William Roberts Pty Ltd Trading as William Roberts Lawyers v Hackworthy

[2016] FCCA 213

FEDERAL CIRCUIT COURT OF AUSTRALIA

WILLIAM ROBERTS PTY LTD TRADING AS WILLIAM ROBERTS LAWYERS  v HACKWORTHY [2016] FCCA 213

Catchwords:
BANKRUPTCY – Review of orders made by a registrar on a creditor’s petition – petition dismissed but a costs order made against the debtor – basis for the dismissal questionable – undertaking accepted for payment of the balance of the amount due on the petition – reduced order as to costs of the petition.

Legislation:

Federal Circuit Court (Bankruptcy) Rules 2006 (Cth)

Federal Court Rules 2011 (Cth)

Strata Plan 50164 v O’Connor [2010] FMCA 833

Applicant: WILLIAM ROBERTS PTY LTD TRADING AS WILLIAM ROBERTS LAWYERS ACN 115 089 864

Respondent: IAN HACKWORTHY

File Number: SYG 2488 of 2015

Judgment of: Judge Driver

Hearing date: 8 February 2016

Delivered at: Sydney

Delivered on: 8 February 2016

REPRESENTATION

Mrs J Hackworthy-Grundy appeared with leave on behalf of the applicant

Solicitors for the Respondent: Mr A Bobb of William Roberts Lawyers

ORDERS

1. The Court notes the undertaking of Mrs Jean Hackworthy-Grundy to pay the amount of $2,565.14 (being the balance due on the creditor’s petition) within 7 days.

2. Order 3 made by Registrar Wall on 12 November 2015 is vacated.

3. The respondent debtor is to pay the applicant creditor’s costs of the creditor’s petition, fixed in the sum of $6,000.

4. There be no order as to costs of the review application.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2488 of 2015

WILLIAM ROBERTS PTY LTD TRADING AS WILLIAM ROBERTS LAWYERS ACN 115 089 864

Applicant

And

IAN HACKWORTHY

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

1. I have before me an application for review of orders made by District Registrar Wall in this case on 12 November 2015.  The orders made by the Registrar were, first, to grant leave to the petitioning creditor to withdraw the petition; secondly, to order that the petition against the respondent debtor be dismissed;  and, thirdly, to order that the respondent pay the creditor’s costs of the petition, fixed in the amount of $7,078.94.  The Registrar finally ordered that the applicant creditor was not to enforce the costs order on or before 18 November 2015. 

2. The petition was based on non-compliance with a bankruptcy notice which, in turn, was based on a judgment of the Local Court which had followed a costs assessment of costs incurred by the petitioning creditor, a firm of solicitors, purportedly acting for the debtor, Dr Hackworthy.  The heart of the dispute between the parties was that Dr Hackworthy denied being a client of the solicitors and hence denied any liability to pay their costs. 

3. The available material, however, established that the solicitors had acted in relation to proceedings in which both Dr Hackworthy and his wife were engaged and had undertaken work in good faith, and hence were entitled to be paid by somebody.  The dispute was not resolved prior to the assessment of costs or prior to the registration of the costs certificate in the Local Court and the resulting Local Court judgment, or in relation to the bankruptcy notice.  It was in part resolved in the petition proceedings when the debt was in part paid, although there is some question whether it was paid by Dr Hackworthy or his wife. 

4. Mrs Hackworthy appeared by leave on behalf of her husband today.  Dr Hackworthy, I accept, is unwell and receiving medical treatment for a serious illness.  Mrs Hackworthy told me that she does not dispute that legal work was undertaken by the solicitors on her behalf and that she is liable to pay the solicitors’ costs.  She gave, and I accepted, an undertaking to pay within seven days the amount of $2,565.14, being the balance due on the amount sought in the petition. 

5. I do have some concerns about the orders made by the Registrar.  I am not convinced that it was appropriate to grant leave to withdraw the petition at the same time as dismissing the petition.  Nevertheless, that issue has not been argued and I will not interfere with those orders.  I also note from the material that the parties appear to have been proceeding under a misapprehension of the law in that both parties assumed that if the debt due on the petition was reduced to a figure below $5,000 then the petition could not be further pursued. 

6. In my opinion, that position is wrong, as indicated by me in Owners of Strata Plan 50164 v O’Connor[1].  Nevertheless, in the light of the undertaking given by Mrs Hackworthy, it would not be appropriate on review to make a sequestration order.  On that basis, the focus of the review was Order 3, being the costs order made by the Registrar.  The amount of the costs awarded by the Registrar equated with the amount sought in a short-form bill of costs filed by the solicitors pursuant to an earlier direction by the Registrar.  Having regard to that bill, I accept that the disbursements paid by the solicitors in the course of the proceedings are properly recoverable. 

   [1] (2010) FMCA 833 at [59]

7. The costs component should, in my view, not exceed the amount prescribed in item 14.2 of Schedule 3 to the Federal Court Rules 2011 (Cth) prescribed for the purposes of rule 13.03(2) of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth).  Mrs Hackworthy contends that there should be no costs order at all, on the basis that the solicitors wrongly pursued her husband for their fees rather than her.  In circumstances where the Court is no longer considering a sequestration order, there would, in my opinion, be no basis to go behind the judgment of the Local Court and the costs assessment that preceded it.  It would be most unfortunate if the issue as to who was the appropriate and liable client or clients of the solicitors was not resolved with finality in this present proceeding. 

8. I have concluded that it would be appropriate to vacate Order 3 made by the Registrar on 12 November 2015 and substitute instead an order that the respondent debtor pay the applicant creditor’s costs of the petition fixed in the amount of $6,000.  I appreciate that Mrs and Dr Hackworthy maintain a sense of grievance arising out of the proceedings but, as I explained to Mrs Hackworthy, it is my strong view that they should put that grievance behind them with the resolution of the case.

9. Given that, on review, both parties have been partially successful in relation to the costs order, I do not consider that there should be any order as to the costs of the review.  I will so order.

I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Judge Driver

Date: 12 February 2016