Robins v Black
[2009] FMCA 45
•30 January 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ROBINS v BLACK | [2009] FMCA 45 |
| BANKRUPTCY – Creditor’s Petition – respondent debtor’s opposition to Creditor’s Petition – judgment reserved after hearing – matter settled immediately prior to delivery of written judgment. COSTS – Application for costs – claim for indemnity costs. |
| Bankruptcy Act 1966 (Cth), ss.32, 40(1)(d)(ii) Federal Court Rules (Cth), O.62 Federal Magistrates Act 1999 (Cth), ss.79, 86(b) Federal Magistrates Court Rules 2001 (Cth) Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), r.13.01 |
| Colgate Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225 Quick on Costs, Vol.2, Lawbook Co. (accessed on Legal Online, 29 January 2009) |
| Applicant: | ANDREW ARTHUR ROBINS |
| Respondent: | RICHARD DAMIEN BLACK |
| File number: | SYG 2263 of 2007 |
| Judgment of: | Lloyd-Jones FM |
| Hearing dates: | 19 September 2007, 5 November 2007, 4 December 2007, 20 March 2008, 22 April 2008, 26 September 2008, 5 December 2008 |
| Delivered at: | Sydney |
| Delivered on: | 30 January 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr M Condon on 19 September 2007, 4 November 2007, 5 December 2007 and 20 March 2008; Mr A Robins appeared for himself at other times. |
| Solicitors for the Respondent: | Mr M Carr of Foreshaws Neill Solicitors on 19 September 2007 and 4 November 2007; Mr R Black appeared for himself at other times. |
ORDERS
The respondent pay the applicant’s costs of the proceedings (including reserved costs) as agreed or as taxed, on a party/party basis.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2263 of 2007
| ANDREW ARTHUR ROBINS |
Applicant
And
| RICHARD DAMIEN BLACK |
Respondent
REASONS FOR JUDGMENT
(As corrected)
Application
This is an application concerning the costs of proceedings over a number of days before this Court and the dismissal of the proceedings on 12 May 2008 due to settlement between the parties immediately prior to delivery of a reserved judgment.
The parties acknowledge that the respondent debtor, Richard Damien Black, is liable for an order for costs following dismissal of the Creditor’s Petition, as the debt was paid immediately prior to delivery of the reserved judgment. The nature of the costs order is in dispute and the petitioning creditor, Andrew Arthur Robins, seeks indemnity costs which is opposed by the respondent.
The proceedings
This was a Creditor’s Petition for a sequestration order which was opposed. Mr Robins, presented a petition filed 23 July 2007 for the sequestration of Mr Black’s estate. Mr Robins relies on an alleged act of bankruptcy, being an alleged return of a writ of execution that was unsatisfied. Mr Black, by his amended grounds of opposition filed on 27 September 2007, seeks to set aside the Creditor’s Petition on the grounds that there has been no proper return of the writ of execution pursuant to s.40(1)(d)(ii) of the Bankruptcy Act 1966 (Cth) and that no act of bankruptcy has been committed.
This matter was referred to this Court by Hedge R on 18 September 2007 and fixed for hearing on 19 September 2007. On that date Mr Carr, for the respondent, sought an adjournment to allow for a Notice of Motion to set aside the writ in the Local Court (proceedings 5258 of 2006) to be listed for hearing on 11 October 2007. A costs order was made for the respondent to pay the applicant’s costs thrown away that day. That Notice of Motion was heard and dismissed with costs by Dillon M on 11 October 2007.
The opposition to the Creditor’s Petition was heard on 5 November 2007 and 4 December 2007, after which I reserved my judgment. On 20 March 2008 an urgent application was listed at the request of Mr Robins, seeking an order over certain residential properties registered in Mr Black’s name. I made orders restraining Mr Black from dealing with the nominated properties until 5.00pm on 22 April 2008. I also made an order that all costs were to be agreed, or if not, to be assessed.
The matter was listed on 22 April 2008 for handing down of the reserved judgment. At the commencement of that listing, the parties settled the matter at the bar table moments before judgment was to be handed down. Consequently, I stood the matter over until 12 May 2008 for further directions at the request of the parties. The issue of costs was raised and preliminary submissions made. Because of the tension during the conduct of the matter over the numerous hearing days, I believe that the best course to follow was for the parties to file written submissions in respect of costs instead of allowing any further ventilation of the issues in dispute between the parties in Court. At the directions hearing on 12 May 2008, the Court was advised that the parties could not agree on costs. The orders made on 12 May 2008 were that:
1. The petition be dismissed.
2. The applicant to file and serve the written submissions on costs by 10 June 2008.
3. The respondent file and serve written submissions on costs by 24 June 2008.
Both parties were late in complying with the above orders, with Mr Robins filing his submissions on 19 July 2008 and Mr Black filing his on 15 September 2008.
As indicated above, this matter has been fiercely contested between the parties over numerous days. Any attempt to settle the costs issue voluntarily between the parties was not achievable. Unfortunately, both parties filed very substantial written submissions with considerable focus on the issues already argued at the hearing. The submissions also include other issues not previously addressed in Court.
Jurisdiction
Section 86(b) of the Federal Magistrates Act 1999 (Cth) provides that the Federal Magistrates Court Rules 2001 (Cth) may make provision for costs of proceedings in the Federal Magistrates Court. Section 79(2) of the Federal Magistrates Act provides that in general federal law proceedings, the Court “has jurisdiction to award costs in all proceedings… other than proceedings in respect of which any other Act provides that costs must not be awarded”. Section 79(3) provides that costs are in the discretion of the Court, “(e)xcept as provided by the Rules of the Court or other Act”.
Rule 13.01 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) provides that a person entitled to costs in a Bankruptcy Act proceeding “is entitled to costs in accordance with Order 62 of the Federal Court Rules unless the Court otherwise orders”.
Section 32 of the Bankruptcy Act provides that the Court may “make orders as to costs as it thinks fit”. That section makes clear that costs in bankruptcy proceedings are entirely within the Court’s discretion: ReHardwick [1976] Qd R 264 per Dunn J at 266.
Order for costs
The usual practice, not to be lightly departed from, is that costs be on a party-party basis: Colgate Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225 at 233 per Sheppard J:
4. In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client ``as and when the justice of the case might so require'’. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice…
This approach has been considered recently in Lee v Mavaddat [2005] WASC 68 at [17] per Roberts-Smith J in supplementary reasons:
[17] In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, Sheppard J presented a useful distillation of principles (at 232–234) from his survey of the authorities in this area. It is clear from those that the "settled practice" is for costs orders to be made on a party/party basis, and a different order usually ought not be made. It will be made only where justified by the circumstances. As Sheppard J pointed out, the tests have been variously put, but in essence all seem to come to the existence of some special or unusual feature of the particular case justifying such an order. Some examples of such circumstances given by his Honour include the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; evidence of particular misconduct that causes loss of time to the court and to other parties; the fact that the proceedings were commenced or continued for some ulterior motive, or in wilful disregard of known facts or clearly established law; and the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions, amongst others.
In Winspear v Mackinnon [2008] FCA 322, Marshall J made the following observations at [4]-[5]:
[4] The defendants resist the plaintiff’s claim for indemnity costs. They contend, correctly, that the usual course is that costs are payable on a party and party basis, unless the circumstances of the case warrant a departure from that normal course; see Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233, per Sheppard J and Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 1844 at [3] and [17], per Gray J.
[5] The categories of cases in which indemnity costs may be granted are not closed. The overriding consideration is the justice of the particular case. This includes the recognition that there are circumstances which justify the order of indemnity costs, including when a party unreasonably causes another party to incur costs; see Colgate-Palmolive at 233 and Leahy Petroleum at [17].
In Upton v Tasmanian Perpetual Trustee [2007] FCAFC 57 at [142]-[143], Graham J (with whom Kiefel and Besanko JJ agreed) stated:
[142] The relevant principles to be observed in respect of costs are conveniently summarised in the judgment of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 230–234.
[143] The ordinary rule is that, where the Court orders that the costs of one party to litigation be paid by another party, the order is for payment of those costs on the party and party basis. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs of some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court departing from the usual course. The existence of particular facts and circumstances capable of warranting the making of an order for payment of costs on the indemnity basis does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always at the discretion of the trial judge. Provided that the discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case, its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
Indemnity costs
The relevant authorities on circumstances in which a court will depart from the usual practice have been summarised in Genovese v BGC Construction Pty Ltd (No. 2) [2007] FMCA 601 at [47]-[48] per Lucev FM:
Indemnity costs — issues from the cases
[47] In determining whether to award indemnity costs the Court has a very wide discretion, to be exercised judicially.36 What is an appropriate costs or indemnity costs order depends on the circumstances of the case.37 The normal practice, not to be lightly departed from, is to provide for costs to be on a party — party basis.38 Nevertheless, there are certain issues to which the Court will give consideration, and have to weigh, when determining whether to make, and the extent of, an indemnity costs order, which should only be made where the issues establish special or unusual circumstances warranting an indemnity costs order.39 Those issues include:
a) whether a party should have known that there was no prospect of success in the case;40
b) where a party alleges fraud or forgery, knowing the accusation to be false, or irrelevant to the issues;41
c) where a party precipitately punctuates proceedings by resiling from a previously adhered to view;42
d) where a party acts in a high handed manner;43
e) whether the party against whom indemnity costs is sought is a self-represented litigant, and whether the self-represented litigant ought escape the consequences of indemnity costs;44
f) where a party proceeds “vexatiously” that is “without sufficient grounds for the purpose of causing trouble or annoyance”;45
g) where a party proceeds for no good purpose at all due to inertia and carelessness;46
h) where a party persists in the making of allegations which ought not have been made, or in undue prolongation of groundless contentions;47
i) where a party’s conduct causes loss of time to the Court, and to other parties;48
j) where a party imprudently refuses an offer to compromise;49
k) whether the award of indemnity costs is sought against a contemnor;50 and
l) having regard to the objects of:
i) encouraging savings of private costs and avoidance of inherent risks, delays and uncertainties of litigation;
ii) saving public cost necessarily incurred in litigation which events demonstrate to have been unnecessary; and
iii) indemnifying one party where the real cause and occasion of the litigation is the attitude adopted by the other party.51
[48] The discretion is not so circumscribed that an indemnity costs order “may only be made against an ethically or morally delinquent party”.52 The discretionary categories are not closed, and “other elements of litigatious of misconduct may be relevant”.53
36 PCRZ Investments Pty Ltd v National Golf Holdings [2002] VSCA 24 at para 32 per Chernov JA (“PCRZ Investments”) applied in D’Souza v Pattison [2007] FMCA 116 at para 24 per McInnis FM; Bhagat v Global Custodians Ltd [2002] FCA 223 at para 60 per O’Loughlin, Whitlam and Marshall JJ (“Bhagat”); Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397 at 401 per Woodward J (“Fountain Selected Meats”).
37 PCRZ Investments at para 32 per Chernov JA; Colgate-Palmolive at 227 per Sheppard J.
38 Colgate-Palmolive at 230 and 233 per Sheppard J; Davids Holdings Pty Ltd v Coles Myer Limited & Ors (1995) ATPR 41-383 at 40, 298 per Drummond J (“Davids Holdings”).
39 Fountain Selected Meats at 400 per Woodward J; Colgate Palmolive at 233 per Sheppard J; Davids Holdings at 40, 298 per Drummond J.
40 Fountain Selected Meats at 401 per Woodward J; Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, 3 May 1991) at 8 per French J. (“Tetijo Holdings”)
41 Australian Guarantee Corporation Ltd v De Jager (1984) VR 483 (“De Jager”); Fountain Selected Meats at 401 per Woodward J.
42 Bass Coast Shire Council v King [1977] 2 VR 5 at 28–30 per Winneke P.
43 De Jager at 502 per Tadgell J; Fountain Selected Meats at 401 per Woodward J.
44 Bhagat at para 57 per O’Loughlin, Whitlam and Marshall JJ.
45 Fountain Selected Meats at 400 per Woodward J, citing the Shorter Oxford Dictionary definition of “vexatious”.
46 Fountain Selected Meats at 400 per Woodward J.
47 Colgate-Palmolive at 233 per Sheppard J.
48 Ugly Tribe Co Pty Ltd v Sikola & Ors [2001] VSC 189 at para 7 per Harper J.
49 Colgate-Palmolive at 233–234 per Sheppard J (and cases there cited).
50 Colgate-Palmolive at 234 per Sheppard J.
51 Rouse v Shepherd [No (1994) 35 NSWLR 277 at 279 and 281 per Badgery-Parker J.
52 Botany Municipal Council v Secretary, Department of Arts, Sport, Environment, Tourism & Territories (1992) 34 FCR 412 at 415 per Gummow J.
53 Tetijo Holdings at 8 per French J.
The other significant aspect of indemnity costs is that they are designed to indemnify, not punish. In Ford Motor Company of Australia Ltd v Jefferson Ford Pty Ltd [2007] FCA 998 at [3], Jessop J applied Hammond v New South Wales [2002] FCA 424 per Gray J:
Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.
I also note the reference in Mr Black’s written submissions to the passage in Quick on Costs, Vol. 2, Lawbook Co. at [4.270], entitled “Indemnity Costs Excessive”:
There is also some evidence of judicial concern about the excessive costs which can be occasioned by an order of indemnity costs.
I also note the further comment in Quick on Costs at [4.250] which states:
…that in deciding whether any costs are unreasonable on the indemnity basis, the receiving party was to be given the benefit of any doubt.
Consideration
It is important to note that Mr Black conceded a cost order against him on 12 May 2008, when the amount claimed in these proceedings was paid and the proceedings dismissed. Provision was made for time to resolve the issue of costs, which included settlement of previous cost orders made on 19 September 2007 and 12 May 2008.
A letter of 14 May 2008 addressed to Mr Black from Mr Robins states:
On 12 May 2008 the suggestion was made by the court that an opportunity be provided to agree costs, in order that further costs be avoided. Note that I cannot conceive of any reason why an indemnity costs order would not be made if no agreement is made.
Attached is a form of costs order that I would accept. The only addition is order 4. The rest is as you saw it.
These factors behind the figure of $20,000 proposed (which are without prejudice to taxation should it be required) include the registrars party / party estimate in the SYG 10/2007 matter, and the comparative scale and unrecovered costs in the Local Court (actual counsel’s fees less costs orders made).
Time costs here would be considerably higher than the SYG 10/2007 matter.
$20,000 is roughly estimated to be about 25 c in the dollar (if Supreme Court costing applied) and less than half the costs that I would expect on taxation of the costs order I would expect – that is, indemnity costs with Cachia v Hanes (1994) 179 CLR 403 followed (as it must be) and my own item 42 charges substantially allowed.
The proposal effectively amounts to indemnity costs in form, but party/party costs in amount.
If there is no agreement I will proceed on the basis of the order indicated on 12 May 2008.
The offer to accept $20,000 (reflected in the enclosed order) will remain open until 27 May 2008 (5pm). That timing roughly reflects the court’s original suggestion.
Absent acceptance, the timetable will proceed and the court will make a formal ruling. Correspondence since12 May 2008 will be attached to submissions.
Other Matters
This offer exists ONLY in relation to the SYG 2263/07 matter. It does not affect any decision I may make in relation to the 3 Supreme Court matters, nor any decision I make about the nature of the costs made in order in the SYG 10/2007 matter, which (upon application) can be reconsidered.
You will see that the order does not require any payment before 31 July 2008. By that time an overall solution will be attempted.
All matters will have to be resolved in writing. There will be no oral agreement, nor any agreement with any oral term.
Yours faithfully
ANDREW ROBINS
Mr Robins proposed the following orders:
1. The Petition be dismissed.
2. In the manner specified in 3, the Respondent pay the Applicant’s costs of the proceedings (including reserved costs) as agreed or as taxed, on an indemnity basis.
3. Pursuant to 2, the Federal Magistrates Court Act 1999 s.79 and Federal Magistrates Courts Rule 21.02(2)(b) the Court directs that on a taxation the taxing officer shall proceed as follows –
[i] the Applicant’s own time and other costs (and disbursements) shall be taxed and recovered as and in the manner of “Counsel’s Fees” referred to in The Federal Court Rules Schedule 2 (order 62, rule 12) item 42 (“Item 42 Costs”) on an item by item basis, and having regard to (and according to) the practice of the Supreme Court of NSW of allowing those costs;
[ii] the Applicant’s own costs shall be in addition to any Item 42 Costs of any other Legal Practitioners (as defined in the Legal Profession Act (NSW) 2004) retained by the Applicant;
to the intent that on taxation all of the Applicant’s costs (as referred to in 2 and 3) are to be allowed except those that appear to the taxing officer to have been unreasonably incurred or of an unreasonable amount (if any) as proscribed by Uniform Civil Procedure (NSW) Part 42 r.5(b) and on an item by item basis.
4. Such other orders as the court sees fit.
5. The Court directs that these orders be entered forthwith.
That offer lapsed and it was apparent that there was no prospect of an informal resolution to the costs issue. The Court was advised of that position and the parties reverted to preparing written submissions on costs. As I have indicated above, the submissions on costs reverted to a detailed re-ventilation of a number of issues between the parties. Both the applicant and the respondent made accusations against the other party regarding their behaviour and conduct in these proceedings.
The original debt fell due in 2001 and 2002 and was the subject of proceedings in both the Local and Supreme Courts of New South Wales. If Mr Black was solvent at all times, as he claims, then costs may have accumulated because of proceedings which may not have been necessary. After settling the proceedings in this Court and conceding that a cost order was to be made against him, Mr Black did not fully pursue an opportunity to settle costs. There is no evidence before the Court that Mr Black made a counter offer or pursued negotiations. A compromise immediately before the delivery of a reserved judgment compelled an order of costs against Mr Black on the principle that “where conduct of a debtor has rendered the petition nugatory”, an order for costs is attracted by the debtor: Maneros & Anor v Korakas & Anor [2007] FMCA 2129.
The offer made to Mr Black was an estimate of costs based on comparisons with similar proceedings. By his failure to negotiate an agreed settlement, a formal costs order is now required. Mr Robins seeks an indemnity costs order. The issues to be considered before making such an order were considered in Genovese v BGC Construction Pty Ltd (No. 2) and set out at [14] above.
Mr Robins also referred to a discussion on indemnity costs in Ritchie’s Uniform Civil Procedure NSW at [42.5.5] and relies on the following principles listed in that service which he claims were present in this matter, either directly or by analogy:
a)a party has misled the Court;
b)a party has maintained proceedings that the party should have known had no real prospects of success;
c)proceedings were maintained for an ulterior purpose;
d)the conduct of the proceeding has caused unreasonable delay and expense;
e)a defendant unreasonably delayed an admission of liability;
f)a party obtained a judgment no better than a prior settlement offer by the other party.
Detailed written submissions were filed by Mr Black denying these claims. Mr Black relies on Quick on Costs at [4.250] which is cited above at [19].
As I have indicated above both parties submitted written detailed submissions addressing the issue of costs. The substantial part of these submissions revisited the disputed issues between the parties in an attempt to re-canvass them before the Court. The submissions also contained denials of certain aspects of the other party’s submissions. The Court has no intention of revisiting these issues. Again, despite the orders in respect of costs being limited to one set of submissions from each party, the issue was raised in an attempt to pursue a course of replies and counter replies. Submissions to this effect were submitted to the Court. However, at a directions hearing on 26 September 2008 I advised both parties that I did not intend to accept any further submissions than those covered by the orders made on 12 May 2008.
I acknowledge that the dispute between the parties has been vigorously pursued in this and the State courts. Considerable tension remains between the parties despite the resolution of the outstanding debts. Both parties have merits to their argument and at the same time weaknesses in their entrenched positions. I do not intend to further evaluate the arguments and counter arguments put forward by the parties in justifying the claims of costs. I am not prepared to penalise one side with an indemnity costs order and allow the other side to benefit from that order. Consequently, I intend to order costs on a party/party basis.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 16 February 2009
CORRECTIONS
Representation for the Applicant corrected and now reads as follows “Mr M Condon on 19 September 2007, 4 November 2007, 5 December 2007 and 20 March 2008. Mr A Robins appeared for himself at other times.”
Representation for the Respondent corrected and now reads as follows “Mr M Carr of Foreshaws Neill Solicitors on 19 September 2007 and 4 November 2007; Mr R Black appeared for himself at other times.”
Paragraph 5 line 4 – delete “a freezing” and insert “an”.
Paragraph 5 line 5 – delete “a freezing order” and insert “orders”.
Paragraph 6 line 1 – delete “12 May 2008” and insert “22 April 2008”.
Paragraph 6 line 4 – delete “dismissed the application and the issue” and insert “stood the matter over until 12 May 2008 for further directions at the request of the parties”.
Paragraph 7 line 1 – delete “failed to” and insert “were late in”.
Paragraph 28 corrected and now reads as follows “As I have indicated above both parties submitted written detailed submissions addressing the issue of costs. The substantial part of these submissions revisited the disputed issues between the parties in an attempt to re-canvass them before the Court. The submissions also contained denials of certain aspects of the other party’s submissions. The Court has no intention of revisiting these issues. Again, despite the orders in respect of costs being limited to one set of submissions from each party, the issue was raised in an attempt to pursue a course of replies and counter replies. Submissions to this effect were submitted to the Court. However, at a directions hearing on 26 September 2008 I advised both parties that I did not intend to accept any further submissions than those covered by the orders made on 12 May 2008.”
Paragraph 29 corrected and now reads as follows “I acknowledge that the dispute between the parties has been vigorously pursued in this and the State courts. Considerable tension remains between the parties despite the resolution of the outstanding debts. Both parties have merits to their argument and at the same time weaknesses in their entrenched positions. I do not intend to further evaluate the arguments and counter arguments put forward by the parties in justifying the claims of costs. I am not prepared to penalise one side with an indemnity costs order and allow the other side to benefit from that order. Consequently, I intend to order costs on a party/party basis.”
Paragraph 30 – deleted.
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