Timbercorp Finance Pty Ltd (In Liq) v Gulabovski (No 2)
[2023] FedCFamC2G 69
Federal Circuit and Family Court of Australia
(DIVISION 2)
Timbercorp Finance Pty Ltd (In Liq) v Gulabovski (No 2) [2023] FedCFamC2G 69
File number(s): MLG 1158 of 2022 Judgment of: JUDGE MANSINI Date of judgment: 8 February 2023 Catchwords: BANKRUPTCY – COSTS – whether costs should be awarded on an indemnity basis – exercise of court’s discretion – applicable principles – where creditor is entitled to costs – costs awarded in a fixed sum. Legislation: Bankruptcy Act 1966 (Cth) s.32
Federal Circuit and Family Court of Australia 2021 Act (Cth) s.214
Federal Circuit and Family Court of Australia (Bankruptcy) Rules 2021 r.13.01
Federal Court Rules 2011 r.40
Cases cited: Lowbeer v De Varda and Lowbeer v Tov-lev [2017] FCCA 1658
Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11
Re Ministers for Immigration; Ex Parte Quin (1997) 186 CLR 622
Washington v Qantas Airways Limited (2014) 107 IPR 144; [2014] FCCA 1413
Division: Division 2 General Federal Law Number of paragraphs: 20 Date of last submission/s: 7 December 2022 Date of hearing: On the papers Place: Melbourne Solicitor for the Applicant Mills Oakley Lawyers Solicitor for the Respondent No appearance by or for the Respondent ORDERS
MLG 1158 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: TIMBERCORP FINANCE PTY LTD (IN LIQ)
Applicant
AND: ALEX GULABOVSKI
Respondent
order made by:
JUDGE MANSINI
DATE OF ORDER:
8 December 2023
THE COURT ORDERS THAT:
1.The Applicant Creditor’s costs fixed in the sum of $14,566.08 be paid from the estate of Alex Gulabovski in accordance with the Bankruptcy Act 1966 (Cth).
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Judge Mansini
INTRODUCTION
This is an application for costs made by Timbercorp Finance Pty Ltd (in liquidation) following judgment in their favour in an application by Mr Gulabovski for review of a sequestration order.
The sequestration order made by a registrar of this Court on 28 October 2022 was subject of Mr Gulabovski’s review application. Those review proceedings were essentially a re-prosecution by the creditors of their petition which was heard on 16 November 2022 and determined by judgment delivered on 28 November 2022. Orders were made in the following terms:
1.The registrar’s sequestration order made on 13 October 2022 be set aside.
2.Timbercorp Finance Pty Lty (in liquidation) have leave to amend paragraph 4 of the creditor’s petition to substitute 29 March 2022 with 19 May 2022 as the date of the commission of the act of bankruptcy by extension in accordance with s.41(7) of the Bankruptcy Act 1966 (Cth) (Act).
3.The requirement for re-verification and re-service of the creditor’s petition is dispensed with.
4.The estate of Alex Gulabovski be sequestrated under the Act.
5.The Court will hear further as to costs.
For the reasons that follow, I have determined that it is appropriate that costs be awarded in the amount of $14,566.08.
costs in bankruptcy proceedings
This Court has a broad discretion to order costs to the successful party in a proceeding.
Section 214 of the Federal Circuit and Family Court of Australia 2021 Act (Cth) (FCFCOA Act) provides:
(1) This section does not apply to:
(a) family law or child support proceedings; or
(b) proceedings in relation to a matter arising under:
(i) the Fair Work Act 2009; or
(ii) section 14, 15 or 16 of the Public Interest Disclosure Act 2013.
Note 1: Paragraph (a)—see section 117 of the Family Law Act 1975 in relation to family law or child support proceedings.
Note 2: Subparagraph (b)(i)—see section 570 of the Fair Work Act 2009 for proceedings in relation to matters arising under the\at Act.
Note 3: Subparagraph (b)(ii)—see section 18 of the Public Interest Disclosure Act 2013 for proceedings in relation to matters arising under section 14, 15 or 16 of that Act.
(2)The Federal Circuit and Family Court of Australia (Division 2) or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
(3)Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Circuit and Family Court of Australia (Division 2) or Judge.
Note: For further provision about the award of costs, see Division 4 of Part 6 and paragraphs 192(4)(d) and (e).
Relevant to the present application, the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) provides that the Court may make such orders as to costs “as it thinks fit” in any proceeding before it: s.32.
In Re Ministers for Immigration; Ex Parte Quin (1997) 186 CLR 622, McHugh J explained at [6]:
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order…
Although the discretion afforded to the Court is broad, it must be exercised judicially and in the context of the relevant Court rules: see Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, at [65].
In bankruptcy proceedings, the entitlement to costs is governed by the Federal Circuit and Family Court of Australia (Bankruptcy) Rules 2021 (Bankruptcy Rules).
Pursuant to r.13.01 of the Bankruptcy Rules, subject to Division 13.2 and unless the Court otherwise orders, a person who is entitled to costs in a proceeding in which the Bankruptcy Act applies is entitled to costs according to Part 40 of the Federal Court Rules 2011 (Federal Court Rules): r.13.01(1). The award of such costs is in the discretion of Division 2 of this Court or the Judge and may be fixed: r.13.01(2) and (3).
Division 13.2 makes provision in relation to the costs that may be charged by a legal practitioner for a creditor for work done in relation to a creditor’s petition - but does not apply if the Court fixes the amount of the costs: r.13.02.
In Lowbeer v De Varda and Lowbeer v Tov-lev [2017] FCCA 1658 at [30], Judge Mansousaridis explained the costs indemnity principle in the following way:
The “costs indemnity principle” provides that “costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation” (emphasis added). A frequently quoted statement of the costs indemnity principle is that provided by Bramwell B in Harold v Smith:
Costs as between party and party are given by the law as an indemnity to the person entitled to them they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them. Therefore, if the extent of the damnification can be found out, the extent to which costs ought to be allowed is also ascertained. Of course, I do not say there are not exceptional cases, in which certain arbitrary rules of taxation have been laid down, but, as a general rule, costs are an indemnity, and the principle is this, - find out the damnification, and then you find out the costs which should be allowed
There is no rigid formula to be applied to the determination of costs and the exercise of the discretion will require regard be had to the facts and law at issue in the proceeding: Washington v Qantas Airways Limited (2014) 107 IPR 144; [2014] FCCA 1413.
whether to order costs in this case
The factual background to the circumstances which lead to the sequestration of the estate in the present case is summarised in the reasons for judgment delivered on 28 November 2022 and need not be repeated here.
Judgment in the substantive matter included an order that the Court hear separately as to costs. Since then, the costs applicant proposed that the matter of costs be determined on the papers which was not opposed and a program for the filing of materials was subsequently fixed. The costs applicant subsequently filed a written submission in support of its costs application, along with a statement of costs and disbursements. Nothing was filed by or on behalf of the costs respondent and the trustee in bankruptcy expressly declined the opportunity to address the Court in relation to costs.
The costs applicant sought that their costs be fixed in the sum of $14,556.08 and be paid from the estate of the costs respondent in accordance with the Bankruptcy Act. The itemised statement of costs and disbursements specified: the costs and disbursements sought and awarded before the Court’s registrar on 13 October 2022 plus an additional amount of $5,880 said to comprise Counsel’s costs of the application for review, up to and including the costs of the costs application. In the alternative, the costs applicant sought that its costs be taxed and so paid.
The costs applicant was the successful party in the substantive review application and there is nothing before the Court to warrant any departure from the orthodox approach wherein costs in their favour follows the event.
In the present case, it may be accepted that the costs of the alternate taxation process would be disproportionate to the quantum of costs sought. There is nothing before the Court to suggest that the costs applicant is entitled to indemnity from a third party or other arrangement that might warrant departure from the “costs indemnity principle” referred to above.
There being no opposition to such approach and, on what is before the Court, I am satisfied it is appropriate to “fix” the costs in the matter in accordance with the statement of professional costs and disbursements.
CONCLUSION
For the above reasons, I am satisfied it is appropriate to exercise the discretion vested in the Court to order that the costs applicant have its costs fixed in the sum of $14,566.08 paid from the estate of Alex Gulabovski in accordance with the Bankruptcy Act.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 8 December 2023
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