Vlymen v Lever Solomon Ltd
[2021] FCCA 884
•10 May 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VLYMEN v LEVER SOLOMON LTD & ANOR | [2021] FCCA 884 |
| Catchwords: BANKRUPTCY LAW – Application to set aside a Bankruptcy Notice – dismissed after underlying judgment debt set aside in the Solomon Islands Court of Appeal – remaining dispute on the question of costs. |
| Legislation: Federal Circuit Court of Australia Act 1999 (Cth) ss 79; 86. Federal Circuit Court Rules 2001 rr 21.02, 21.03, 21.04 |
| Cases cited: Re Skase; ex parte Donnelly [1992] FCA 429 |
| Applicant: | WILLEM JOHAN VAN VLYMEN |
| First Respondent: | LEVER SOLOMON LIMITED |
| Second Respondent: | RUSSELL ISLANDS PLANTATION LIMITED |
| File Number: | SYG 1528 of 2019 |
| Judgment of: | Registrar Chuan Ng |
| Hearing date: | 6 April 2021 |
| Date of Last Submission: | 20 April 2021 |
| Delivered at: | Sydney |
| Delivered on: | 10 May 2021 |
REPRESENTATION
| For the Applicant: | Mr S Keleher solicitor |
| For the Respondents: | Ms S Nash solicitor |
ORDERS:
Each party bear their own costs.
THE COURT NOTES:
The Bankruptcy Notice number 240750 issued on 14 May 2019 was set aside on 10 May 2021.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1528 of 2019
| WILLEM JOHAN VAN VLYMEN |
Applicant
And
| LEVER SOLOMON LIMITED |
First Respondent
| RUSSELL ISLANDS PLANTATION LIMITED |
Second Respondent
REASONS FOR DECISION
On 6 April 2021 Bankruptcy Notice Number 240750 issued on 14 May 2019 was set aside.
The question of costs was adjourned to the present date.
For the reasons identified in this judgment, each party is to bear its own costs.
BACKGROUND
This matter has a convoluted history. It traverses four court jurisdictions: the High Court of the Solomon Islands; the Court of Appeal of the Solomon Islands; the Supreme Court of NSW; and the Federal Circuit Court of Australia.
The following narrative is derived from the judgment of the Court of Appeal of the Solomon Islands in Vlymen v Lever Solomons Limited & Ors [2021] SBCA 2; SICOA-CAC 20 of 2019.
The original litigation in the Solomon Islands
The parties originally commenced litigation in the High Court of the Solomon Islands. Respectively, the Respondents and Applicant were the Plaintiff (Respondents in the appeal) and the Defendant (Appellant in the appeal) in the Solomon Island proceedings.
On 18 August 2018 the Plaintiff purportedly served a Statement of Claim on the Defendant in the High Court. Pursuant to the applicable rules of Court in that jurisdiction, the Defendant had 14 days to file a Conditional Response. That was not complied with within that prescribed time period.
On 6 September 2018, the Defendant’s lawyer, a Desmond Namepo, belatedly filed a Conditional Response disputing that his client was properly served with the Statement of Claim. Mr Namepo asserted that his client only discovered the existence of these proceedings from a third party.
On 11 September 2018 Mr Namepo wrote to the Plaintiff’s advising that service of the Statement of Claim was disputed by the Defendant. This correspondence was not, as a matter of common sense and practicality, copied to the Registry of the High Court. The Defendant also did not file a Defence on the last prescribed day, being 17 September 2018.
On 19 September 2018, Mr Namepo filed an Application to set aside the purported service of the Statement of Claim on behalf of the Defendant. This Application was not accompanied by any sworn statements which was required under the relevant rules of Court.
On an unidentified date shortly after the 19 September 2018, the Registrar of the High Court wrote twice to Defendant’s lawyer to enquire about the missing statements that were required to accompany the filing of the Defendant’s Application to set aside the purported service of the Statement of Claim. The correspondence by the Registrar was not responded to on behalf of the Defendant.
Notwithstanding the existence of the Application to set aside the purported service, on 12 October 2018 the Plaintiff filed an Application for default judgment. The Defendant would later claim that this was never received.
On 16 October 2018 the Application for a default judgment was listed in the High Court. For reasons which remain unexplained, the presiding Registrar was unaware of the Defendant’s Application to set aside the purported service. I can only surmise that this Application did not make its way onto the physical court file.
In a further complication, the Plaintiff who appeared on 16 October 2018 before the Registrar did not alert her to the existence of the Defendant’s Application to set aside the purported service. There was also no appearance on behalf of the Defendant before the Registrar.
In the absence of the Defendant, the Registrar proceeded to make and enter the default judgment in favour of the Plaintiff, awarding damages of SBD 33,189,367.30 (local currency).
On 28 November 2018, the Defendant filed a Notice of hearing seeking to set aside both the purported service and default judgment (“the Defendant’s Applications”). This hearing was set down by the Registry on 4 March 2019.
On 4 March 2019, the Defendant’s Applications came before Faukona J in the High Court. Despite this hearing being initiated on the Defendant’s behalf, there was no appearance by him or his lawyers. In circumstances where the primary Judge was satisfied that the Statement of Claim had been properly effected (relying on sworn statements demonstrating service by the process server), the Defendant’s Applications were dismissed and indemnity costs were awarded in favour of the Plaintiff.
Registration of the High Court judgment in the Supreme Court of NSW
On 24 April 2019, the Plaintiff registered the judgment of the High Court in the Supreme Court of NSW for AUD $5,903,830.19.
Bankruptcy Notice obtained and served
Relying on this judgment from the Supreme Court of NSW, on 14 May 2019 the Plaintiff obtained a Bankruptcy Notice (number 240750) from the Official Receiver in Bankruptcy, AFSA.
On 4 June 2019, the Bankruptcy Notice was served upon the Defendant by being left in his residential mail box pursuant to Regulation 16.01 of the Bankruptcy Regulations.
Proceedings in the Federal Circuit Court of Australia
On 21 June 2019, the Defendant filed an Application to set aside the Bankruptcy Notice and supporting affidavit in this Court.
On 9 July 2019, the Respondent filed a Notice of Opposition and supporting Affidavit in response to the Applicant’s Application to set aside the Bankruptcy Notice.
Because of the proceedings in the Court of Appeal in the Solomon Islands, the bankruptcy proceedings in this Court were the subject of a number of adjournments which were by the consent of the parties. Time for compliance with the Bankruptcy Notice was also extended. The following table summarises the history:
Date
Court event 16 July 2019 Registrar Cho considers the Application in chambers and adjourns matter and extends time for compliance. 30 July 2019 Registrar Burns adjourns matter and extends time for compliance 23 September 2019 Registrar Morgan adjourns matter and extends the time for compliance 1 October 2019 Registrar Burns adjourns matter and extends the time for compliance, noting that Judgment is due to be delivered on 25 October 2019 in related Supreme Court proceedings 29 October 2019 Registrar Segal adjourns the matter and extends the time for compliance, noting that the related Solomon Islands Court of Appeal proceedings have granted the Applicant leave to renew his application for leave to appeal to the Full Court of the Solomon Islands 21 January 2020 Registrar Ng adjourns the matter and extends the time for compliance noting the related Supreme Court proceedings are reserved for Judgment and enforcement of the registered Judgment in those proceedings is stayed subject to undertakings given by the Applicant 18 May 2020 Registrar Ng adjourns the matter and extends the time for compliance. 6 October 2020 Registrar Ng adjourns the matter and extends the time for compliance 2 November 2020 Registrar Ng adjourns the matter and extends the time for compliance 30 November 2020 Registrar Ng adjourns the matter and extends the time for compliance 28 January 2021 Registrar Ng adjourns the matter and extends the time for compliance
Application to set aside the registration of the judgment in the Supreme Court of NSW
On 12 July 2019, the Defendant applied to set aside the registration of the High Court Judgment in the Supreme Court of NSW.
Back to the Solomon Islands: the proceedings in the Court of Appeal
Returning to the South Pacific, sometime after June 2019 the Defendant filed an Application seeking leave to appeal in the Court of Appeal. This first leave application was dismissed by the President of the Court due to a number of procedural defects.
On 18 October 2019, the Defendant filed a second Application seeking leave to appeal against the judgment of Justice Faukona on 4 March 2019. On this occasion the Court of Appeal granted leave.
Just over a year later, on 29 October 2020 the Court of Appeal heard the appeal and reserved judgment.
On 1 February 2020, the Court of Appeal (constituted by Goldsbrough P, Lunabek and Gavara-Nanu JJA) delivered its judgment. In upholding the appeal and finding in favour of the Appellant/Defendant, the Court of Appeal concluded that the Registrar had no jurisdiction to hear the Respondent/Plaintiff’s application for default judgment (let alone enter it) when there was a pre-existing Application on foot by the Defendant disputing the service of the Statement of Claim. The Court of Appeal went on to criticise the Respondent/Plaintiff’s lawyers for appearing before the Registrar to make the ex parte application for default judgment in circumstances where the Defendant’s lawyer had not been served with the Application for default judgment, and where the latter’s Application to set aside the purported service was still pending in the High Court. The Court of Appeal was also critical that the Respondent/Plaintiff’s lawyer did not notify the Registrar of the Appellant/Defendant’s pre-existing applications.
The Court of Appeal concluded that as the default judgment was not regularly entered, the primary judge’s decision to dismiss the Defendant’s applications to dispute service of the Statement of Claim and set aside the default judgment on 4 March 2019 were made in error, as there was nothing for Faukona J to set aside.
After making some pointed observations reminding the lawyers of their overriding duty to assist the Court, the Court of Appeal allowed the appeal, set aside default judgment, and remitted to the High Court for hearing. Where both sides had failed to comply with a raft of procedural requirements at first instance, the Court of Appeal exercised its discretion and concluded that each side should bear their own costs.
Bankruptcy Notice set aside in the Federal Circuit Court: remaining dispute in relation to costs
The matter was last before this Court on 6 April 2021. On that date I set aside the Bankruptcy Notice by consent.
In circumstances where costs were disputed, I adjourned this remaining aspect to 10 May 2021 and made timetabling orders for the parties to file their respective written submissions and any supporting evidence.
On 6 and 20 April 2021, the Respondents (the Plaintiff in the Solomon Islands) filed two sets of written submissions (one in reply) and the affidavit of Sally Susan Nash deposed on 20 April 2021.
On 14 April 2021, the Applicant (the Defendant in the Solomon Islands) filed its written submissions and the affidavit of Sean Keleher deposed on 14 April 2021.
THE EVIDENCE AND SUBMISSIONS OF THE PARTIES
The Respondents’ submissions and affidavit evidence
The Respondents contend that this Court should award costs in their favour. In support they rely on the delays that were caused by the Applicant in the High Court. In the alternative, the Respondents contend that this Court should follow the decision of the Court of Appeal and order that each party bear their own costs.
The Respondents submitted that this Court should take into account the Applicant’s repeated delays to file his responses in the Solomon Islands in a timely manner, citing his failure to serve his court papers on the Respondent, failing to appear before Faukona J on 4 March 2019, and failing to prosecute his appeal expeditiously in the Court of Appeal.
In the supporting affidavit of Sally Nash, the Respondent identified its costs in opposing the Application to set aside the Bankruptcy Notice as $7,715 which excludes GST.
In their written submissions the Respondent cite the decisions of Sockhill v DCT [2000] FCA 1208; Genovese v BGC Construction Pty Ltd (No. 2) Pty Ltd [2007] FMCA 601; and Shephard v Chiquita Brands (South Pacific) Ltd [2003] FCA 464.
Paragraph 2 of the Respondents’ written submissions identify the delays caused by the Applicant in the High Court of the Solomon Islands (see subparagraphs (a) to (g)).
In Sockhill v DCT (supra), the Court dealt with a review of a Deputy Registrar’s decision to extend time to comply with a bankruptcy notice which had been made ex parte pursuant to the (former) Order 77 rule 14 of the Federal Court Rules. In setting aside the extension of time to comply made by the Deputy Registrar, Dowsett J held that there were no proper grounds which entitled the Applicant to have his application dealt with ex parte, in circumstances where no attempt was made by the Applicant to notify the Respondent of this application. Having read this judgment, the only reference to “interim” or “injunctive” relief is found in paragraph [12] where Dowsett J remarked:
“In the context of injunctive relief, for example, it is necessary for the moving party to demonstrate a serious question to be tried and that the balance of convenience favours the grant of interlocutory relief. Although subs 41(6C) prescribes certain circumstances in which relief under subs 41(6A) is not to be granted, those circumstances are not the only relevant considerations in exercising the subs 41(6A) discretion. Factors such as "a serious question to be tried" (on the appeal) and "balance of convenience" may be relevant by analogy in the exercise of that discretion.”
The Respondent relies on Sockhill v DCT [2000] FCA 1208 to submit that an Application to set aside a Bankruptcy Notice is in the nature of an injunction and should be heard urgently, and that the Applicant’s repeated delays warrant the making of an adverse costs order against him.
While I accept general principles often dictate that applications for injunctive relief require the applicant to act with urgency (an example would be a Mareeva injunction or an application by ASIC to freeze bank assets), I am not persuaded that the remarks made by Dowsett J in paragraph [12] directly assists the Respondent ground this submission.
The Respondents contend that the Applicant’s delays in the High Court of the Solomon Islands has somewhat contributed to the delay in the bankruptcy proceedings reaching the stage that it did on 6 April 2021. I am more inclined to take the view that a larger portion of the delay was caused not by the Applicant, but rather by the less than expeditious court processes in the Solomon Islands. As described in the chronology above there was a 16 month hiatus from the granting of the second (and successful) application for leave to appeal (on 18 October 2019) to the actual hearing (on 29 October 2020) and then final delivery of the judgment (1 February 2021). To a large extent this appeal in the Solomon Islands court process was out of the hands of either of the parties.
The Respondents also rely on Genovese v BGC Construction Pty Ltd (No. 2) Pty Ltd [2007] FMCA 601. In that decision Lucev FM (as his Honour then was) held that the Federal Magistrates Court was empowered to make an order that the manner in which the Applicant conducted his case (where he was unsuccessful in setting aside the bankruptcy notice) pay indemnity costs. In circumstances where I have arrived at the conclusion that each party bear their own costs, this reliance on this case is moot.
The Respondents finally rely upon Shephard v Chiquita Brands (South Pacific) Ltd [2003] FCA 464 and [2003] FCA 871[1] in support of its submission that as the Bankruptcy Notice remained valid from when it was issued and up until the decision of the Court of Appeal was delivered on 15 February 2021, it should at the very least be awarded its costs right up to this date. Shephard v Chiquita Brands (South Pacific) Ltd (supra) dealt with a bankruptcy notice that was served on 28 March 2001 and where the hearing was finalised after “a long and complicated process” after the matter was initially transferred from the FCA to the FCCA, substantively heard in the FCCA, appealed to the FCA, and then remitted to the latter for a rehearing before a second final appeal. Without needing to traverse the facts, the decision by Madgwick J to award costs to the successful Respondent creditor simply reaffirms the Federal Court’s wide discretion to award costs.
[1] The Respondent only cited [2003] FCA 464 which comprises of a 1 page judgment awarding costs to the Respondent. The facts are contained in [2003] FCA 871.
The Applicant’s submissions and supporting evidence
In rebuttal, the Applicant’s solicitor contends that as the Respondent was unsuccessful at every step of the proceedings: ultimately in the Court of Appeal (where default judgment was set aside in the Solomon Islands); in the Supreme Court of NSW (where registration of the foreign judgment was stayed); and in setting aside the Bankruptcy Notice in this Court, costs should follow the event in these bankruptcy proceedings and this Court should exercise its discretion to award costs in its favour.
In seeking an order for costs, the Respondent’s affidavit has itemised its costs calculated on a party-party basis as incurred in these bankruptcy proceedings as $10,112.00 ($9,340 plus $772 GST).
THE LEGAL PRINCIPLES: THE QUESTION OF COSTS
Section 32 of the Bankruptcy Act 1966 (Cth) governs the question of costs in bankruptcy proceedings (with bold emphasis added):
The Court may, in any proceeding before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit.
The unfettered discretion of the federal courts to deal with the question of costs in matters relating to bankruptcy were discussed in Principal Strategic Options Pty Ltd, in the matter of Coshott v Coshott[2001] FCA 664. At paragraphs [18] – [19], Branson J held:
[18] The Court has a very wide discretion with respect to the making of orders as to costs. The discretion must, of course, be exercised judicially.
[19] The general rule in bankruptcy proceedings, as in proceedings before the Court generally, is that costs should follow the event (Re Skase; ex parte Donnelly [1992] FCA 429; (1992) 37 FCR 509 per Drummond J at 522). In Re Skase, Drummond J treated as applicable to bankruptcy proceedings certain propositions propounded by Wilcox J in Cummings v Lewis [1992] FCA 334. Drummond J in Re Skase set out those propositions as follow:
(a) The Court has an unfettered discretion as to its costs order: here see s 32 of the Bankruptcy Act.
(b) But, because of the usual practice of the court, a successful respondent has a reasonable expectation of recovering costs, in the absence of special circumstances.
(c) In considering the matter of costs, the court is entitled to look beyond the actual conduct of the case and have regard to the circumstances out of which it arose.
(d) However, there must be a limitation on the weight to be put on pre-litigation conduct, lest the exception overwhelm the rule. If too much emphasis is placed upon the circumstance that the litigation would not have arisen but for an action of the defendant, few successful defendants would recover their costs.
(e) The court may take into account the conduct of the litigation by the successful party. Where a successful party has put the opposing party to significant expense in connection with an issue on which that party failed, it may be reasonable to take that matter into account by awarding something less than full party-party costs.
(f) There is no difference in principle between the case of a successful plaintiff and that of a successful defendant.”
DETERMINATION
Having had regard to the convoluted history of these proceedings, both in the Solomon Islands and Australia, I have concluded that the appropriate order I should make is that the parties should bear their own costs. This is in circumstances where both parties cannot claim to be faultless in the delays that arose in the originating proceedings.
As the Plaintiff and Defendants in both the High Court and Court of Appeal in the Solomon Islands, both parties and their respective lawyers contributed to the inefficient delays that arose in that jurisdiction. Accepting the findings of fact made by the Court of Appeal:
(a)The Plaintiff did not serve the Statement of Claim on the Defendant.
(b)After discovering the existence of the Statement of Claim, the Defendant failed to file his Conditional Defence within the prescribed 14 day period.
(c)When the Defendant wrote to the Plaintiff to dispute service of the Statement of Claim, his lawyers did not consider it useful to notify the High Court Registry.
(d)The Defendant did not file a Defence by the prescribed date.
(e)When the Defendant filed his Application to set aside the purported service of the Statement of Claim, he failed to annex the requisite sworn statements in compliance with the rules of Court.
(f)The Defendant failed to respond to two letters sent to his lawyers from the Registrar of the High Court enquiring about the non-filing of the requisite sworn statements.
(g)The Plaintiff did not serve the Application seeking default judgment on the Defendant.
(h)The Plaintiff failed to notify the Registrar of the existence of the Defendant’s Application to set aside the purported service of the Statement of Claim when the application for default judgment came before her in the High Court.
(i)The Defendant failed to include sworn statements when he filed his Notice of Hearing to set aside the purported service and entry of the default judgment.
(j)The Defendant failed to appear before Faukona J when his Application to set aside the purported service and the default judgment was listed for hearing.
(k)The Defendant’s first Application for leave to appeal was deficient and rejected by the President of the Court of Appeal due to procedural deficiencies.
I also observe that whilst the Bankruptcy Notice has now been set aside as a result of the Applicant’s successful appeal to the Court of Appeal, the matter is far from concluded. The parties will now have to contest their original dispute afresh in the High Court of the Solomon Islands where the outcome and the ultimate victor is unknown.
Given these aforementioned circumstances, I am persuaded that the approach taken by the Court of Appeal in directing both parties to bear their own costs should also be applied in these bankruptcy proceedings.
ORDERS
The parties will bear their own costs in these proceedings.
THE COURT NOTES
The Bankruptcy Notice number 240750 issued on 14 May 2019 was set aside on 10 May 2021.
I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Registrar Chuan Ng.
Registrar’s Assistant:
Date: 10 May 2021
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