ZAGHLOUL v JEWELLERY and Gift Buying Services Pty Ltd and Anor (No.2)

[2019] FCCA 595

FEDERAL CIRCUIT COURT OF AUSTRALIA

ZAGHLOUL v JEWELLERY & GIFT BUYING SERVICES PTY LTD & ANOR (No.2) [2019] FCCA 595

Catchwords:
BANKRUPTCY – Costs – where Applicant wholly unsuccessful – where costs follow the event – are indemnity costs justified – fixed costs order made.

Legislation:

Bankruptcy Act 1966 (Cth)

Applicant: HASSAN ZAGHLOUL

First Respondent: JEWELLERY & GIFT BUYING SERVICES PTY LTD T/AS NATIONWIDE JEWELLERS (ACN 050 055 591)

Second Respondent: DAVID LOMBE (TRUSTEE)

File Number: PEG 396 of 2017

Judgment of: Judge Vasta

Hearing date: 27 February 2019

Date of Last Submission: 27 February 2019

Delivered at: Perth

Delivered on: 27 February 2019

REPRESENTATION

The Applicant appearing on his own behalf

Counsel for the Respondents: Mr S.D. Majteles

Solicitors for the Respondents: Patrick Ferguson Solicitor

ORDERS

1. That the Applicant pay the costs on an indemnity basis to the First Respondent fixed in the sum of $40,000.

2. That the Applicant pay costs on an indemnity basis to the Second Respondent fixed in the sum of $40,000.

3. That costs pursuant to Orders 1 and 2 above be paid within seventy-five (75) days from the date of these Orders.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT PERTH

PEG 396 of 2017

HASSAN ZAGHLOUL

Applicant

And

JEWELLERY & GIFT BUYING SERVICES PTY LTD T/AS NATIONWIDE JEWELLERS (ACN 050 055 591)

First Respondent

DAVID LOMBE (TRUSTEE)

Second Respondent

REASONS FOR JUDGMENT

(Ex Tempore)

1. On 20 February 2019, I made orders dismissing the applications of the Applicant.  It is trite to say that costs follow the event.  Given the way in which the Applicant has conducted the matter, the First and Second Respondent have asked this Court to order that the Applicant pay their costs on an indemnity basis.  This has arisen when one looks at the way in which the proceedings have evolved.

2. The Applicant sought an annulment of bankruptcy on the grounds that he was not served to start with. That was a matter that was quite irrelevant given that there had been an order for substituted service and the substituted service had been affected. 

3. The second ground was that the Applicant says that he was solvent at the time, and yet the contrasting evidence between what he says now and what he said at the time of the bankruptcy, militated towards me finding that he was not solvent at the time. The Applicant himself said that he wanted, and was grateful for, the protection that the bankruptcy order had given him during that time in which the trustee administered his affairs. 

4. And the third matter was that he said that there was no true debt, seeking to go behind a judgment; a debt that was decreed by the Local or Magistrates Court in New South Wales in circumstances where he, the Applicant, had never lodged an appeal. 

5. To describe the case as a hopeless case, as Counsel for the two Respondents has, is very much an apt description.  But then the Applicant sought to add a number of equitable claims that followed from the facts; an alleged maladministration of the estate and the manner in which the First Respondent had conducted their business.  These were also matters where, if one calmly sat down and looked at what it was that was being sought to be proved, one would come to a very quick decision that there was really a very slim, if not no, chance of success. 

6. The Applicant cannot say that he is unfamiliar with Court processes given the myriad number of applications that have been made in the Federal Court and the Supreme Court over the years.  He cannot claim that it was ignorance or some form of naiveté that has caused him to be in the position in which he now finds himself. 

7. I have wanted to ensure that the process for costs does not drag on any longer and, because of that, I have asked for the Respondents to tell me what the scheduled costs are so that I can make a fixed costs order rather than go through the exercise of taxation and then causing more costs to be expended.  I have been given these figures on a schedule basis. 

8. From start to finish, the First Respondent would seek costs of $29,400.27 and the Second Respondent would seek costs of $28,820.77.  On an indemnity basis the First Respondent would seek costs in the sum of $45,996.62 and the Second Respondent would seek costs in the sum of $45,218.29. 

9. The Applicant has told me that he is impecunious.  He is surviving on a social security payment per week and will not be in a position to make payment of those costs. 

10. He has also quite candidly said that he is considering an appeal which is, of course, his right to do so, and that appeal period will elapse on 20 March 2019.  I will endeavour to have my reasons revised by then and that does depend a lot on what my schedule is.  I will make it a priority.  He has asked for a stay of the costs order until it is that he decides whether he will appeal.

11. I do not feel that a stay of the orders is appropriate but I can order that the costs be paid by a certain time during which there will be a decision by the Applicant as to whether he will appeal or not.  The Applicant quite candidly concedes that costs do follow the event and that he will be liable to pay costs, but he queries the duplication of costs given that the First and Second Respondents were represented by the same solicitor and by the same counsel. 

12. He also queries the fact that Deloittes has charged for the time of the Second Respondent and that those costs are costs that are sought on an indemnity basis.  It seems to me that there is no merit in the argument as to the duplication of costs.  Whilst it may seem as there has been duplication, in fact there has probably been a saving of costs by not having separate representatives by both. 

13. When one considers that the combined costs on the schedule would total just under $60,000 and the total on an indemnity basis is a smidgen over $90,000, it seems to me that the costs charged by the legal representatives have been extremely reasonable considering the enormous amount of work that had to be undertaken to meet the myriad claims in this particular application. 

14. I have taken into account what the authorities have said on the question of indemnity costs and in what circumstances it is appropriate to order cost on an indemnity basis.

15. I am of the view that I ought make a fixed costs order and whilst I will not make it for the full indemnity costs, I am of the view that it is appropriate to make an order that the Applicant pay the costs of the First Respondent fixed in the sum of $40,000 and of the Second Respondent fixed in the sum of $40,000. 

16. I will decline to make any stay order, however, I will order that those costs be paid within 75 days.  That is two and a half months. 

I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date:       13 March 2019