Reid v Hubbard and Esandcee Pty (No.2)
[2004] FMCA 428
•3 August 2004 by Phipps FM
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| REID & ANOR v HUBBARD & ESANDCEE PTY (No.2) | [2004] FMCA 428 |
| PRACTICE & PROCEDURE – BANKRUPTCY – COSTS – where the first respondent sought an order for costs on an indemnity basis following the dismissal of the setting aside of a bankruptcy notice – where the submissions of the first respondent in relation to costs did not come to the attention of the presiding chief federal magistrate – whether the court had jurisdiction to entertain the application for costs by the first respondent having already made a cost order in favour of the second respondent – applicants ordered to pay the first respondents costs on a party/party basis. |
Federal Magistrates Court Rules 2001, Rule 21.02
Federal Court Rules 1976, Order 35, Rule 7(4)
Reid v Hubbard & Esandcee Pty [2003] FMCA 407
Reid & Anor v Hubbard & Esandcee Pty (No 2) [2004] FMCA 3
Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries(Qld) Pty Ltd (1993) 45 FCR 224
Preston Banking Co. v William Allsup and Sons (1895) 1 Ch 141
ReScowby (1897) 1 Ch 741
Bailey v Marinoff (1971) 125 CLR 529
| First Named Applicant: | SUSAN REID |
| Second Named Applicant: | MICHAEL JAMES REID (by his litigation guardian SUSAN REID) |
| First Named Respondent: | JOHN HAROLD HUBBARD |
| Second Named Respondent: | ESANDEE PTY LTD (not required) |
| File No: | MZ877 of 2003 |
| Completed on: | 2 July 2004 by Bryant CFM |
| Delivered on: | 3 August 2004 by Phipps FM |
| Delivered at: | Melbourne |
| Hearing date: | Submissions filed 5 April 2004 |
| Judgment of: | Bryant CFM (as she then was) |
REPRESENTATION
| Counsel for the First & Second Named Applicant: | Mr Kirby |
| Solicitors for the First & Second Named Applicant: | Marshalls & Dent |
| Counsel for the First Named Respondent: | Mr Isakow |
| Solicitors for the First Named Respondent: | Isakow Solicitors |
| Counsel for the Second Named Respondent: | Not required |
| Solicitors for the Second Named Respondent: | Not required |
ORDERS
THAT in the event that the applicants wish to make submissions as to why an order for part/party costs should not be made in favour of the first respondent, they file written submissions within 14 days in relation to the order for party/party costs sought against them.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MZ877 of 2003
| SUSAN REID & MICHAEL JAMES REID (by his litigation guardian SUSAN REID) |
Applicants
And
| JOHN HAROLD HUBBARD & ESANDCEE PTY |
Respondents
REASONS FOR JUDGMENT
Introduction
This application is an application for costs by the first respondent John Harold Hubbard against the applicants arising from orders made by me on 1 October 2003. The Reasons for Judgment[1] delivered on that day set out in detail the reasons for dismissal of the applicant’s application to set aside a bankruptcy notice issued by the second respondent against the first respondent.
[1] See generally Reid v Hubbard & Esandcee Pty [2003] FMCA 407.
When the Reasons for Judgment were handed down the first respondent was represented as were the other parties. In written submissions in the substantive proceedings the second respondent had sought costs on an indemnity basis in the event that the application was unsuccessful. On 1 October 2003 when judgment was handed down and it was apparent the application had been dismissed, Senior Counsel for the applicants sought an opportunity to file written submissions in relation to costs which they subsequently did.
The first respondent had not previously filed any submissions regarding costs and did not raise any matters of costs on that day.
The applicants were ordered to file written submissions in relation to the second respondent’s application for costs by Tuesday 7 October 2003.
Following receipt of written submissions a judgment as to costs was handed down on 13 January 2004. The order for costs made on that day was in essence that the applicants pay the second respondent’s costs on an indemnity basis.
When judgment was handed down all parties were notified. The applicants and the second respondents appeared but no one appeared on behalf of the first respondent.
On a practical level, what occurred following the orders and reasons for judgment in the substantive matter was that the applicants appealed to the Federal Court. The file was transmitted to the Federal Court and remained with the relevant judge (Heerey J) until those proceedings were concluded. The file was then returned to my chambers so that I could prepare reasons for judgment in relation to the costs issue. By this stage the file was substantial in size and all the Court documents were contained in a large box. In preparing the reasons for judgment it was necessary for me to carefully go through the box to extract the documents, in particular, the written submissions about the costs, in order to prepare the reasons for judgment. No written submissions by the first respondent were contained in the box which contained all of the filed documents.
However, it transpired that the first respondent had filed a document which was a one page submission attached to a facsimile transmission, that document being faxed through to the Court on 7 October 2003.
As it appeared to be in the form of a facsimile transmission it was placed by a member of the registry staff into a folder which contained correspondence. Thus, when I went through the file of documents and extracted the submissions I was unaware that the first respondent had made a written submission because I did not peruse the correspondence sleeve and folder.
The first respondent's problem in this regard was compounded because for reasons that are not apparent to me, when I delivered judgment in relation to costs (and did not make any order in favour of the first respondent, believing none to have been sought), the first respondent was not represented, nor present, and the fact that a written submission regarding costs had been made was not then brought to my attention.
It was only subsequently when the first respondent read the reasons for judgment in relation to costs, saw the orders and noticed that no order in his favour had been made, that the matter was then raised. I have noted and accept that the first respondent did file a submission regarding costs (by facsimile transmission) on 7 October 2003.
The first respondent's submission
The first respondent (Mr Hubbard) seeks orders that he should receive costs from the applicants following the dismissal of the application, on an indemnity basis.
Mr Hubbard contends that the proceedings were ostensibly between the applicants and the second respondent and that he had maintained quite simply that he owed the money claimed by the second respondent and would pay it if he were able to do so. He concedes that in the course of the proceeding no other submissions save for the claiming of legal professional privilege were made and scant evidence was led.
Thus, it is contended, Mr Hubbard made it plain to the Court that he did not oppose the application save that he opposed the application which required him to apply to the County Court of Victoria to set aside the second respondent's judgment against him because he believed that the debt was due and payable.
It was further contended that in exercising its discretion as to costs, the Court should take into account the fact that the proceedings were needlessly protracted by irrelevant and unmeritorious assertions and allegations by the applicant which were wholly dismissed.
He contends that:
Mr Hubbard should not be penalised for the costs of being made a respondent to an ill founded application which was vexatiously prosecuted. It would simply be unjust if Mr Hubbard was only to receive his solicitor and own client costs. Mr Hubbard should receive full indemnity costs.
Upon learning of the fact that Mr Hubbard had filed submissions in accordance with the timetable set by me, I arranged for the matter to be mentioned by telephone between all parties. As the second respondent had no interest in this application, the second respondent was excused from further involvement.
The applicant contends that there is no jurisdiction to make an order for costs and filed written submissions in support of those contentions.
The applicant's submissions
The first submission of the applicants is that there is no jurisdiction to now entertain an application for costs by Mr Hubbard. The applicant contends the following:
a)Mr Hubbard never made an application for costs during the proceeding. It is contended further that there were numerous opportunities to do so, when the proceeding commenced, when judgment was handed down in the substantive proceeding and the question of costs was discussed, and by written submissions.
This is it contended was consistent with his passive conduct throughout the application, that is not opposing the application save for the order requiring him to apply to the County Court to set aside the default judgment.
The applicants further contend that the "submissions" dated 7 October 2003 are not an application for costs for the following reasons:
i)Submissions must be founded on an application and none was made in this case. In addition, as no application was made, the applicants were not given the opportunity to respond to the contentions of Mr Hubbard;
ii)Assuming that Mr Hubbard was entitled to bring an application for costs without notice, the submissions were not filed and served until after 5 pm on 7 October and therefore out of time; and
iii)The submissions do not particularise against whom the costs are sought and are too uncertain to have any legal effect.
Costs are a discretionary matter for the Court at the conclusion of a hearing. It is not necessary for a formal application for costs to be made either in an application or a Response, a Statement of Claim or a Defence. A failure to seek an order for costs in such document is not fatal to an oral application for costs being made at the conclusion of the proceedings when a decision has been handed down.
Thus it was not incumbent upon the applicant to formally seek an order for costs in the event that the applicants' application was unsuccessful.
Further, Rule 21.02 of the Federal Magistrates Court Rules 2001 provides that an application for costs may be made at any stage in a proceeding, within 28 days, after a final decree or order is made or within further time allowed by the Court. The Rule is intended to capture the case where no application for costs is made until after the final substantive orders are made or where a new application for costs is made on the basis of new facts. The Rule supports the view that it is not necessary for an application to be made prior to the judgment being handed down.
Although the applicant did not orally seek an order for costs on 1 October when judgment was handed down, I find that Mr Hubbard did file a submission regarding costs on 7 October. That submission was in the form of a written submission forwarded to my Associate. Whilst the written submission indicates that the document was sent 9 minutes after 5 pm I regard that as a technical breach of the order only and, had I have been aware of the submission it would in no way have created any practical injustice to the applicants in being filed (albeit by facsimile transmission) so shortly after 5 pm ( although it may have warranted an opportunity for the applicants to respond ).
Mr Hubbard contends that a copy was sent to the applicants. There is some dispute as to whether or not they received it, and as I cannot determine that dispute, for the purpose of these proceedings I will treat the applicants as not having received the written submission at that time, although they now have.
Thus, I do not agree with the applicant’s contention that the written submissions do not constitute an application for costs simply because no application was formally made in any previous document. The written submissions are clear as to the fact that an application for costs at the conclusion of proceedings is to be made and I intend to treat it as a submission in support of an application for costs. To do otherwise would in my view, defy common sense.
I further reject the contention of the applicants that it is not clear against whom the order is sought. In my view the document can be read only in one way, which is that Mr Hubbard is seeking costs from the applicants following the dismissal of their application.
The applicants then contend that there is no jurisdiction to entertain the application as costs orders were made on 16 January 2004 (and entered on 19 January 2004) and were final orders in the application. It is contended by the applicants that the legal effect of final orders has been simply stated in Bailey v Marinoff (1971) 125 CLR 529 where the Court said:
Once an order of a proceeding has been perfected by being drawn up as a record of the Court, that proceeding apart from any specific and relevant statutory provision is at an end in that Court and in its substance, in my opinion, beyond recall by that Court. It would, in my opinion, not promote the due administration of the law or the promotion of justice for a Court to have a power to reinstate a proceeding of which it has finally disposed.
(Per Barwick CJ at 530).
…
This appeal is not concerned with the power of a Court to alter orders in pending litigation. It is concerned with the power of a Court to make an order in litigation which, without any error or lack of jurisdiction, has been regularly concluded and is no longer before the Court. To recognise the problem is, I think, to solve it. However wide the inherent jurisdiction of a Court may be to vary orders which have been made, it cannot, in my opinion, extend the making of orders in litigation that has been brought regularly to an end.
(Per Menzies J at 532).
The applicants contend that they have appealed the orders of 16 January 2004 and that a Notice of Appeal was filed and served on Mr Hubbard on 6 February 2004. Final orders in respect of the appeal from the orders of 16 January were made by Heerey J on 25 March 2004. It is contended that at no time did Mr Hubbard file his own cross appeal in relation to his costs nor make an application in respect of the costs in issue which he now says should have been dealt with in the orders of 16 January 2004.
Conclusion
The principle regarding finality set out in Bailey v Marinoff is subject to only a few limited exceptions:
a)the varying of non-substantive or "machinery order";
b)fraud;
c)the Slip Rule; and
d)the making of supplementary orders on the basis of circumstances occurring after the final orders.
Further, under Order 35 Rule 7(4) of the Federal Court Rules 1976 the Court has power to
vary or terminate the operation of an order by a supplementary order.
I agree with the contentions of the applicant that this case does not involve the varying of a machinery order, nor allegations of fraud nor the application of the Slip Rule. I further agree with the contentions of the applicant that there is a very narrow jurisdiction for the Court to make a supplemental order where circumstances occurring after the final orders make it appropriate to do so. In Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries(Qld) Pty Ltd (1993) 45 FCR 224 the respondent/cross claimant obtained a judgment and a costs order against the applicant/cross respondent. The applicant company subsequently went into liquidation and the respondent therefore did not consider the costs order worth pursuing. Subsequent to the final orders certain facts came to the knowledge of the respondent for the first time. These "new" facts led the respondent to apply for what was in effect an alternative costs order against the applicant's solicitors. The applicant's solicitors argued that the Court had no jurisdiction to make such an order because final orders had been entered.
The Full Court of the Federal Court held that the Court did have jurisdiction to hear the application for costs against the solicitors. In following the English authority in Preston Banking Co. v William Allsup and Sons (1895) 1 Ch 141 and ReScowby (1897) 1 Ch 741 the Full Court held that jurisdiction to make supplemental orders required that circumstances have occurred since the final orders which bring a supplemental order necessary.
The Full Court made two further points:
a)the application could not be one which in any way varied or alters the initial order. As the application involved a non-party the Court would not be adjudicating on the matter determined in the "primary judgment”; and
b)in what was really a public policy decision, in that case if no costs order were made, and the solicitor was able to keep hidden information of his misconduct, he would escape an order for costs once judgment had been entered and become liable in damages only in tort.
The applicants contend that there was no new evidence which came to light after the orders of 16 January 2004 were made. They also contend that there was no suggestion that the applicants had in any way misrepresented any facts or law to the Court which would enliven the limited jurisdiction to make a supplemental order. Further they contend that the consideration of any costs order in favour of Mr Hubbard would impact on the applicants and may have impacted on the Court's exercise of discretion in respect of costs orders already pronounced. Also they contend the applicants could have made their own application for costs against Mr Hubbard.
I agree with the contention of the applicants that no misrepresentation has occurred in this case however I do not agree there has not been any "new" evidence which came to light after the orders of 16 January 2004 were made. There is new evidence, and that evidence is that Mr Hubbard had made an application for costs on 7 October 2003 but that that application had not come to my attention when I prepared the Reasons for Judgment[2] and then handed them down and made orders. True it is, that if Mr Hubbard's solicitor had appeared when the costs judgment was handed down no doubt it would have come to my attention at that stage that the submissions had been made. However, I can appreciate that given that he assumed that the Court would deal with this application he saw no reason to appear.
[2] See generally Reid & Anor v Hubbard & Esandcee Pty (No 2) [2004] FMCA 3.
Mr Hubbard has done everything that he could have done to bring his application before the Court. The fact that the written submission was placed on a part of the file which did not come to my attention was not the fault of Mr Hubbard. The new evidence which has come to light after the orders were made is the fact that an application for costs had been made appropriately by the first respondent, but that due to circumstances beyond the control of Mr Hubbard the Court was unaware of that application. In my view this does fall within the limited exceptions in Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (Qld) Pty Ltd. I am satisfied therefore that the Court has jurisdiction to entertain the application for costs made by Mr Hubbard against the applicants.
It is also critical to the jurisdiction of the Court that the application not be one in any way to vary or alter the initial order. In my view the present application does not seek to do this. It is in the same way as the order described in Caboolture, a supplemental order.
As the Full Court said in Caboolture at paragraph 54:
The principle behind denying the right of a Court to vary or alter a judgment regularly given and entered is a need for finality of litigation. The Court has adjudicated upon the facts of the claim brought by a plaintiff against the defendant, found for one side and entered the relevant judgment. Neither the facts nor the law are to be agitated again, save on appeal. But the issues involved where a claim is made against a solicitor for costs by a party to the litigation have not been determined by the judgment which has been entered. They remain yet to be resolved.
Similarly in this case the claim made by Mr Hubbard for costs has not been determined by the judgment which has been entered, and remains to be resolved.
Should an order for costs be made?
Mr Hubbard raises two matters; first that an order for costs should be made in his favour, and secondly that that order should be costs on an indemnity basis.
In my judgment on costs handed down on 16 January 2004 I ordered that the applicants pay the second respondent's costs on an indemnity basis. My reasons for so doing are set out in the reasons for judgment I handed down on that day. The gravamen of that decision was that there were allegations of impropriety made against a solicitor without an evidentiary basis. Although it was alleged that Mr Hubbard had colluded with the second respondent, the allegations related to the behaviour of the second respondent which the applicants alleged had constituted an abuse of process in the issuing of a bankruptcy notice. As I indicated in my reasons for judgment it is a rare case in which indemnity costs would be ordered. In view of the fact that most of the applicants’ contentions involved the behaviour of the second respondent, which I did not find to constitute an abuse of process, I do not consider the same considerations apply in relation to Mr Hubbard as they do to the second respondents. If Mr Hubbard is to be entitled to an order for costs then those costs should be in my view on a party/party basis and not an indemnity basis.
There are in my view, strong grounds upon which it would be reasonable to make an order for party/party costs in favour of Mr Hubbard. True it is that he opposed only the order which would require him to apply to the County Court to have the judgment set aside. He did not actively oppose any of the other orders. To that extent it might be said that his attendance and thus the incurring of costs was necessary only as to one part of the application. However that part of the application was not withdrawn by the applicants although they had ample opportunity to do so. Mr Hubbard was joined as a first respondent to the proceedings and was in my view entitled to be represented throughout the proceedings given that at least one of the orders sought, required him, if successful, to apply to set aside a County Court order and he opposed the making of such an order.
In the circumstances, my preliminary view is that an order for party/party costs in favour of Mr Hubbard should be made against the applicants. However, I am conscious of the fact that the applicants have not had the opportunity to make submissions on this issue and that their written submissions, by agreement with me, were limited to the question of jurisdiction. I think therefore that the applicants should have the opportunity to file submissions on the question of why a party/party costs order should not be made in favour of the first respondent. I will provide an opportunity for the applicants to file written submissions within 14 days if they wish to do so and otherwise have the matter listed for the determination of this issue before another Federal Magistrate.
I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Bryant CFM
Associate: Peter Smith
Date: 3 August 2004
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