Owners - Strata Plan No 77992 v Arouchanov

The case of Owners - Strata Plan No 77992 v Arouchanov involves a dispute over costs incurred in a bankruptcy proceeding. The Strata Owners had obtained a judgment against Mr Arouchanov in the Local Court of New South Wales, and subsequently a sequestration order was made against him. The Trustee in bankruptcy, who was representing the Strata Owners, sought an indemnity costs order or alternatively a fixed amount of $13,500, which was the difference between the actual costs incurred and the fixed costs that had been awarded earlier. The legal issues before the court were whether the costs should be paid on an indemnity basis, and if not, whether they should be assessed or fixed in a lump sum. The court considered the principles applicable to indemnity costs and found that it was not an appropriate occasion to award indemnity costs. The court also found that the application for review was not inevitably doomed to fail and that Mr Arouchanov did not act unreasonably in bringing it. The court concluded that the costs should be assessed on a party/party basis, and awarded the sum of $14,552.80 to the Trustee, which included the costs of the present application for costs. The court also noted that except in exceptional circumstances, it would not allow any fee to be claimed for a vacated hearing.

The court's reasoning was based on the principles applicable to indemnity costs, which require the Court to consider whether the losing party's conduct was so unreasonable as to warrant such an order. The court found that there was no evidence to suggest that Mr Arouchanov acted unreasonably in bringing the application for review, and that the application was not inevitably doomed to fail. The court also noted that it was not the role of the Court to predict the outcome of a hypothetical case, and that there was a live contest about whether Mr Arouchanov was served with the bankruptcy notice or the creditor’s petition. The court concluded that it was not appropriate to award indemnity costs, and that the costs should be assessed on a party/party basis. The court also noted that there was no evidence of any reasonable communications among the parties when Mr Arouchanov became represented, and that the Trustee and the Strata Owners did not take any steps to explain to Mr Arouchanov why it was necessary to put him into bankruptcy and sell his home.

The final orders of the court were that the Trustee's costs of $14,552.80 be paid by Mr Arouchanov on a party/party basis, and that the sequestration order made against Mr Arouchanov be set aside. The court also noted that the costs of the present application for costs were included in the sum awarded to the Trustee. The court did not make any orders as to the costs of the application for review, as the matter had been settled between the parties. The court's decision highlights the importance of considering the principles applicable to indemnity costs, and the need for parties to communicate reasonably with each other, particularly when one party is self-represented.