Schofield, Anthony James v Rangott, William Balfour

[1997] FCA 896

IN THE FEDERAL COURT OF AUSTRALIA	)
)
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	)  AX13 of 1992 )
)
GENERAL DIVISION	)

RE:                

ANTHONY JAMES SCHOFIELD and CECILIA ANNE SCHOFIELD
Debtors

  EX PARTE:             

WILLIAM BALFOUR RANGOTT
Applicant

P&B BARRON PTY LTD
ACN 000 607 143
Respondent

JUDGE:	FINN J
PLACE:	CANBERRA
DATED:	3 SEPTEMBER 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

(1)no order be made as to the costs of and incidental to the hearing and ruling on the admissibility of the s81 transcripts of evidence;

(2)the respondent otherwise pay the applicant’s costs on the basis that such costs are to include all costs except in so far as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the applicant will be completely indemnified by the respondent for his costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	)   AX13 of 1992 )
)
GENERAL DIVISION	)

RE:                

ANTHONY JAMES SCHOFIELD and CECILIA ANNE SCHOFIELD
Debtors

  EX PARTE:             

WILLIAM BALFOUR RANGOTT
Applicant

P&B BARRON PTY LTD
ACN 000 607 143
Respondent

JUDGE:	FINN J
PLACE:	CANBERRA
DATED:	3 SEPTEMBER 1997

REASONS FOR JUDGMENT

The one outstanding matter in this proceeding is costs.  Accepting the usual rule that costs follow the event, two issues have, nonetheless, been raised.  First, the respondent has contended that, as it successfully opposed at a preliminary hearing the attempt of the applicant, the trustee in bankruptcy of the Schofields, to have transcripts of evidence given at an examination under s81 of the Bankruptcy Act, 1966 (Cth), admitted in evidence in the principal proceedings, it should be awarded the costs of that hearing.  Second, not only does the applicant submit to the contrary on that issue, he also seeks to have the costs of the principal application awarded on an indemnity basis.  Because of their interrelationship it is appropriate to deal with both of these matters together.

The Setting

The principal application was one in which I found that a mortgage given by the debtors to the respondent was both a voidable settlement under s120 of the Bankruptcy Act and a fraudulent disposition under s121.  It was clear from the outset that a significant practical difficulty facing the trustee in his prosecution of that application would be that one of the debtors, Mr Schofield, had died and hence could not give evidence relating to the circumstances of the transaction in question.  It was apparent that, on their side of the transaction,  Mr Schofield alone was the active party in the matter with the consequence that his wife, the other debtor, likewise could not be expected to provide illumination of it.  The trustee, then, was confronted with an obvious evidentiary problem.

Proceedings by the trustee to impugn the mortgage were not initiated until 15 December 1995, he having previously taken steps against the respondent under Division 4B of Part IV of the Bankruptcy Act.  The relevant s139 ZQ notice was set aside by this Court on 19 October 1995.

Prior to this occurring, the firm of solicitors apparently then (but no longer) acting for the respondent wrote to the solicitors for the trustee on 22 September 1995.  While contesting the efficacy of the particular s139 ZQ notice that had been served, they indicated their client was prepared to comply with a proper notice and that:

“we are preparing a Discharge of the Mortgage and arranging for it to be executed under seal and will send this to you in due course.”

I note in passing that the applicant has submitted that this was in effect an admission of the substance of the claim that he eventually had to fight to finality in the principal application.

It would appear that after the above letter the respondent changed solicitors;  the discharge of the mortgage did not take place;  an offer was made by the applicant to the respondent’s new solicitors (those presently acting for it) to have the matter mediated;  and then the principal application was filed.

Considered in isolation, the statement of claim filed by the applicant as also its amended successor are not particularly revealing as to the actual substance of the claims made by the trustee.  The respondent made issue of this in some directions hearings.  This said, there had been a s81 examination conducted by the trustee on 4 and 5 May 1995 of all relevant persons and there could not in my view have been any real misapprehension in consequence of the burden and basis of the claim being made.

Nonetheless the respondent has not only resisted the application strenuously, it has also so conducted itself as to act as positive impediment to the trustee’s prosecution of his application.  Its non-compliance with directions that would reveal the evidence upon which it intended to rely was systematic - and again I note the trustees own evidentiary problem in this.  Directions were given on this matter on four occasions beginning on 8 March 1996 and concluding on 18 April 1997.  On the last occasion I should note, I indicated my preparedness to entertain an application from the applicant under O10 r7 of the Federal Court Rules.  Explanation was not given for this pattern of non-compliance.  I also indicated at directions hearings the risk being run of adverse costs orders.  Having failed to get the s81 transcripts admitted - though the respondent later relented in relation to some number of these - the trustee sought to interrogate the respondent.  The latter’s failure to cooperate in settling the questions notwithstanding my request so to do, and the giving of an adjournment to that end, resulted in a wholly unsatisfactory course being taken in relation to interrogatories - a course I would note about which the respondent later complained with no little discourtesy but without justification.

And when it came to the affidavits belatedly served and relied on by the respondent in the proceeding they by no means encompassed the material upon which the respondent relied.  I have made sufficient adverse comment in my judgment of 29 July 1997 on this aspect of the matter to avoid the need for repetition here.

Considered against the background of the letter of 22 September 1995, and my findings in the 29 July judgment, I find the conclusion unavoidable that the respondent has adopted a course aimed at hindering and delaying the prosecution of this application.  In particular it has attempted to place impediments in the way of the trustee in his ascertaining the evidence on which it intended to rely as also in his attempts to secure the reasonable resolution of this matter.  That conduct is worthy of censure as is the systematic disregard shown for the procedures of this court and their purpose, notwithstanding adverse comment made at directions hearings and the highlighting of the risks being run.

The respondent has occasioned considerable additional expense to the trustee in a matter in which the prospects of successful defence were slender indeed.  Its conduct is censurable in the circumstances.

Indemnity Costs

The Full Court of this Court in Re Wilcox;  Ex parte Venture Industries Pty Ltd (1996) 141 ALR 727 has recently reiterated the principles governing the manner in which the court’s jurisdiction to award indemnity costs ought to be exercised. Justices Cooper and Merkel had this to say (at 732-733):

“(1)     Section 43 of the FCA confers an absolute and unfettered discretion on the court to make orders as to costs but the discretion must be exercised judicially.

(2)     In order to exercise the discretion judicially the following principles have been accepted by the court as applicable:

(a)the court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the court in departing from the usual course;

(b)the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the court in departing from the usual course;

(c)while the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis.”

Save in one respect to which I will refer below, this is an appropriate case in which to award costs on an indemnity basis.  In so doing I should indicate that it is the totality of the respondent’s conduct and its effect that I have already outlined, and not merely one particular aspect of that conduct alone (eg mere non-compliance with directions:  cf John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 52 FCR 201 at 207), that has led me to this conclusion. I need not reiterate the features of the respondent’s conduct I have found to be objectionable. I merely add that their effect is such that the interests of justice requires an award on an indemnity basis.

The saving to which I referred relates to the interlocutory hearing and ruling on the admissibility of the s81 transcripts.  Given the applicant was there unsuccessful it is not appropriate that he nonetheless be awarded costs.  But, notwithstanding the respondent’s success, considered in the context both of this application and its conduct and of the purpose of the hearing on the transcripts, the appropriate order is that no order be made as to the costs of and incidental to that hearing.

Accordingly, I order that:

(1)no order be made as to the costs of and incidental to the hearing and ruling on the admissibility of the s81 transcripts of evidence;

(2)the respondent otherwise pay the applicant’s costs on the basis that such costs are to include all costs except in so far as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the applicant will be completely indemnified by the respondent for his costs.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn

Associate:

Dated:            3 September 1997

Counsel for the Applicant:	P Shiels QC
Solicitor for the Applicant:	Scott Shiels & Glover
Counsel for the Respondent:	D Ridge
Solicitor for the Respondent:	Eakin McCaffery Cox
Dates of Hearing:	28 August 1997