Quek v Pro Trader Pty Ltd

[2019] FCCA 675

FEDERAL CIRCUIT COURT OF AUSTRALIA

QUEK v PRO TRADER PTY LTD [2019] FCCA 675

Catchwords:
BANKRUPTCY – Where judgment was delivered some time ago – where applicant was wholly unsuccessful – where costs did not follow in the event – where the Respondents filed an application in a cost seeing indemnity costs.

Legislation:

Federal Circuit Court Rules 2001 (Cth), r.21.02

Federal Court (Bankruptcy) Rules 2016, r.3.02

Applicant: JULIE QUEK

Respondent: PRO TRADER PTY LTD
(ACN 086 051 881)

File Number: PEG 597 of 2015

Judgment of: Judge Vasta

Hearing date: 27 February 2019

Date of Last Submission: 27 February 2019

Delivered at: Perth

Delivered on: 27 February 2019

REPRESENTATION

Solicitors for the Applicant: TGC Lawyers

Solicitors for the Respondent: Zafra Pty Ltd

ORDERS

1. That the Applicant pay costs on an indemnity basis to the Respondent as agreed, to be taxed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT PERTH

PEG 597 of 2015

JULIE QUEK

Applicant

And

PRO TRADER PTY LTD (ACN 086 051 881)

Respondent

REASONS FOR JUDGMENT

(Ex Tempore)

1. On 11 October 2018, His Honour Judge Lucev delivered a decision some 42 pages in length, which ruled that the Applicant’s application to set aside a bankruptcy notice was dismissed.  His Honour said at paragraph 69:

   The Court will hear the parties as to costs.

2. I do not have a transcript, nor is there any affidavit evidence as to what occurred on that day and as to why His Honour had not heard the application for costs.  Unfortunately, this does become a matter that does seem to haunt some of us because of r. 21.02 of the Federal Circuit Court Rules 2001 (“the Rules”), which allows an application for costs to be made within 28 days of the Order. That is what has happened now.

3. The background to this matter is that Ms Quek and Pro Trader Pty Ltd had been involved in arguments as to the employment of Ms Quek and whether moneys are owed over some period.  The matter ended up in the Supreme Court.

4. It does seem that Ms Quek did withdraw some matters that were in the Supreme Court, which concluded the proceedings and which led to the Registrar ordering costs in the sum of over $7,000. 

5. Because of that judgment debt, Pro Trader made a number of attempts to have Ms Quek pay that money.  It would seem, inferentially, that there was a decision made that, if Ms Quek is having trouble paying this debt, that it may be that she cannot, in fact, pay her debts as they are due and owing, and to protect her and to protect the rest of the community, a bankruptcy notice ought be issued.  The bankruptcy notice was issued, it would seem, on 9 December 2015. 

6. Two days later on 11 December 2015, solicitors for Ms Quek wrote to solicitors for Pro Trader and said inter alia:

   …We have instructions to apply to set the notice aside on the basis our client has a counter-claim/set-off cross demand equal to or greater than the amount claimed in the Bankruptcy Notice.

   The petitioning creditor is well aware that our client is owed a considerable amount in wages that haven’t been paid. We are also instructed that the petitioning creditor has breached other agreements to pay our client a substantial sum in settlement of her outstanding wages entitlement and in payment of her shares in the company.

   The bankruptcy notice is in our opinion an abuse…

   And that the bankruptcy notice should be withdrawn by 14 December 2015 or the solicitor holds instructions to apply to have it set aside. 

7. The solicitor for Pro Trader then sent an email on 14 December 2015 to the solicitor for Ms Quek and said this:

   … 1. the amount sought by our client from your client pertains to a judgment debt obtained over 9 months ago;

   2. our client formally demanded payment for the judgment debt 9 months ago;

   3. the “considerable amount in wages” now allegedly sought by your client is a matter that was unsuccessfully claimed by your client in the very proceedings by which your client now owes our client the judgment debt (COR 75 of 2014);

   And that Pro Trader would proceed with bankruptcy or sequestration proceedings if it were that Ms Quek could not pay the amount, and that there were instructions to accept service of any originating process. 

8. In time, on 29 December 2015, Ms Quek did file an originating application seeking to set aside the bankruptcy notice.  It is trite to say that r.3.02 of the Federal Court (Bankruptcy) Rules 2016 which deals with setting aside bankruptcy notices has this at r.3.02(3):

   (3) If the application is based on the ground that the debtor has a counter-claim, set-off or cross demand referred to in paragraph 40(1)(g) of the Bankruptcy Act, then the affidavit must also state:

   … (c) why the counter-claim, set-off or cross demand was not raised in the proceeding that resulted in the judgment or orders to which the bankruptcy notices relates.

9. In other words, an application to set aside the bankruptcy notice will fail if the counter-claim, set-off or cross demand that is being made from a bankruptcy notice is something that has already been decided in, or been part of the issues in, the proceeding that resulted in the judgment order. 

10. The letter that was sent by the solicitor for Pro Trader made that point very clearly on that date before the application was even filed.  The affidavit that was then filed in support by Ms Quek did not mention why the counter-claim, set-off or cross demand was not raised in the proceeding that resulted in the judgment or order in relation to which the bankruptcy notice was issued. 

11. That fact was brought to the attention of the solicitor for Ms Quek in a letter that was sent on 24 March 2016.  In that letter the solicitor points out the deficiencies and has shown why, in the opinion of the solicitor for Pro Trader, that the application is doomed to failure. 

12. There was an invitation to withdraw the application with the costs of Pro Trader to be taxed on a party and party basis.  That offer expired on 7 April 2016, and what was said in the letter was that, if the matter fails to be resolved in the above terms, then, if the matter proceeded to go to court, that Pro Trader would seek indemnity costs. 

13. The letter was not answered and the matter simply proceeded.  There were notices of appearances filed, lists of authorities filed, outlines of submissions filed, and the matter then proceeded to a full hearing before His Honour Judge Lucev on 12 December 2016.  As I have previously mentioned, his Honour delivered a 42-page judgment on 11 October 2018, which was some 22 months later. 

14. In the part of the judgment headed Consideration, paragraphs 57, 58, 59 and 60, talk of this particular aspect.  Paragraph 60 says this:

    For the above reasons the Court is of the view that the cross demands now made by Ms Quek in these proceedings could have been and, in fact were, set up by her in the Supreme Court Proceedings and there is therefore no basis for the Court to be satisfied that the cross demand could not have been set up in the Supreme Court Proceedings.  On this basis, the necessary requirements for the Court to set aside the Bankruptcy Notice: see [20], and in particular [20(c)], above, have not been made out, and it follows that the application to set aside the Bankruptcy Notice must be dismissed.

15. The ordinary course is that costs follow the event and the Applicant has now sought his costs. 

16. Pro Trader is now seeking costs, but is seeking costs on an indemnity basis because of what it is that it said in the letter of 16 March 2016, which ended up being quite correct. 

17. After the judgment had been delivered, there was a letter sent by the solicitor for Pro Trader asking for their costs on an indemnity basis and that, because there was a reasonable offer made on 24 March 2015 which was unreasonably refused, the offer was to settle the matter by the payment of costs by 19 October 2018, otherwise there would be an application in a case for costs.  The offer was not accepted and the application was filed on 30 October 2018. 

18. Mr Galic, who appears for Ms Quek says that this is not an indemnity costs matter; this is one where the matter should have been the subject of an order for costs on the day, but it was not.  There was no explanation as to why the parties were not heard as to costs. 

19. The submission was made that the rules, in effect, say that costs will follow the event unless there is some other order that has been made; and it was also submitted that this outcome was not as straightforward as the Applicant makes out; that counsel had given opinions that this was a matter that should be put before the Court.    There was a hearing, and it was submitted that the fact that His Honour Judge Lucev took 22 months to deliver the decision does illustrate the complexity of it. 

20. In my view, notwithstanding that His Honour did take 22 months to deliver the judgment, his concluding paragraph 60 is a conclusion that was an inevitable one.  It was an inevitable conclusion at the time when Ms Quek and Pro Trader’s solicitors were talking about how bankruptcy notice would be dealt with back in 2015. 

21. It was an inevitable conclusion when it was that Ms Quek filed her application to set aside the bankruptcy notice and failed in her affidavit to show why the counter-claim, set-off or cross demand was not raised in the proceeding. 

22. It was an inevitable conclusion at the time that the letter of 24 March 2016 was sent. 

23. It is my view that Pro Trader has been put to absolutely unnecessary expense and a long and protracted legal process, that is still, in some ways, still proceeding here in February 2019. 

24. If Ms Quek had looked at the rules and the legislation, this matter would never have come to Court. 

25. I am therefore of the view that not only should the costs follow the event, but they should be made on an indemnity basis, to be taxed.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date:  10 May 2019