Spark New Zealand Trading Limited v Lester
[2024] FCA 364
•15 April 2024
FEDERAL COURT OF AUSTRALIA
Spark New Zealand Trading Limited v Lester [2024] FCA 364
File number: VID 1087 of 2023 Judgment of: SNADEN J Date of judgment: 15 April 2024 Catchwords: COSTS – whether foreign bankrupt has standing to seek costs – whether court should exercise discretion to award costs – where costs may vest with foreign trustee – where conduct of successful party was put in issue Legislation: Bankruptcy Act 1966 (Cth) ss 32, 40, 47
Federal Court of Australia Act 1976 (Cth) s 35A
Trans-Tasman Proceedings Act 2010 (Cth)
Insolvency Act 2006 (NZ)
Cases cited: Cummings v Claremont Petroleum NL (1996) 185 CLR 124
Griffiths v Civil Aviation Authority (1996) 67 FCR 301
Radich v Bank of New Zealand (1993) 45 FCR 101
Talacko v Talacko [2013] VSC 712
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 23 Date of hearing: 10 April 2024 Counsel for the Applicant: Ms R J McCarthy Solicitor for the Applicant: MinterEllison Counsel for the Respondent: Mr M Grady Solicitor for the Respondent: Taylor Rose Lawyers ORDERS
VID 1087 of 2023 BETWEEN: SPARK NEW ZEALAND TRADING LIMITED
Applicant
AND: MARK ANDREW LESTER
Respondent
ORDER MADE BY:
SNADEN J
DATE OF ORDER:
15 APRIL 2024
THE COURT ORDERS THAT:
1.Pursuant to s 47(2) of the Bankruptcy Act 1966 (Cth), the applicant have leave to withdraw its creditor’s petition of 18 December 2023.
2.The applicant pay the respondent’s costs of and pertaining to the application in an amount to be assessed in default of agreement in accordance with the court’s costs practice note (GPN-COSTS).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
SNADEN J:
On 18 December 2023, the applicant, Spark New Zealand Trading Limited (hereafter, “Spark”), filed a creditor’s petition by which it moved the court for a sequestration order to render the respondent, Mr Lester, a bankrupt pursuant to the Bankruptcy Act 1966 (Cth) (hereafter, “the Act”). It no longer presses for that relief and, instead, moves the court for leave, under s 47(2) of the Act, to withdraw its creditor’s petition.
Mr Lester does not oppose the withdrawal of the petition; but maintains that the court should make an ancillary order entitling him to recover from Spark the costs that he has expended in defending the proceeding to date. Spark submits that there should be no order with respect to costs.
For present purposes, the parties rely upon three affidavits. Spark read two: one deposed by Mr Nathan Brumley, solicitor, on 20 February 2024; and a second deposed also by Mr Brumley on 25 March 2024. Mr Lester read an affidavit that he affirmed on 4 April 2024.
For the reasons that follow, I am satisfied that it is appropriate to grant Spark leave to withdraw its creditor’s petition; and to require that it pay costs on the usual basis.
To understand what those costs might be, it is necessary to say something about the trajectory of the matter to date. Mr Lester is presently a bankrupt pursuant to what appears to be (indeed, quite plainly is) the New Zealand equivalent of the Act. That came about as a result of a judgment debt that Spark secured against him in November 2021 (and, one assumes, his failure to pay it upon demand).
Mr Lester has since moved to (and continues to reside in) Australia. That reality appears to have spawned attempts by Spark to pursue payment of the judgment debt here. On 16 May 2023—and pursuant to the terms of the Trans‑Tasman Proceedings Act 2010 (Cth)—it registered in this court the judgment that it obtained in November 2021. Thereafter, it served upon Mr Lester a bankruptcy notice, which Mr Lester sought to have set aside under the Act. In an affidavit that he made in support of that endeavour, Mr Lester deposed as follows:
3.The Respondent bankrupted me in New Zealand because of the same proceedings for which they are relying now...
4.I am currently under the administration of the Official Assignee in New Zealand and report to them with regards to that bankruptcy.
5.Section 101 of the Insolvency Act 2006 explicitly states that all my property both inside and outside New Zealand vests in the Official Assignee.
6.Section 154 of the Insolvency Act 2006 further states – after adjudication, the bankrupt, and any other person (other than the Assignee) who claims through or under the bankrupt, has no power to recover any property that is part of the bankrupt's estate or give release or discharge in relation to that property.
7.The debt that the Respondent is trying to collect is part of the same claim that it made to bankrupt me in New Zealand.
8.The Respondent is aware that I was bankrupted because it initiated the proceedings.
9.The Respondent is aware that all my assets are subject to the control of the Official Assignee.
10.The Respondent is aware that it needs to make a claim against my assets with the Official Assignee.
Spark considered that the making of those representations (and, in particular, that which is contained within [9] above) amounted to an act of bankruptcy pursuant to s 40(1)(h) of the Act. It was apparently on that basis that it filed its creditor’s petition.
The proceeding was the subject of unremarkable programming orders, pursuant to which the parties prepared and filed a series of affidavits and associated material, including written submissions. Not all of those orders were complied with but nothing presently turns on that. Pursuant to s 35A of the Federal Court of Australia Act 1976 (Cth), the creditor’s petition was referred for judicial determination. Plainly, that has since given way to the present application for leave to withdraw.
In recent months, Spark has (or appears to have) succeeded in reigniting efforts by the Official Assignee in New Zealand to look into certain property transactions that it considers might feature in the discharge of Mr Lester’s bankruptcy there. It appears to be those efforts that have led to its decision to seek leave to withdraw the creditor’s petition that was filed in this court late last year (although Mr Lester posits less orthodox reasons for that change in heart, the particulars of which needn’t now be rehearsed).
I am satisfied—indeed, it is not credibly to be doubted—that it is appropriate for the applicant to have leave to withdraw its creditor’s petition. In circumstances where Mr Lester is already subject to an overseas bankruptcy regime, there is no reason apparent on the evidence why leave to withdraw ought to be withheld. The explanation given by Spark as to why leave to withdraw the creditor’s petition ought to be granted was persuasive (and not the subject of resistance) and I accept it.
The only remaining issue is what, if any, order should be made as to costs. On that score, s 32 of the Act confers upon the court a wide discretion that is fettered only by the requirement that it be exercised judicially.
Spark advances two reasons that are said to warrant that there should be no order as to costs. First, it maintains that Mr Lester lacks standing to request one. Alternatively, it submits that the court should refrain from making a costs order against it on two discretionary footings: first, on the related basis that anything that might be paid would vest in the Official Assignee in the administration of Mr Lester’s bankruptcy in New Zealand; and, second, that a measure of sharp practice has attended Mr Lester’s conduct in connection with his bankruptcy in New Zealand, absent which the institution and trajectory of the present proceeding might well have been different (and, in particular, less expensive).
There is little if anything in the way of properly admissible evidence, expert or otherwise, concerning the nature or effect of bankruptcy legislation in New Zealand. It appears to be presumed that the regime that applies there is equivalent to that which applies here under the Act. That is almost certainly so and the extent to which there exists some measure of dispute between the parties as to whether, on the state of such evidence as there is, I could properly proceed upon that assumption is difficult to discern; but, fortunately, doesn’t much matter.
I do not accept that Mr Lester lacked standing in Australia to resist the creditor’s petition; nor that he lacks standing now to require that Spark should pay the costs associated with what has proved to be the success that he has had in that resistance. That would be the usual course and I am not persuaded that any deviation from it is warranted merely because Mr Lester is subject to an overseas bankruptcy regime. Mr Lester was always entitled to resist the creditor’s petition. There is no suggestion otherwise; indeed, the originating application itself properly noted as much. Were he to do so successfully, as has now transpired, there is little doubt that he would normally expect to benefit from an award of costs. As Mr Lester noted in his written submissions: Spark does not “…cite any authority for the proposition that a person bankrupt in a foreign jurisdiction may defend a bankruptcy proceeding but cannot seek his costs of doing so”.
The only circumstance that is said to disqualify Mr Lester from that usual course is the fact that he is a bankrupt in New Zealand. Spark contends that he lacks standing to press any application for costs in the same way that a bankrupt ordinarily lacks standing to commence or continue any proceeding for the advancement of a money claim: Cummings v Claremont Petroleum NL (1996) 185 CLR 124, 135-136 (Brennan CJ, Gaudron and McHugh JJ). I reject that submission. Mr Lester’s standing to recoup his costs in the normal way here is an ordinary incident of the standing that he very clearly had to defend the creditor’s petition that was commenced against him. Although the parties were unable to identify any authority in which the point was considered at the level that I am now invited to consider it, I was nonetheless taken to several decisions that culminated in an award of costs in favour of a successful bankrupt: Talacko v Talacko [2013] VSC 712 (Sloss J); Griffiths v Civil Aviation Authority (1996) 67 FCR 301 (Spender, Einfeld and Cooper JJ); Radich v Bank of New Zealand (1993) 45 FCR 101 (Einfeld, Foster and Drummond JJ).
That, I think, reflects the nature of an award of costs. Costs are not an independent cause of action in and of themselves. They are neither sought nor awarded as a means of vindicating the prosecution or defence of private rights upon which there is alleged to have been some trespass. Instead, they are an ancillary incident of broader interests of justice. Here, those interests require that Spark should have leave to withdraw the application that it made against Mr Lester, which Mr Lester very clearly has standing to resist; but there is no reason why it shouldn’t, in the usual way, pay for any costs expended in the defence of what it now abandons.
Spark’s suggestion that statute law in New Zealand should be understood to operate so as to disqualify Mr Lester from seeking costs should be rejected. It cannot be that, when it enacted the Insolvency Act 2006 (NZ), the New Zealand legislature purported—indeed, succeeded—extraterritorially to extinguish the standing of persons domiciled in Australia to seek (or defend themselves from) relief in an Australian court; or, otherwise, to avail themselves of this court’s power to award costs in bankruptcy proceedings under s 32 of the Act.
I turn, then, to address the second of Spark’s contentions (which is very closely related to, if not the same as, the first) as to why no order for costs ought to be made: namely, that the funds payable under any such order would vest with the Official Assignee in New Zealand. Again, whether that is so or not is (or may be) difficult to say on the state of the evidence about how the regime in New Zealand operates. But, perhaps more fundamentally, I am unable to see why it should matter. That costs paid in satisfaction of any order that this court might make in the present circumstances may vest in the Official Assignee is not obviously a matter that should inform or dictate the broad costs discretion that the court enjoys under s 32 of the Act. If that is what ultimately would transpire, then so be it. It is not, in my view, a reason why the court should favour some deviation from the ordinary rule that, upon discontinuance, costs should be awarded against the discontinuing party.
Finally, it was suggested that, as a matter of discretion, the court should refrain from making an award of costs in Mr Lester’s favour because of the less‑than‑exemplary manner in which he has attended to the administration of his bankruptcy in New Zealand. Evidence was led to suggest that Mr Lester might not have been as forthcoming about his affairs as Spark and the Official Assignee in New Zealand were entitled to expect. Although perhaps in terms that were somewhat muted, Spark submitted that that reality should inform the court’s exercise of the discretion that I am satisfied it has under s 32 of the Act.
I am not persuaded that it should; certainly not to the point that might warrant some deviation from the usual course described earlier. The evidence does not extend to suggest that, when it filed its creditor’s petition, Spark had reason to think that there was no prospect that the Official Assignee would, in connection with Mr Lester’s bankruptcy, look into the potential recovery of funds related to transactions that, to that point, it had not examined. Indeed, the evidence demonstrates that it made inquiries of the Official Assignee as to the status of Mr Lester’s bankruptcy after the present application had been commenced. Even assuming that Mr Lester was tardier than might have been hoped in his cooperation with the Official Assignee, I do not consider that it is possible to conclude that the present application would necessarily have taken a different (and less expensive) course.
That being so, I do not accept that the court’s discretion to award costs under s 32 of the Act should be exercised otherwise than in the orthodox way.
Those observations are sufficient to dispose of the matter now before the court. It is unnecessary that I should venture any observations (or further observations) about Mr Lester’s interest in any award of costs, nor about the nature or value of Spark’s endeavours to sequester Mr Lester’s estate in Australia or to reanimate the interest of the Official Assignee in New Zealand as to the potential unwinding of property transactions in which Mr Lester was or may have been involved. In my view, the matter is straightforward: Mr Lester has expended energies and funds in the legitimate defence of a proceeding that has now been withdrawn; and there ought, in the usual way, to be some measure of recompense for those efforts.
I will make orders consistent with that course.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Snaden. Associate:
Dated: 15 April 2024
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