then the action would have proceeded in this Court and therefore the immediate discontinuance argument put against us by the applicants is not one that has weight and would, in your Honour’s words earlier, deny Mr Ogle access to advice on these particular questions and prejudice his position.

In respect of the issue of the immediate discontinuance, I wish to refer your Honour to the judgment in Owens v Comlaw, a copy of which I have brought with me.  Actually, your Honour, that is not the one I wish to refer you to.  It is a different one called Campbell v Metway Leasing, a copy of which I have also provided for your Honour.  Your Honour, I wish to refer you to, in particular, paragraph [22] of the reasons in that case referring to what the effect of the deemed abandonment on an existing action would be.  In particular, Justice Katz in that case was of the view – this is moving over to page 105 at the top – that the appropriate order where there is either an actual election or a deemed election is not a dismissal of the proceeding but, in fact, a stay of the proceeding and expressly – and your Honour will see in the middle of paragraph [22] – on the basis that it is open to the trustee to change their mind or to seek an extension of time to make that election should they ultimately decide to pursue that particular proceeding.

Your Honour, that applies to the case here and there is no vice in Mr Ogle, on advice by Cranston McEachern, seeking to change the trustee’s mind so as to be able to continue with the special leave application and in respect of the action needing to be immediately discontinued, the reasons in Campbell indicate that that was not the appropriate order in any event and the only issue should be a continuation of the existing stay.  That is a matter that – it is not my clients that took a different view from the applicants in relation to 60(2) but the Registrar of this Court took a different view and that is nothing that is causally connected to either Mr Ogle or Cranston McEachern.  If the applicants disputed that view, it was in their power and within their hands to be able to bring that application before the Court or to press it in further correspondence to my client seeking consent to stay.

Indeed, from the outset, what is significant from both Mr Ogle and Cranston McEachern’s situation is they accept the operation of 60(2) and, in their words, do not take objection to the applicants not taking further steps until the issue has been resolved.  That is expressed in their first letter from the outset.  One would expect that that attitude would continue and there is certainly nothing in the correspondence from Cranston McEachern on behalf of Mr Ogle that at a later point in the action take some different view to that.

In regards to the costs incurred and also the timing exercise, I can refer your Honour to the figures.  The figures are contained in Mr Hamilton’s second affidavit.  Your Honour, the affidavit annexes various tax invoices from counsel and also from its firm starting at page 19 of the exhibit.  While there appears to be some overlap with the Planning and Environment Court action, what is clear is that the dates on which costs were incurred, or the bulk of them, you will see from Mr Coulsen’s invoice, 7 and 9 November 2008 on page 19.  On page 20 in terms of Mr Gore’s costs, while there are some small costs on 3 December, there are some costs incurred on the 8th and the 10th and that appears to be in regard to the revised outline of argument.  On page 21 Mr Gore’s invoice also indicates that the bulk of the costs were incurred up to 10 November 2008.

HER HONOUR:   I tag “B29”, is that a reference to these proceedings or the ‑ ‑ ‑

MR GREINKE:   B29 is these proceedings, that is correct.

HER HONOUR:   Yes, these proceedings, yes.

MR GREINKE:   Your Honour, in terms of the work that is done by the solicitors, that is at page 24 and what is interesting about page 24 is this.  Accordingly to the chronology and the costs incurred by the solicitors, there are no costs which are outlined for either 3 or 4 November 2008, the 3rd being the date on which the applicants asserted to this Court that the final election had to be made by the trustee.  There is no contact, according to the invoice here, with the trustees until a week later, on the 10th, and even after that phone call on the 10th, which is about halfway down the page on page 24, there are further costs incurred that day to continue to finalise the submissions to this Court.  There appears to be no issue about having made contact earlier or taken any steps to avoid those costs being incurred once they were known that the election had not been made.

It seems to be the earliest date that the issues were looked at was at the end of the page on 13 November where it refers to a call regarding “issues with s60, possibilities of consent to dismissing HCA proceedings”, but that issue of consent was never raised in correspondence with Mr Ogle through Cranston McEachern at any stage.

So in terms of the causation of the costs, it is an issue that was known to the applicants to be an issue worthy enough to ask this Court for an extension of time to allow 3 November to pass without costs being incurred.  Once that date had in fact passed, the applicants, curiously, did not apply for a further extension or other stay and did not even make contact, apparently, with the trustees to ascertain whether or not an election had, in fact, been made or not made.  One would have thought that was critical given that only a week earlier they had been seeking an extension and granted an extension from this Court.

Your Honour, in terms of the vesting question, I rely upon – and your Honour will see that in my outline – Cummings Case with a view that there is a difference in operation between the vesting under section 58 and the operation of section 60(2) and that in a case where we are dealing with an appeal by Mr Ogle against an adverse finding against him but, more importantly, not an issue where on an appeal to this Court he was seeking to obtain a property, in our view, or other rights that would enhance the estate, according to the approach in Cummings, that right of appeal does not vest like a chose in action in a trustee either.

So, on the question of what the state of the law is, the approach that was taken from the outset in the first letter to say while it does not vest in the estate, nonetheless we accept that section 60(2) applies, is constant not only with this Court in Cummings, but also the other cases I have referred your Honour to in my outline which are to the effect of that differing approach between section 58 and section 60(2).

Even, your Honour, if there was some contest as to the scope of section 58 and a live issue as to whether or not that vested in the trustee or not, Mr Ogle has a right to press that issue.  For example, if there was a dispute between him and the trustees, which ultimately there was not, about whether there was a vesting on that action, he would be within his rights to ask Cranston McEachern to advise him on that and, if need be, to have an argument about whether that was in fact the case.

The law is certainly, in my submission, either clearly on the side of the approach that Cranston McEachern took, but certainly not so clearly the opposite conclusion that it was so unreasonable of them to take the position that they could.  It is not a case of a “doomed to failure” argument, as has been used in other cases.

Given all of those issues, your Honour, and given the high degree of satisfaction that your Honour needs to have, that there has not just been errors by Cranston McEachern but conduct amounting to serious misconduct or gross negligence on their part, in my submission, the applicants have failed even to show that there is any misconduct let alone with a standard that the case law suggests needs to be required, particularly having regard the public policy not only of solicitors not acting for fear of adverse costs orders, but also in this case for Mr Ogle, solicitors not acting for persons who are impecunious, which seems to be the real heart of the complaint.  Your Honour, unless there is anything further to assist your Honour, those are my submissions.

HER HONOUR:   An application for special leave to appeal was filed by the applicant, Donald Gordon Ogle, on 27 August 2008.  His summary of argument and a draft notice of appeal followed on 1 October 2008.  On 3 October 2008 a sequestration order was made against his estate.  On 6 October 2008 notice of this proceeding was given to the Trustee in Bankruptcy. 

By section 60(2) of the Bankruptcy Act 1966 (Cth), an action is stayed until the trustee makes an election whether to prosecute or discontinue the action. By section 60(3), if that election is not made within 28 days after notice of action is served, the trustee is deemed to have abandoned the action. That period expired on 3 November 2008 and no election was made.

The first and second respondents had been directed to file their summary of argument in these proceedings on 3 November 2008, prior to the expiration of the period in question.  They had sought and obtained from the Court an extension of time until 10 November to do so, which took account of the time for the trustee’s election.  They filed their summary of argument on 10 November 2008 and later on 10 December 2008, filed an amended argument raising the issue of section 60 and its effect on the proceedings as abandoned.  The applicant filed a reply on 17 November 2008.

On 24 December 2008, the applicant’s solicitor wrote to the first and second respondents, solicitors, advising that it was now acknowledged that the proceedings were abandoned and would not take steps to further prosecute it.  On 6 December 2008, the Deputy Registrar wrote to the applicant’s solicitors requiring a notice of discontinuance to be filed.  This was not done and some correspondence was entered into between the first and second respondents’ solicitors in this period. 

The first and second respondents seek costs against the applicant on an indemnity basis for the costs incurred prior to 6 October 2008 and costs against his solicitors personally for all those costs incurred after 6 October 2008.  It would appear that the larger portion of costs was incurred in the preparation of the written argument and its amendment which were filed in this Court.

The basis for the application against the applicant is his knowledge of his impending bankruptcy at the time when these proceedings were brought.  This would appear a sufficient basis for the making of an indemnity order.

The grounds for an order against the applicant’s solicitors appear to be: 

(a)that the first and second respondents incurred expenses in reliance upon the applicant’s solicitors’ contentions in their letter of 7 October 2008, that section 60(2) did not apply;

(b)that the applicant’s solicitors could not be retained and could not act once the trustee was appointed; and

(c)that the first and second respondents incurred costs consequent upon the applicant’s solicitors not discontinuing the action.

The applicant was entitled to have legal advice as to the trustee’s election and how that might be secured. His solicitors did assert in their letter of 7 October to the first and second respondents’ solicitors that the right of action was not vested in the trustee. However, at the same time they acknowledged that a stay operated pursuant to section 60(2). The solicitors’ contentions may have seemed somewhat inconsistent, but they did not assert that section 60 had no application, as the first and second respondents’ solicitors now contend. In any event, the effect of section 60(3) must have been obvious to the first and second respondents’ solicitors when no election was made. It was with respect to the operation of that section that their position ought to have been considered.

There were steps which could have been taken, both prior to and following the non‑election by the trustee, concerning the abandonment of the action, by the solicitors for the first and second respondents.  They could have sought directions or made application to this Court in connection with the abandonment and sought orders such as a stay or a dismissal of the action, if it appeared that there was no possibility of an election later being made.  To have done so would have obviated the need to file a written argument and it would have obviated the incursion of further costs.

This is not to say that the first and second respondents were responsible for the incursion of all costs.  But importantly, for the purposes of this application, the incursion of the costs in relation to the written arguments are not shown to be causally connected to what was said by the solicitors for the applicant in their correspondence.  The costs of filing the first and second respondents’ summary of argument could not be said to have been brought about by the applicant’s solicitors’ letter of 7 October.  It was a course to which the first and second respondents’ solicitors considered they were committed, as the correspondence to the Court regarding the extensions confirms.

The contention that the proceedings should be deemed abandoned, a matter which was open immediately after 3 November, was not raised in these proceedings until 10 December in their amended written submissions.  This was two weeks prior to the acknowledgment from the applicant that the proceedings were abandoned by law and that no steps would be taken.

The solicitors for the applicant were not guilty of misconduct in relation to taking further steps in connection with an election in this period.  They could not make concessions without instructions.  It may be inferred that costs in this regard are sought against them because their client is bankrupt.  However, they should have taken steps to procure a notice of discontinuance, especially when a direction was made by the Court to do so. 

I am not satisfied that an order for costs is warranted with respect to the letters forwarded in pursuit of a notice for discontinuance.  There was no particular need for a notice of discontinuance given the alternative proceedings which could have been brought in this Court.  It may be that the first and second respondents’ solicitors at this point were not in receipt of specific instructions to that effect and were likely not to have been put in funds.  In any event, it is not shown that there are substantial costs which were incurred with respect to the letters which passed about the fact of a notice of discontinuance.

It is regrettable that the first and second respondents have incurred substantial costs in the bringing of this application.  In view of their lack of success, it is not likely that they will recover these costs, but I will hear from counsel on the matter.

MR COULSEN:   Your Honour, perhaps before dealing with the costs orders - there is correspondence – this is dealing with the orders that we would seek against Mr Ogle as opposed to the solicitors.

HER HONOUR:   Yes.

MR COULSEN:   Your Honour, there is correspondence from the Registry dated 7 April 2009 which the Registrar advises that the matter has been deemed abandoned, but there is no certificate of abandonment issued yet pending this application.  So that in that circumstance, given the advance state of that procedure, it may simply be appropriate that I do not seek orders against Mr Ogle and simply that the deemed abandonment inside the Registry be allowed to continue.

HER HONOUR:   So you are not seeking any orders?

MR COULSEN:   Well, your Honour, on the basis that there is a – the Rules simply operate in respect to the abandonment of the action under the Court Rules as opposed to the Bankruptcy Act.

HER HONOUR:   Whether you are or are not seeking an order against Mr Ogle is all I have to know.

MR COULSEN:   Well, your Honour, on the basis that there will be a deemed abandonment under the Court Rules in any event.

HER HONOUR:   I am not ruling on that.  Are you seeking an order, or you are not?

MR COULSEN:   I will seek an order, to be safe, your Honour.

HER HONOUR:   Yes.

MR COULSEN:   Your Honour, on the issue of costs, while, yes, the normal course would be that costs would follow the event, here, your Honour, the only submission I can make is there are some curious comments in the correspondence and that perhaps if both sets of solicitors had acted in a manner different, then there would not be any need for the application.  In that circumstance, each party should bear their own costs.

HER HONOUR:   Mr Greinke, do you want to be heard in relation to costs?

MR GREINKE:   Yes, your Honour.  I seek an order for costs incurred by Cranston McEachern in respect of this summons because what has been brought is an application which essentially has to allege misconduct on their part such as to obtain an order for costs personally against them.  It is an extraordinary step in this Court.  Having failed on that, the first and second respondents should pay their costs which are costs not to do with Mr Ogle but to do with the firm personally.

HER HONOUR:   There will be orders in terms of paragraph 1 of the summons, that the applicant pay the first and second respondents costs of an incidental to the proceedings incurred before 6 October 2008 on an indemnity basis to be assessed.  The summons against the solicitors for the applicant is dismissed and I order the first and second respondents to pay the costs of the solicitors for the applicant incurred in connection with the summons. 

AT 11.01 AM THE MATTER WAS CONCLUDED