Sarina v Nicols
[2009] FMCA 977
•2 September 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SARINA v NICOLS | [2009] FMCA 977 |
| BANKRUPTCY – Whether proceedings by the respondent in this court should be stayed until the costs of the applicant in Local Court proceedings are paid. |
| Bankruptcy Act 1966 (Cth), ss.60, 120, 121, 122 Federal Magistrates Court Rules, r.13.02 |
| Bowen v Hickey (1958) 78 WN (NSW) 820 CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301 Hutchison v Nominal Defendant [1972] 1 NSWLR 443 Idoport v National Australia Bank Limited & Anor [2006] NSWCA 202 Martin v Earl Beauchamp (1883) 25 Ch D 12 McCabe v Bank of Ireland (1889) 14 App Cas 413 Rana v Fsaser Hotel Pty Ltd [2007] FMCA 403 |
| Applicant: | KAREN SARINA |
| Respondent: | STEVEN NICOLS AS TRUSTEE OF THE BANKRUPT ESTATE OF PAUL SAMIR HANNA |
| File Number: | SYG 650 of 2009 |
| Judgment of: | Barnes FM |
| Hearing dates: | 24 April 2009, 19 May 2009, 23 July 2009, 10 August 2009 and 2 September 2009 |
| Delivered at: | Sydney |
| Delivered on: | 2 September 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr D A Allen |
| Solicitors for the Applicant: | Proctor Phair Lawyers |
| Counsel for the Respondent: | Mr P Newton |
| Solicitors for the Respondent: | PH Legal Pty Ltd |
ORDERS
The proceedings number SYG3226 of 2008 in this Court in relation to Karen Sarina as the first respondent be stayed until the applicant Steven Nicols pay the sum of $29,000 on account of the costs in Local Court proceedings number 79586 of 2008, such money to be held in the trust account of Proctor Phair Lawyers, the solicitors for Ms Sarina, until further order of this Court.
The respondent pay the costs of the applicant in relation to the application for the stay as agreed and in the absence of agreement taxed in accordance with the Federal Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 650 of 2009
| KAREN SARINA |
Applicant
And
| STEVEN NICOLS AS TRUSTEE OF THE BANKRUPT ESTATE OF PAUL SAMIR HANNA |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
By application filed on 19 March 2009 the applicant, Karen Sarina, seeks orders on an interim basis that proceedings SYG3226 of 2008 in this court be stayed until Steven Nicols, the respondent in these proceedings, pay the costs of Ms Sarina in Local Court of New South Wales proceedings 79586 of 2008. The proceedings in this court in relation to which the stay is sought were brought by Mr Nicols as trustee of the bankrupt estate of Paul Samir Hanna against Ms Sarina and also against Clinton Sarina, her husband. Mr Nicols seeks a number of orders concerning rights and liabilities in relation to a racehorse called Strategic Answer (the horse). The principal claim against Ms Sarina is for the sum of $35,970 plus interest and costs. Further, or in the alternative, Mr Nicols seeks a declaration that Ms Sarina be “estopped from asserting beneficial ownership” over the horse, the market value of the horse at the time of transfer less the consideration paid by her, or further, or in the alternative, the market value of the horse at the time of transfer. Claims are also made against Mr Sarina for damages and injunctive relief.
The Local Court proceedings were commenced by Mr Nicols against Ms Sarina by a statement of claim filed on 19 May 2008 seeking 75 per cent of prize moneys and other earnings of the horse on the basis that the bankrupt, Mr Hanna, had a 75 per cent interest in the horse. The claim was, as is the principal claim in the proceedings in this court, for the sum of $35,970 plus interest and costs.
Ms Sarina filed a defence and also a cross-claim in the Local Court, in which she asserted that it had been agreed that Mr Hanna’s interest in the horse would be transferred to her, in circumstances where it was alleged that Mr Hanna had not met his share of fees for the horse to which prize money had been applied.
By a notice of motion and then an amended notice of motion filed on 7 November 2008 in the Local Court, Mr Nicols sought leave to file an amended statement of claim maintaining the claim for 75 per cent of earnings, but adding allegations that any transfer from Mr Hanna to Ms Sarina was void pursuant to ss.120, 121 or 122 of the Bankruptcy Act 1966 (Cth). Mr Nicols also sought orders from the Local Court that the Local Court proceedings should be dismissed, upon filing of the amended statement of claim that he be ordered to file proceedings in this court within seven days in accordance with the amended statement of claim and that each party pay its own costs of the Local Court proceedings. I am told that he did so on the basis that he had not been made aware of the claim by Ms Sarina in relation to transfer of the horse until she filed a defence, notwithstanding earlier demands for payment made on her solicitors. On this basis Mr Nicols sought to end the Local Court proceedings as that court would not have had jurisdiction in relation to proceedings under the Bankruptcy Act.
However, while on 28 November 2008 the Local Court ordered that Mr Nicols be given leave to discontinue the proceedings against Ms Sarina, it ordered that he pay Ms Sarina’s costs of those proceedings as agreed or assessed. There is no evidence before the court as to the reason for such a costs order against Mr Nicols.
Mr Nicols’ evidence is that he entered into consent orders in the Local Court, although the consent orders in evidence before the court are consent orders in relation to a cross-claim by Ms Sarina that, without an admission as to liability, Mr Nicols pay Ms Sarina the sum of $1,500. There was no order as to costs in relation to the cross-claim.
In the proceedings in this court against Mr and Ms Sarina, the primary relief sought against Ms Sarina is the same as that sought in the Local Court. The application relies on the same grounds in relation to the operation of ss.120 – 122 of the Bankruptcy Act as were relied on in the amended statement of claim filed in the Local Court proceedings. In addition orders are also sought against Mr Sarina who was not a party to the Local Court proceedings.
There was no agreement in relation to the amount of Ms Sarina’s costs in the Local Court. The costs were assessed in April 2009 in the sum of $28,338.34. A certificate of determination of the costs was registered in the Local Court on 12 May 2009.
The current position in relation to the costs determination is that a review has been sought under s.373 of the Legal Profession Act 2004 (NSW). It is not in dispute that as the costs determination is the subject of a review, its operation has been “suspended” under s.377 of the Legal Profession Act. The panel may end a suspension if it affirms a determination or in other circumstances. If a certificate had been issued by the costs assessor (as was the case in those proceedings) the certificate would cease to have effect. Any judgment taken to have been effected in relation to that certificate would also cease to have effect, while any enforcement action taken in respect of that judgment would be reversed. Under s.378 if a determination is set aside by a panel after the costs have been paid, the amount by which the payment exceeds the amount specified in the determination of the panel may be recovered as a debt in a court of competent jurisdiction. Section 382 provides for an appeal against a determination of a panel (and see s.386).
I am told that while the solicitors for Ms Sarina have registered the certificate of determination of the costs assessor in the Local Court, they have agreed not to proceed with any attempted enforcement at this stage.
Ms Sarina relies on an affidavit sworn on 18 March 2009 in which she attested that Mr Nicols had not paid the amount of $1,500 owing to her in relation to the Local Court cross-claim, that her solicitors had applied for a writ of execution, that execution had been attempted but that the writ had been returned unpaid with a notice of non-levy. That amount has now been paid.
I note that in proceedings 3226 of 2008 commenced in this court on 5 December 2008, Mr Nicols had sought an interim order that there be a stay of the proceedings in the Local Court and of all orders in respect of those proceedings pursuant to s.60 of the Bankruptcy Act. However, his solicitor indicated that the application for such an order was not pursued when the matter came before the court and that application was dismissed on 24 April 2009.
The hearing in relation to the stay application by Ms Sarina was adjourned on a number of occasions. The parties have unsuccessfully participated in mediation. Counsel for Ms Sarina told the court today that in light of the review of the costs determination, the order sought was that the proceedings in relation to Ms Sarina be stayed until Mr Nicols paid $29,000 on account of the costs in the Local Court proceedings, such money to be held in Ms Sarina’s solicitor’s trust account until there was a determination by the review panel. No stay is sought in relation to the proceedings against Mr Sarina.
Initially counsel for Ms Sarina suggested that this court had power pursuant to rule 13.02(3) of the Federal Magistrates Court Rules to stay the present proceedings. Rule 13.02 is contained Division 13.1 of Part 13 of the Federal Magistrates Court Rules which deals with “Discontinuance”. It is as follows:
(1) If a party discontinues an application, or part of an application, another party in the proceeding may apply for costs.
(2) Unless the Court or a Registrar directs otherwise, an application for costs must be made by a party within 28 days after service on the party of the notice of discontinuance.
(3) If an order for costs is made against a party and the party brings against the party to whom the costs are payable a further proceeding on the same or substantially the same matter, the Court may stay the further proceeding until the costs are paid.
Considered in context, I am satisfied that rule 13.02(3) applies to circumstances in which an application had been filed in this court, the proceedings discontinued and subsequently a further proceeding commenced in this court. (Also see Order 22 rule 8 of the Federal Court Rules). These are not the circumstances of the present case.
However, as conceded by counsel for Mr Nicols, this court has jurisdiction to grant a stay of the nature sought by Ms Sarina under s.15 of the Federal Magistrates Act 1999 (Cth) which confers power on the court in relation to the matters in which it has jurisdiction to “make orders of such kinds, including interlocutory orders, as the Federal Magistrates Court thinks appropriate”.
The exercise of the power of the court in this respect is a matter of discretion. The issue before the court is whether it is appropriate to exercise its discretion to grant the stay sought by Ms Sarina on the proposed basis.
Ms Sarina relied on what was said to be the approach taken by Cameron FM in Rana v Fsaser Hotel Pty Ltd [2007] FMCA 403. In that case proceedings in this court were stayed until a State Magistrates Court costs order was paid, notwithstanding that the costs order had been made without a final determination of the facts before dismissal of those proceedings and that the costs were in the process of being taxed. Hence the amount of the costs had not been determined at the time of the application for a stay. Cameron FM was satisfied that the proceedings in this court were, in substance, the same as the proceedings that had been commenced in the Local Court.
His Honour referred at [8] to the principles applicable in relation to the exercise of the Court’s discretion, in particular the fact that, notwithstanding that the claim in the Federal Magistrates Court may have merit, the respondent ran the risk of its costs not being paid and may have to meet the same claim twice without having its costs met, should it be successful in the proceedings in this court as well as in the State Magistrates Court.
Cameron FM also referred to Hutchison v Nominal Defendant [1972] 1 NSWLR 443 at 448, in which Isaacs J cited the well-established principle “that a second action brought in respect of the same subject-matter in respect of which the plaintiff has already bought an action and failed will be stayed until the costs of the first action have been paid”. His Honour observed that this was “not an absolute right”, but rather was “an exercise of the discretion of the court to stay proceedings [that were] vexatious, unjust, oppressive, malicious, or frivolous” and that the courts had taken the view that it was “unjust and oppressive for a defendant, who ha[d] already faced an action by the plaintiff and succeeded and ha[d] not been paid his costs to run the risk of having to face a second action on the same subject-matter with probably the same result, and the risk that if the plaintiff fail[ed] in that second action the defendant [would] be unable to recover his costs”.
Counsel for Ms Sarina suggested that the suspension of the costs determination should not prevent a stay and that the amount of the cost determination provided a guide as to an appropriate amount that might be paid into the applicant’s solicitor’s trust account in order to avoid there being a stay of the proceedings.
It was contended by counsel for Mr Nicols that the decision in Rana could be distinguished on a number of bases and that for a number of reasons a stay should not be ordered. In written submissions it had been suggested that Rana could be distinguished because at the time of the application for a stay the costs of Ms Sarina in the Local Court proceedings had not been assessed. However, as counsel for Ms Sarina pointed out, in Rana the costs were in the process of being taxed, so that there was not, in fact, an amount assessed at that time. Nonetheless the stay was granted. It is now said for Mr Nicols that Rana can be distinguished on the basis that the costs determination has been suspended by virtue of the review process.
Counsel for Mr Nicols also submitted that the proceedings in this court were not the same as those discontinued in the Local Court, on the basis that in these proceedings Mr Sarina was a respondent and it was alleged that the transfer of Mr Hanna’s interest in the horse to Ms Sarina was voidable under ss.120 – 122 of the Bankruptcy Act. It was submitted that it was relevant that part of the claim that Mr Nicols makes against Mr Sarina for damages includes the amount of the costs ordered against him in relation to Ms Sarina in the Local Court proceedings. It was also suggested that it was “objectively curious” that one party could assert something contrary to the other party, apparently on the basis that Mr and Ms Sarina are husband and wife.
I am not persuaded that it would necessarily be particularly unusual for a husband and wife to each assert things that were not entirely consistent with what the other said. Resolution of any discrepancy between the assertions of Mr and Ms Sarina is a matter to be determined at the final hearing of these proceedings. The fact that they are husband and wife and that ultimately Mr Nicols might, if successful, recover from one party to a marriage an amount which might compensate him for the liability that he has for costs to the other party to the marriage in separate proceedings, is not of itself, or in conjunction with the other evidence before the court, such as to satisfy me that it would therefore be inappropriate to make the stay order sought by Ms Sarina.
It is necessary to have regard to whether it is unjust or oppressive in relation to Ms Sarina as a respondent to the proceedings in this Court, rather than as the wife of another respondent against whom orders were sought which might compensate the applicant in the proceedings for his liability to her for the costs of the Local Court proceedings.
While Mr Sarina is a respondent to the proceedings in this court, no stay is sought in relation to the proceedings against him. Insofar as Mr Nicols has a claim against Mr Sarina, this would not be affected by a stay of the proceedings in relation to Ms Sarina, although I recognise that as a matter of practicality, it may have some impact on the manner and cost of proceeding. I am not persuaded that the involvement of Mr Sarina in the proceedings in this court is a reason not to stay the proceedings against Ms Sarina until the Local Court costs she has been awarded have been paid.
In relation to the nature of the claim against Ms Sarina, the amended statement of claim filed in the Local Court in substance included all of the claims now brought against Ms Sarina in the proceedings in this Court. The primary claim for some $35,000, costs and interest and the alternatives pleaded are in this respect in substance the same as the claims made in the Local Court. Any difference lies not in the nature of the claims, but rather in Mr Nicols’ view as to whether or not certain aspects of the claims were within the jurisdiction of the Local Court. This was the issue that led Mr Nicols to seek to discontinue the proceedings in the Local Court.
It was submitted for Mr Nicols that the facts before the court did not support the exercise of the court’s discretion on the basis that the trustee could be said to have properly commenced the Local Court proceedings on the assumption that the bankrupt had an entitlement to prize moneys and a share in the horse, that three letters of demand had been sent to Ms Sarina’s solicitors to which there had been no response and it was not until she filed a defence in those proceedings that the issue of a transfer to her of Mr Hanna’s interest in the horse was raised. This issue of the transfer led the trustee to determine that it was appropriate to discontinue those proceedings and commence proceedings in this court.
It was said that these factual circumstances did not support a stay of proceedings, as Ms Sarina had not “assisted”, and her silence had allowed the trustee not to doubt his entitlement as trustee of the estate of Mr Hanna to 75 per cent of the horse and its earnings. It may well be that discontinuance was appropriate given the jurisdictional issue, nevertheless it is significant that Mr Nicols was ordered to pay the costs of Ms Sarina in the Local Court in relation to those proceedings. The issue of Ms Sarina’s alleged silence as to her claims may have been a matter to be raised in the Local Court in relation to the costs on discontinuance, but it is not for this court to determine whether the Local Court costs order was appropriate and I am not satisfied on the evidence before me that the fact that Mr Nicols did not become aware of any issue under ss.120 – 122 of the Bankruptcy Act until Ms Sarina filed her defence and cross-claim is such as to defeat the application for a stay.
In Rana there was some evidence of impecuniosity on the part of Mr Rana. It was suggested for Mr Nicols that that also distinguished the present circumstances. In fact there is no evidence before the court as to the financial position of Mr Nicols. There is evidence that a writ of execution on the part of the applicant was returned unsatisfied in circumstances where an attempt was made to execute it at Mr Nicols’ office. While I am not persuaded that this is such as to establish the impecuniosity of Mr Nicols, all that can be said is that there is no evidence before the court to satisfy me either way on the financial situation of Mr Nicols.
Nor am I persuaded by the submission that these proceedings are not in substance the same as the discontinued proceedings, albeit the amended statement of claim in the Local Court proceedings may have been amended in circumstances where it was intended to seek to discontinue those proceedings. The fact that the proceedings in this court involve an additional respondent is not of significance in circumstances where what is under consideration is whether it is appropriate to exercise the court’s discretion to stay the proceedings in relation to a particular respondent because of a costs order in favour of that respondent. Insofar as it was submitted that a stay would unnecessarily stultify the prosecution of claims by Mr Nicols against Mr and Ms Sarina, as indicated, any stay would only be in relation to Ms Sarina.
No submissions have been made as to the merits of the proceedings in this court, other than to address the nature of the allegations made. There appear to be conflicting approaches to the relevance of the merits of the proceedings sought to be stayed. In Rana Cameron FM suggested, in effect, that it seemed not necessary to look at the merits. On the other hand cases which have addressed the question by analogy to principles applicable in relation to abuse of process have considered the merits of the proceedings.
While I am not in a position to have regard to the merits of proceedings in this court I have had regard to the fact that Mr Nicols has a claim that he wishes to bring against Ms Sarina in his capacity as trustee of a bankrupt estate. At the same time, it is necessary to have regard to the well-established principle that as a general rule, where a plaintiff or applicant has failed in an action and seeks to bring a second action based in substance on the same facts against the same defendant or respondent, the general rule is that the court will stay proceedings in the second action until costs of the first action are paid (see Hutchinson v Nominal Defendant and Bowen v Hickey (1958) 78 WN (NSW) 820 at 822). That may be so even if the proceedings are not identical.
In Bowen v Hickey the plaintiff was non-suited in a negligence action brought against the Tattersalls Club and the trainer of a horse that had kicked him. The plaintiff subsequently commenced fresh proceedings against the same parties, not having paid the costs that he had been ordered to pay in respect of the first action. The second proceedings were framed in contract. The New South Wales Court of Appeal observed that the second action was based upon the same matter as the first, the incident complained of was the same and the damage alleged was identical. Notwithstanding the difference in the pleadings, the court was of the view that the second proceedings should be stayed pending payment of the costs or, in that case, until security had been given. (Also see Beazley JA in Idoport v National Australia Bank Limited & Anor [2006] NSWCA 202 and CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301 per Giles JA at [40]).
Insofar as there might be any doubt about the power of the court to stay proceedings where the prior proceedings were initiated in a different court, in Martin v Earl Beauchamp (1883) 25 Ch D 12, it was stated that the question to be decided was whether the second action was really and substantially a second action for the same matter and that it was not of material significance that the parties in the two actions were not sued in the same right. The court has the power to stay proceedings in a action before it where a prior action had been brought substantially asserting the same rights against the same parties “in the same or another court”, until the costs of that prior action have been paid (see McCabe v Bank of Ireland (1889) 14 App Cas 413).
Having regard to all of the circumstances and the submissions of the parties, on balance I am satisfied that it is appropriate as a matter of discretion that the proceedings against Ms Sarina be stayed in this court until the costs of the prior Local Court proceedings have been paid, as it would otherwise be unjust or oppressive to permit the proceedings against her to continue. That is so notwithstanding the basis on which Mr Nicols brings the proceedings in this court and notwithstanding the jurisdictional issue that arose in the Local Court. An order for costs was made in the Local Court. It was not an order that each party pay his or her own costs as Mr Nicols had sought. The fact that there are also proceedings against Mr Sarina which, if successful, might ultimately compensate Mr Nicols for the costs order made against him in favour of Ms Sarina is not such as to make a stay in relation to the proceedings against Ms Sarina inappropriate.
A suspension of the costs assessment is in place. I do not consider that the fact of a suspension in relation to the determination of the amount of the liability for costs is such as to prevent there being a stay (see Rana), although it does mean that the amount of the costs has not been finally determined at this time. I note that the question of enforcement is separate from the issue of a stay.
The order sought by Ms Sarina is not that costs be paid to her (which would not be an appropriate order to make at this time), but rather that there should be a stay until Mr Nicols pays an amount calculated having regard to the amount of the costs determination (on the basis that that is an appropriate amount), on account of the costs in the Local Court proceedings, to be held in Ms Sarina’s solicitor’s trust account until there is a determination by the review panel. I understand that the costs determination is being reviewed, but there is a liability for an amount of costs and the determination provides an appropriate basis for determination of an amount to be held by Ms Sarina’s solutions in the absence of any proposal for a lesser amount to be paid by Mr Nicols, who opposes any stay.
Counsel for Ms Sarina did not clarify precisely what was intended to occur when there is a determination by the review panel. I assume that it was intended that the matter would somehow come back before the court for a further determination. However while I consider that it is appropriate that there be a stay of the proceedings in this court, it is an appropriate protection for Mr Nicols, should the review result in a lesser amount being ordered for costs, that the amount should be held in the trust account of Ms Sarina’s solicitors until further order of the court. The parties have liberty to apply.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 8 October 2009
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