Sacca, J. v Drevikovsky, M

[1994] FCA 230

230 ?V

JUDGMENT No. ........ ........ .. I ........ ....

?	IN THE FEDERAL COURT OF AUSTRALIA )
EWXFUJPTCY DIS;%RICT 1 No. NB 2229 of 1992
c	.-

r	'	OF THE STATE OF NEW SOUTH WALES	1
3	"

Re: JOSEPH SACCA

Debtor

Ex parte: WARTIN DREVIKOVSKY. RICHARD

PEGG and STEPHEN TOOMEY tradinq as TOOMEY PEGG h DREVIKOVSKY

Creditor

REASONS FOR JUDGMENT

EINFELD J SYDNEY 8 APRIL 1994

On 22 December 1993 I gave judgment in part of the unmeritorious history of litigation between these parties. The matter considered then was whether, in the context of an application to extend time for compliance with the bankruptcy notice after the time had expired due to an accidental oversight, the Court should entertain and grant an application to set aside the bankruptcy notice on the grounds that it was oppressive to the debtor. The matter in dispute between these parties, as pointed out in that judgment, is some $11,000 in legal fees which the creditors allege is owed to them by the debtor.

of orders and proceedings in that Court. As pointed out in my	judgment on 22 December, the debtor has been required, as part
and parcel of that re-hearing, to pay into the District Court some $20,000 by way of security, both in respect of the judgment and, presumably, of the costs in that Court. I therefore suggested in the judgment that the bankruptcy notice should be set aside by consent, both because it did not seem likely that the bankruptcy notice would lead to a sequestration order, and more importantly, because the security lodged in the District Court made bankruptcy proceedings unlikely to be necessary as a means of enforcement of the debt. The parties have followed up that proposal by consenting today to the setting aside of the bankruptcy notice, and I order by consent that it be set aside.
The creditors apply for costs, notwithstanding the failure of the bankruptcy notice, and the debtor asks for an order that each party pay his and their own costs. It is not at all unusual these days for successful parties to be deprived of all or substantial parts of their costs, and it is not even particularly rare that unsuccessful parties receive an order
for costs. The creditors have cited the well known case of
Lentini [l9911 29 FCR 363 where without specifically giving reasons - presumably because the reasons arise by implication from the rest of the judgment - Justice Neaves made an order of the kind they seek today.
Justice Wilcox made a similar order, at any rate in respect of the deprivation of the successful party of costs, in the celebrated litigation of Cumminus v Lewis, 29 May 1992, unreported as to costs. In the course of that judgment his Honour said that in considering questions of costs:

A default judgment was obtained in the District Court, but there is now to be a full re-hearing of that claim by reason

The c o u r t i s e n t i t l e d to l o o k beyond the ac tua l

conduct o f the c a s e and have regard t o the

c i rcums tances o u t o f which it arose .

He said also, however, that:

I f t o o much emphasis i s placed upon the c i rcums tance

t h a t the l i t i g a t i o n would n o t have a r i s e n b u t f o r an

a c t i o n o f the d e f e n d a n t , few s u c c e s s f u l d e f e n d a n t s

would r e c o v e r their costs.

His Honour was of the opinion that the Court may nonetheless take into account the conduct of the litigation by the successful party and said:

Where	a	s u c c e s s f u l	p a r t y h a s pu t	the	oppos ing p a r t y
t o s i g n i f i c a n t	expense	i n connec t i on	w i t h	an	i s s u e
on	which	t h a t p a r t y f a i l e d ,	i t may be	reasonab l e	t o
t a k e	t h a t m a t t e r	i n t o account	by	awarding	something

less than f u l l p a r t y / p a r t y c o s t s .

Here it is not at all a question of whether the costs of the	debtor should be reduced, but whether the creditors should
receive an order that the debtor pay their costs on a full party/party basis.
Some of the history of this matter is set out in my judgment on 22 December 1993 where I commented that the circumstances of the matter did not bring credit on either party, that the type of procedure that has bedevilled this case brings the legal system into disrepute, and that what both the District Court and this Court were involved in was nothing less than a litigant-induced litigious nightmare.
Today I have had made available to me by the creditors some additional evidence and my attention has been redrawn to some of the evidence considered at earlier stages of the proceedings in this Court. These matters, which have not been in any way answered by the debtor who called or presented no evidence on the issue of costs, make clear that the debtor's conduct of the matter has been much less honourable than ought to have been the case.
There have been a number of problems in this Court by reason of what can only be described as a quite casual approach to the litigation by the debtor and his present legal advisers. This has been particularly highlighted by evidence presented to me today showing that on no less than four occasions between February 1993 and the day before yesterday, the
creditors have made proposals for the settlement of this litigation on a sensible basis without having extracted even
so much as an acknowledgment of receipt of the letters, still less a substantive response or counter offer.
It is true that the offers of settlement have varied on each occasion they have been made. The last offer was in fact several thousand dollars less than the offer made more than a year ago. Nonetheless, parties are expected to co-operate and at least show courtesy in relation to offers of settlement. The Court and the overwhelming public lnterest require that legal representatives of parties make efforts at all times to settle all litigation; the smaller the amount in issue, the greater the obligation to try to negotiate a sensible way out of litigation.
The last offer of settlement of the day before yesterday was for a payment of $17,000 within seven days with, as I have said, $20,000 sitting in the District Court as security. The idea that the Federal Court should be asked to convene on very many occasions, as it has been in this case, to rule on and participate in a dispute over a sum of that size is absurd and completely contrary to the Court's and the public interest.
The parties are certainly entitled to pursue their rights, but this must be tempered by the fact in this particular case that the debt goes back to June 1990 and we are almost four years later with a situation where the original claim for a debt is
early stages of these proceedings the creditors were not still to be litigated. Whilst I have no doubt that in the
especially co-operative in bringing about a resolution of what they considered to be a blatant refusal by the debtor to meet his contractual obligations, that has long since on the evidence ceased to be their principal or even minor motivating factor. By now the costs have made the debt seem a quaint irrelevance.
It is not possible for me to assess what the chances of the parties are in the re-hearing to take place in the District Court at some time in the future, but on the history of this matter it cannot be expected that the resolution by the trial judge of the dispute will necessarily be the end of the dispute. At some stage someone has to decide that enough is certainly more than enough and that this absurd litigation should be brought to a negotiated end or that a judge's decision be accepted as the final word in the matter. Yet it would be more than a confident person who would assess that that situation had now been reached.
To this disgrace it seems to me that the major contributor has been the debtor and not the creditors. The fact for example that the defence and cross-claim on which the debtor now relies has had to be the subject of all types of requests for particulars in order for it to be understood is an indication that the allegations which lie behind it were not particularly well considered by the debtor when they were first raised.
Whilst it is not for me to determine whether they have any merit, it will be surprising if the District Court finds them
especially attractive in the context of the creditors' claim.
In my opinion the costs of the application to set aside the bankruptcy notice were substantially caused by the conduct of the debtor. It would not be right to grant to the creditors all of the costs associated with the application but in my opinion the debtor should be required to pay 80 per cent of

the party/party costs associated with the application to set aside the bankruptcy notice including any reserved costs. I so order.

1

I certify that this and the S\%

preceding pages are a true copy of the

Reasons for Judgrn her in of h ~ s Honour

Justice E~nfeld 3 ) h Assocl

M:  17 AP(~ \ \If7 -

Solicitors and Counsel	J. Chippendall instructed
for the applicant	by I.C. Sinnadurai of Toomey Pegg & Drevikovsky
Solicitors for the	M. Foley of Foleys
respondent	Solicitors

Date of Hearing	8 April 1994
Date of Judgment	8 April 1994