Woodgate v Vamoter Pty Limited (No.3)
[2005] FMCA 1885
•20 December 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WOODGATE v VAMOTER PTY LIMITED (No.3) | [2005] FMCA 1885 |
| BANKRUPTCY – Taxation of costs – request for review of decision of Registrar before taxation finalised – whether court should hear matter prior to certificate of taxation – where one question of principle could be decided – whether mortgagee entitled to recover costs awarded against it under its general law indemnity – whether mortgagee’s costs were properly incurred. |
| Bankruptcy Act 1966, s.58 Fisher and Lightwood’s Law of Mortgage Australian Ed. 1995 |
| Inglis and Another v Commonwealth Trading of Australia [1973] 47 ALJR 234 James Rainsford v State of Victoria and Anor [2005] FCAFC 163 Elders Trustees & Executor Co Ltd v Eagle Star Nominees Ltd [1986] 4 BPR 9205 |
| Applicant: | GILES GEOFFREY WOODGATE |
| Respondent: | VAMOTER PTY LIMITED ACN 003 442 813 |
| File Number: | SYG852 of 2003 |
| Judgment of: | Raphael FM |
| Hearing date: | 13 December 2005 |
| Date of Last Submission: | 13 December 2005 |
| Delivered at: | Sydney |
| Delivered on: | 20 December 2005 |
REPRESENTATION
| Solicitors for the Applicant: | Sally Nash & Co |
| Counsel for the Respondent: | Mr M Henry |
| Solicitors for the Respondent: | John S Sheehy |
ORDERS
The respondent to pay the applicant’s costs to be taxed if not agreed pursuant to the Federal Court Act and Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG852 of 2003
| GILES GEOFFREY WOODGATE |
Applicant
And
| VAMOTER PTY LIMITED ACN 003 442 813 |
Respondent
REASONS FOR JUDGMENT
The Notice of Motion which was before me on 13 December 2005 to review certain decisions of taxing officer Registrar Segal in respect of the taxation of the respondent’s costs conducted on various days in May, June and July 2005 arose in the following circumstances. The applicant is the trustee of the bankrupt estate of Ann Carolyn Teese pursuant to a sequestration order made by Driver FM on 20 August 2002. The bankrupt owned a property being in the whole of the land contained in Certificate of Title Folio Identifier 3/SP7313 and known as Unit 3/39 Melrose Place Clovelly. The respondent claimed to be the equitable mortgagee by deposit of title deeds of that property. This was disputed by the trustee. During the course of 2003 the trustee requested that Vamoter produce the title deed of the property so that he could be registered as its proprietor pursuant to the provisions of s.58 of the Bankruptcy Act 1966 (Cth) (the “Act”) and also requested Vamoter to provide him with certain discharges of mortgage in respect of mortgages granted previously to the Commonwealth Bank and to allow the lifting of a caveat 9294423 to enable the trustee to be registered on title. The trustee wished to sell the property and proposals were made to secure an amount claimed by Vamoter from the proceeds of sale pending the resolution of the dispute between the trustee and Vamoter as to Vamoter’s claim to be an equitable mortgagee.
Vamoter declined to proceed as requested by the trustee who then took out an application to this court. Those proceedings were settled on the day prior to hearing and Driver FM made consent orders on 20 May 2003 effectively requiring Vamoter to do that which it had been requested to do by the trustee. His Honour reserved the costs of the application.
Thereafter I heard the substantive issue between the parties. I gave judgment on 8 August 2003 and made orders vesting the property in the trustee pursuant to s.58 of the Act subject to an equitable charge securing the sum of $84,000.00 plus interest in favour of Vamoter. I also ordered that the respondent pay the costs of the applicant of the interlocutory proceedings before Driver FM. I ordered that the costs of the substantive proceedings should be paid by the trustee to Vamoter Pty Limited. My order for costs dealt with the costs of the proceedings but Vamoter Pty Limited also claimed that it was entitled to add to the mortgage debt all costs, charges and expenses reasonably and properly incurred for the purposes of protecting the estate or the mortgagee. After hearing the parties in relation to this matter I agreed that the order for costs should be clarified so that in respect of the actual proceedings, party and party costs would be ordered but that the trustee was also liable to pay the mortgagee all those other costs defined by the general rule; Inglis and Another v Commonwealth Trading of Australia [1973] 47 ALJR 234 at [235] per Mason J; Fisher and Lightwood’s Law of Mortgage Australian Ed. 1995 at [798] and [800]. Those costs were to be taxed on an indemnity basis.
Thereafter various taxations proceeded. One taxation which proceeded to finality was the taxation of the costs of the proceedings before Driver FM. These were taxed at $6,434.50 on 6 April 2004. Registrar Segal made an assessment of the costs he would allow and advised the parties but that assessment was not satisfactory and a full scale taxation was required. The taxation was never completed. Registrar Segal gave indications of certain items that would be allowed or disallowed. The parties were not in agreement. In discussions with Registrar Segal and in correspondence it was suggested that where there were areas of disagreement it might be possible to resolve the problems by referring the matters to myself “to review”. On 17 October 2005 Registrar Segal wrote to the parties as follows:
“I have not seen a notice of motion filed (or proposed to be filed) on behalf of the first respondent. However, as I understand it, the first respondent wishes to test my disallowance of certain mortgagee and public examination costs based on my construction of the costs orders made by the Federal Magistrates.
I agree with the early referral of this question to the court for immediate review. If my construction of the costs orders was incorrect, the court may wish to say so, set aside that part of my decision and return the matter to me to complete the taxation accordingly. If my decision was correct, my decisions on the bill will stand and I will only need to consider the question of the costs of the taxation.
The alternative is for me to consider the question of costs now and for the first respondent to exercise its rights to a full reconsideration by me of the bill. This will result in a great deal of extra time and effort by the parties and myself and likely still lead to an application to the court to, in effect, reconsider my construction of the costs orders.
Yours faithfully”
On 24 October 2005 Registrar Segal wrote again to the parties saying inter alia:
“It follows from my letter of 17 October 2005 that, at present, the taxation is incomplete. (See also O 62 r41(7)). Accordingly, it would be premature at this time to issue a final certificate …”
The matters that came before me for consideration were divided into eleven schedules. Schedule One was entitled “Section 81 Issue”. The issue here appeared to be whether or not the mortgagee could have its costs of attendance at a Section 81 examination including the costs of a lawyer instructed in relation to that matter. But the way in which the dispute came before me was that some of those costs had been allowed by Registrar Segal and some had not and I was being asked to deal with those costs which had not been allowed by the learned Registrar. The same situation pertained in relation to Schedule Two which was described as the “Deed of Arrangement Issue”. After making enquiries of the parties it appeared to me that in respect of all the issues save those contained in Schedules Five and Six the Registrar had made a finding about a particular issue and had taxed the costs in relation to that issue deleting certain charges, which I infer he considered to be excessive. It was only these “excessive charges” that I was being asked to look at. But in fact what the Registrar thought I was going to be asked to look at was the principle itself. Ms Nash who appeared on behalf of the trustee, did not wish to argue only that these items “taxed off” were properly taxed off but also that no sum should have been awarded for these issues.
I have formed the view that the application to me in respect of all the schedules save Schedules Five and Six was premature and misconceived. This is not to criticise the parties or Registrar Segal. The taxation has been long and complex. It is not unexpected that issues would arise as to whether or not particular costs or expenses allegedly incurred by the mortgagee were reasonably and properly incurred for the purposes of protecting the estate or the mortgagee. I am of the view that those matters should have been decided first by Registrar Segal who would have prepared some short reasons for his decision that the parties could have considered in the context of the overall amount awarded under the taxation before making their decisions as to whether or not to seek review. This would have enabled the real issues to be decided with much more precision. The parties would be able to prepare submissions and, if necessary, evidence as to those issues. The dangers inherent in attempting to short circuit matters by deciding “preliminary issues” were pointed out by the Full Bench of the Federal Court in James Rainsford v State of Victoria and Anor [2005] FCAFC 163 and I think it is appropriate to exercise some caution in taking that course in a case such as this.
There is, however, one area in which I believe it is appropriate to make a determination. That is in relation to the treatment of the costs awarded in respect of the notice of motion before Federal Magistrate Driver. The taxed costs of $6,434.50 were included as Schedule Four and the actual costs of the mortgagee in the sum of $2,763.50 were included as Schedule Five. The trustee was awarded those costs because he had been required to bring proceedings against Vamoter in order to obtain the orders which Vamoter eventually consented to. Although it might seem odd that costs which have been awarded to a party should not only be found not to be payable but that that party’s own expenses in relation to the proceedings should also be paid by the successful party, I am urged to make such a determination by the mortgagee. A similar, but not identical problem, was considered by McLelland J in Elders Trustees & Executor Co Ltd v Eagle Star Nominees Ltd [1986] 4 BPR at [9205]. At [9208] His Honour says:
“On or about 17 February 1986 Eagle caused a demand purporting to be given under s.364(2) of the Companies (SA) Code to be served on Elders in respect of the principal sum of $400,000 and interest thereon. Elders thereupon commenced proceedings in this court for an injunction to restrain Eagle from commencing any proceedings pursuant to that demand. On 21 February 1986 in those proceedings Waddell J granted injunctions as sought until further order and made an order that Eagle pay Elders’ costs “of today”. …
There are two matters of principle for determination arising out of this provision [the provision in the mortgage making the mortgagor liable for all costs charges and expenses and payments etc] … The second is whether costs which Eagle has been ordered to pay to other parties are in any event so chargeable.
In my opinion there is a necessarily implied qualification that the provision applies only to costs, charges, expenses or payment properly incurred. This is in my view so obvious that it did not require expression (see, for example, Re Holliday & Godlee (1888) 58 LT 301 at 303). For this purpose I consider that “properly” means reasonably and in good faith (citations omitted) … This is consistent with the view expressed by Street J in Re Shanahan (1941) 58 WN (NSW) 132 at 136 that a clause in a mortgage requiring the mortgagor to pay “all costs and expenses incurred by the mortgagee” in various ways, would not cover “costs which had been unjustifiably or vexatiously incurred by the mortgagees so as to impose an unwarrantable burden on the mortgagors”. …
So far as the costs ordered to be paid by Eagle in proceedings 4492 of 1985 and 5036 of 1986 are concerned, the matter is not in my opinion concluded against Eagle merely by the fact that those orders were made against it. … The answer to the question whether Eagle is entitled to have charged against the mortgaged property the costs which it is liable to pay pursuant to the orders made by Cohen J and by Waddell J will depend in the first place on whether by instituting and prosecuting the respective proceedings in consequence of which those liabilities were incurred, Eagle acted “properly” in the sense explained above. The fate of the respective proceedings and the making of orders for costs are relevant only in so far as they may assist a conclusion to be reached on the question whether it was “proper” for Eagle to institute and prosecute the proceedings.”
Adopting this dicta of His Honour I am satisfied that the action of the mortgagee in declining to deliver up the title deed and discharges of mortgage to the trustee so that the trustee could be registered upon the title pursuant to s.58 of the Act was not a proper action for the mortgagee to have taken. Mr Henry for the mortgagee argues that the trustee sought more than just this. It sought that the first respondent mortgagee pay costs on an indemnity basis and that orders be made against the second respondent the Registrar General, requiring him to act in a certain way if the mortgagee did not comply with orders. I do not think that these orders requested in the notice of motion make the mortgagee’s resistance to the general thrust of the motion legitimate. If the mortgagee had been prepared to permit the registration there would have been no involvement of the Registrar General as second respondent and any orders made in regard to that functionary would not have been necessary. Likewise, a request for payment of indemnity costs in respect of an application that was clearly going to succeed because of the trustee’s overriding entitlement to be registered was not to my mind unreasonable. I cannot see how the mortgagee was protecting either the mortgaged property or itself by its conduct in regard to this application by the trustee. The trustee is acting in the public interest to preserve the estate of the bankrupt and to secure the maximum payment to the bankrupt’s creditors. It is proper that he should be registered on title. It is proper that he should sell the property. His proposals included protection for the mortgagee of the amount the mortgagee claimed to have been owed (which was, incidentally, twice the amount awarded by myself at a later time). I do not think the mortgagee should be excused from paying the costs of the trustee in relation to those proceedings and I do not think the mortgagee should be entitled to any of his own costs from the trustee in respect of them either. Registrar Segal was to my mind correct in declining to award those costs.
In considering the costs of this application I have borne in mind that both parties were making a genuine effort to shorten proceedings. But I think that the way the matter was brought before me by the applicant mortgagee was inappropriate. It was seeking orders in respect of moneys that had been taxed off by the Registrar on the basis that they were not fair and reasonable. That was not a question of principle. The Registrar had already decided the question of principle in favour of the mortgagee by allowing it other costs under those headings. In respect of the one item that was a question of principle I have found against the mortgagee. I think that in those circumstances the proper order is that Vamoter Pty Limited should pay the costs of the trustee Giles Geoffrey Woodgate to be taxed if not agreed according to the Federal Court Act and Rules.
I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
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