Re Burton, Leslie Ross Ex Parte Wily, Hugh Jenner Brandon Pty Ltd NJW Contractors Pty Ltd

[1995] FCA 844

IN THE FEDERAL COURT OF AUSTRALIA                 )

GENERAL DIVISION  )

BANKRUPTCY DISTRICT OF THE STATE          )       No NB 2172 of 1993

OF NEW SOUTH WALES  )

RE:  LESLIE ROSS BURTON
  of 25 Overett Avenue Kemps Creek
  in the State of New South Wales

EX PARTE:          HUGH JENNER WILY

Applicant/First Cross-Respondent

BRANDOWN PTY LIMITED
  ACN 003 830 304

First Respondent

NJW CONTRACTORS PTY LIMITED
  ACN 000 730 192

Second Respondent/Cross-Claimant

PATRICK JAMES HALLINAN
  MAX DAVID RODGERS and
  GEORGE FRANK RODGERS

Third Respondent/
  Second Cross-Respondent
  AND

EX PARTE:          LESLIE ROSS BURTON

Applicant

HUGH JENNER WILY

Respondent

Coram:        Davies J
Date:          20 September 1995
Place:         Sydney

REASONS FOR JUDGMENT

The issue with which I am now dealing is the costs of the two applications in which judgment was given on 26 July 1995.

One application, which was called "the Brandown application",  was an application brought by the trustee, Hugh Jenner Wily.  Mr Wily sought the recovery of two shares in Brandown Pty Limited ("Brandown") which the bankrupt, Mr Leslie Ross Burton had transferred to a family company, NJW Contractors Pty Limited ("NJW").  In that application, Brandown was joined as first respondent, NJW was the second respondent and three persons, Patrick James Hallinan, George Frank Rodgers and Max David Rodgers, who were the remaining directors and shareholders in Brandown, were joined as the third respondents. 

The second application was an application brought by Mr Burton for annulment of his bankruptcy.  In that application, the only parties were the bankrupt himself and the trustee.  The trustee was successful and now seeks his costs as against Mr Burton and NJW.  The trustee also seeks his costs on an indemnity basis.  Dealing first with that application, in my opinion, the costs of the annulment application should be paid both by Mr Burton and by NJW.  I agree with the submission of Mr Holmes that it is unlikely that the application for annulment would have been brought save as a defensive step taken to avoid the possible adverse result of the trustee's application to recover the Brandown shares.  The application was brought at a very late stage after there had already been a good deal of litigation with respect to

matters concerning Mr Burton's bankruptcy.

In the course of his evidence in the proceedings, Mr Burton conceded that his costs were being paid by NJW.  Mr Boyle, the solicitor for NJW who appears today, has been good enough to inform the Court that, although substantial costs of Mr Burton are outstanding, the costs which have been paid have probably been paid by NJW.  I take this to be the situation therefore, that the annulment application was really brought by way of a step which advantaged NJW which was itself seeking to retain the Brandown shares.

Mr Holmes has referred to a number of cases such as Knight v FP Special Assets Limited (1991-92) 174 ALR 178, Re Ayre (1995) 130 ALR 648, Garafano; Ex parte American Express International Inc (1993) 26 FCR 204, Bent v Goth (1992) 26 FCR 204 and Foster v Duus (1994) 49 FCR 309 which show that, in special circumstances, costs may be awarded against a person who is not a party to proceedings but who has nevertheless intervened, where, in the special circumstances of the case, it is just that that person pays those costs. In my opinion, NJW and the bankrupt should both pay the costs of the annulment proceedings in the special circumstances of this case.

I am also of the view that those costs should be paid on an indemnity basis.  Very serious allegations were made against the trustee.  It became a difficult matter which took a great deal of time.  It had to be taken very seriously by the trustee because there were personal allegations against him.  In the end, for the reasons which I gave on 26 July 1995, I thought that there was no merit in the application and I thought that there were very strong reasons as to why the Court would not exercise its discretion to annul a bankruptcy had there been any formal defect that may have justified annulling the bankruptcy in other circumstances.

So in the annulment proceedings I shall order that the costs be paid by the bankrupt, Mr Leslie Ross Burton, and by NJW Contractors on an indemnity basis.

In respect of the Brandown application, NJW and Mr Burton were both unsuccessful respondents and they should pay the costs.  I have come to the view that those costs should be assessed as if they were costs of defended proceedings in the General Division of Court.  It was appropriate that senior counsel be engaged.   

When the matter started the basis of the application was not entirely clear.  It commenced with an application and affidavits and it developed in that way.  Mr Holmes has been good enough to provide me with a ruling I gave on 21 October 1994 in which I ruled on the ambit of the matters alleged.  It seems to me that the issue raised in the Brandown application was an important matter from everyone's point of view.  In a sense, NJW itself was innocent.  It was in fact a dormant company at the time when the transfer took place.  The facts were very complex and I can see how, in the ordinary course of events, it would have been likely that this matter would be defended both by Mr Burton and by NJW.  So I shall order that the trustee's costs be paid by Mr Burton and NJW but indemnity costs are not appropriate.  I shall order that the applicant's costs be taxed in accordance with the scale of costs applicable to a defended proceeding in the general division of the Federal Court.  I note that it was appropriate for the matter to be conducted by senior counsel. 

Mr Nell on behalf of Brandown, Mr Hallinan and the two Rodgers also seeks costs against NJW and Mr Burton.  I think that those costs should be awarded.  Mr Gleeson appeared and put matters quite briefly and in a way that was of assistance to the court and he did so without any undue waste of time.  These parties should have their costs but not the costs incidental to the cross-claim, it having been agreed in the transcript at page 341, that the cross-claim should be dismissed without any order as to costs. 

Mr Nell also sought costs out of the bankrupt estate, but it seems to me that, insofar as Brandown, Hallinan and the Rodgers sought to come into the proceedings to protect their interests, they did so for their own purposes.  It was unnecessary so far as the estate was concerned and the resolution of the issue as between the estate and NJW that they should be represented.  Accordingly I will not make any order as between those parties and the estate.

I certify that this and the 4 preceding pages
are a true copy of the reasons for judgment herein of
the Honourable Mr Justice Davies.

Associate:

Date:     20 September 1995

Counsel for the applicant:  J.K. Chippindall
  M.F. Holmes QC

Solicitors for the applicant:  Aitken & Magney

Appearing for Mr Burton
& NJW Contractors Pty Ltd:  T.P. Boyle (solicitor)

Counsel for Brandown Pty Ltd;
Patrick James Hallinan,
Max David Rodgers &
George Frank Rodgers:  G.J. Nell

Solicitors for Brandown Pty Ltd;
Patrick James Hallinan,
Max David Rodgers &
George Frank Rodgers:  Norton Smith & Co.

Date of hearing:  20 September 1995

Date of judgment:  20 September 1995