CATCHW fo) JUDGMENT No. olf... PRACTICE - PROCEDURE impercunious appellant Security for costs - appellant in receipt of legal aid ~ Jurisdiction of single judge to order security for costs. Federal Court Rules, 0.52, r.20 Legal Aid Act 1978 (Q1d) PRACTICE - PROCEDURE injunction restraining transaction in pursuance of judgment appealed from. FILLIZIO Di FELICE (also known as PHILIP DI FELICE) v. EVERETT THOMSON BENT and VINCENT SAMUEL HUTTLEY & MAUREEN MAVIS HUTTLEY No. Qld G63 of 1982 FITZGERALD J. 14 MAY 1982 BRISBANE f (782, 20090000000 IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) No. G 63 of 1982 GENERAL DIVISION ) FILLIZIO DI FELICE (also known as PHILIP DI FELICE Appellant EVERETT THOMSON BENT First Respondent VINCENT SAMUEL HUTTLEY and MAUREEN MAVIS HUTTLEY Second Respondent ORDER JUDGE MAKING ORDER: FITZGERALD J. DATE OF ORDER: 14 MAY 1982 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application of the second respondents that the appellant be ordered to give security for costs is dismissed. 2. Upon the usual undertaking as to damages of the appellant by his counsel, and upon condition that the appellant prosecute the appeal diligently, and upon condition that the appellant pay into court within 14 days the sum of $3,000 to be available to satisfy any order for costs in favour of the second respondents in respect of these proceedings either at first instance or on appeal: (a) the first respondent and the second respondents are restrained by themselves their servants 2. and their agents or otherwise howsoever until the conclusion of the Brisbane sittings of the Full Court in August 1982 or the conclusion of the hearing of the appeal (whichever is earlier) or until further earlier order from entering into or carrying into effect any option to purchase or ageeement for the sale of certain leasehold lands more particularly described as perpetual lease selection 2591, portion 103 District of Cairns, Parish of Tinaroo, County of Nares, area 252.8805 hectares and perpetual lease selection 2592, portions 98V, 99V and 101V, Dastrict of Cairns, Parish of Tinaroo, County of Nares, area 256.8707 hectares, and other property described in the sub-lease in these proceedings. (b) The order made on 28 April 1982 that the bankrupt pay the costs of the first respondent and the second respondents of and incidental to the application before me dismissed on 7 April 1982, including reserved costs, is stayed until the conclusion of the Brisbane sittings of the Full Court in August 1982 or the conclusion of the hearing of the appeal (whichever is earlier) or until further earlier order. 3. The costs of these applications are reserved for the determination of the court which disposes of the appeal. IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) No. G 63 of 1982 GENERAL DIVISION ) FILLIZIO DI FELICE (also known as PHILIP DI FELICE Appellant EVERETT THOMSON BENT First Respondent VINCENT SAMUEL HUTTLEY and MAUREEN _MAVIS HUTTLEY Second Respondents FITZGERALD J. 14 MAY 1982 EX _TEMPORE REASONS FOR JUDGMENT On 15 May 1979 Fillizio Di Felice (also known as Philip Di Felice) executed a Deed of Assignment pursuant to Part X of the Bankruptcy Act 1966 (Cwlth) and Everett Thomson Bent was appointed controlling trustee. However, Mr Di Felice (the bankrupt) remains registered as lessee under the Land Act 1962-1978 (Queensland) of two perpetual lease selections in the Cairns District, numbers 2591 and 2592. A registered sub-lease of the selections to Vincent Samuel Huttley and Maureen Mavis Huttley (Mr and Mrs Huttley) expired in late 1981. The trustee accepts that Mr and Mrs Huttley have exercised an option in the sub-lease to purchase the selections, together with improvements and certain equipment (the property), and proposes to conclude a sale of the property to them. An application by the bankrupt for orders to -2- prevent the trustee from proceeding was dismissed by me on 7 April 1982. On 28 April 1982 I ordered that the bankrupt pay the taxed costs of Mr and Mrs Huttley and the trustee in respect of the proceedings before me. The bankrupt has appealed from my substantive determination to the Full Federal Court of Australia. In substance, he perseveres in his assertion that there is no valid and enforceable agreement entitling and obliging the trustee to sell the property to Mr and Mrs Huttley. The bankrupt has been given legal aid to prosecute the appeal. There are now before me two applications. Mr and Mrs Huttley seek an order that the bankrupt, or alternatively the trustee, provide security for their costs of and incidental to the appeal by the bankrupt. The bankrupt has applied for an order restraining the trustee and Mr and Mrs Huttley from entering 1nto an agreement for sale required by the option or from performing such agreement, and for a further order that my order that the bankrupt pay the costs of and incidental to the proceedings before me be stayed pending final determination of the appeal. The bankrupt's estate consists of the property the subject of the dispute, a few dollars more than is required to meet the trustee's costs in relation to the proceedings before me, and some equipment, most of which according to -3- the solicitors for the bankrupt in a letter which they wrote to the solicitors for the trustee on 25 March 1982 is "broken down or not in working order". The amount payable by Mr and Mrs Huttley for the property 1s approximately $300,000, approximately $200,000 of which is to be paid by instalments within a period of 10 years from the transfer of the property to them. The bankrupt alleges that the property is worth more. The maximum debts in the estate apart from the costs of litigation are approximately $400,000 but may be no more than $200,000 depending on whether or not, and if so to what extent, the trustee is able to have an income tax assessment of nearly $200,000 reduced. It seems to me to be appropriate, in the circumstances, to proceed on the footing that, on the one hand, not only the bankrupt himself but his creditors may be significantly advantaged 1f the appeal 1s prosecuted successfully but that, on the other hand, the appeal may well be unsuccessful and the amount available in the estate may be substantially less than is required for: (1) the trustee's costs of the appeal proceedings, (2) the present debts required to be paid out of the estate, (3) costs of Mr and Mrs Huttley in relation to the appeal proceedings, -4- (4) any amount payable to them pursuant to the bankrupt's undertaking as to damages proffered by his counsel in respect of the injunction sought. I shall deal first with Mc and Mrs Huttley's application for security for costs. As I have said, the bankrupt has been granted legal aid to prosecute the appeal. My attention was drawn to s.35(1)(a) of the Legal Aid Act 1978 (Queensland), from which it appears that if the appeal is unsuccessful the Legal Aid Commission may, but need not, pay Mr and Mrs Huttley any costs ordered to be paid to them by the bankrupt. [I have already mentioned that there is a real possibility that if the appeal is unsuccessful there will be insufficient in the bankrupt's estate to pay Mr and Mrs Huttley any costs of the appeal ordered to be paid to them by the bankrupt, or indeed the costs below which the bankrupt has already been ordered to pay. Added to this is the as yet unquantified risk that they will have a claim in respect of the bankrupt's undertaking as to damages if an injunction is granted. It seems to me there is a very real potential for injustice involved in all this. By law, the bankrupt's affairs have been placed in the hands of his controlling trustee. The trustee is prepared, and indeed wishes, to conclude the transaction with Mr and Mrs Huttley. —_ -5- I have already held that he should do so although I acknowledge that there is a real possibility that my order will be reversed on appeal. It is true that the Bankruptcy Act does let a bankrupt question decisions by his trustee. However, I am unable to see that he should be able to do so, particularly perhaps beyond the hearzang at first instance, in circumstances in which he may not be able to make good his responsibility to pay the costs of another party if he is unsuccessful. In R. and T. Thew Ltd v. Reeves 1981 3 W.L.R. 190, reference was made by the learned Master of the Rolls to the injustice which may result where legal aid is given to one side but the other side is left entirely unassisted and may have to bear his own costs, with no practical recourse, even if successful. It is true that Order 52 rule 20 of the Rules of this Court envisage that an order for security for costs of an appeal should be the exception rather than the rule. It has also, it seems, been held that the court will not require security for costs to be given by a trustee in bankruptcy where the estate is in insolvent circumstances: see McDonald Henry and Meek's Australian Bankruptcy Law and Practice, 5th edition, paragraph 796. However, here the appellant is the bankrupty, not his trustee, and the trustee opposes the appeal. -6- The bankrupt's solicitor has filed an affidavit in which he states that he was informed by the bankrupt and verily believes that the bankrupt 1s not ina position to provide security for the costs of the appeal and that to order him to do so at ali or in any substantial manner would render a hardship upon him as it would deny him an opportunity fully to pursue his right to appeal. However, I am not convinced that that will necessarily be so, and I note that the bankrupt was apparently able to finance the proceedings before me, which took four days, and indeed, as I recollect, there was evidence before me that he had paid money to his solicitors prior to those proceedings to cover costs, notwithstanding his bankruptcy. He gave some evidence I think, although this is not critical to my decision, that he was earning income. Conscious as I am of the possible effect of my order upon the rights of the bankrupt, I must also take into account the position of Mr and Mrs Huttley who already have an order against the bankrupt for an amount of costs which will doubtless be substantial, which may not be satisfied 1£ the bankrupt's appeal 1s successful. I do not think the bankrupt's impecuniosity ought be permitted to overtake all other factors. If I were able to do so, I would order that the bankrupt give security for costs of the appeal. The solicitor for Mr and Mrs Huttley swore that, in his opinion, the appeal will take approximately three days —~ -7- and the costs of such appeal will be approximately $4500. The solicitor for the bankrupt swore that, in his opinion, the appeal should not take any longer than two days and that the taxed costs of Mr and Mrs Huttley on a party and party basis should not exceed $2500. I think that the appeal could easily take three days if all the grounds raised 1n the notice of appeal are fully argued. I note, for example, that the grounds are not confined to questions of law but extend to matters of fact and I recollect that the facts were quite @ifficult to unravel. No precision is possible and the amount of security whach I would direct were I able to do so is $3000. I would order that the security be given within 14 days. That would give the bankrupt an adequate opportunity to fand the security as well as ensuring that the appeal papers may be prepared next Thursday as is anticipated and that a date for hearing of the appeal can be fixed. I would order that the security be given by payment into court of the sum in question. However, the significance of these matters is in the event concerned with the bankrupt's applications, at least at this point. I have no power to order security; that is for the Court in its appellate jurisdiction: see Federal Court Rules, Order 52 rule 20, and Order 52 rule 1 where "court" as referred to in Order 52 rule 20 is defined. -8-- It remains to deal with the bankrupt's applications for an injunction and that the order for costs below should be stayed. I have no doubt that, if I can possibly do so, I should seek to ensure that the bankrupt's appeal, if successful, is not nugatory. For the bankrupt it was contended that, even if the trustee and Mr and Mrs Huttley do no more than execute an agreement for sale and take ancillary steps under it, such as seeking Ministerial approval under the Land Act, although not proceeding to performance, nonetheless the bankrupt may be irreparably disadvantaged. Although it is by no means clear to me that this submission is correct, it was not gaznsaid by counsel for the trustee or counsel for Mr and Mrs Huttley. Accordingly, I proceed on the assumption that it is necessary for the preservation of the bankrupt's position that any further step be restrained pending the determination of the appeal. An affidavit filed on behalf of the trustee by his solicitor indicates that the smaller creditors of the bankrupt's estate are now strongly pressing for the administration of the estate to proceed as it is causing them financial hardship not to have their claims satisfied notwithstanding the time which has elapsed. Further, the affidavit points out that Mr and Mrs Huttley remain in possession of the property -9- which is producing nothing for the bankrupt's estate at this point. However, I attach little weight to these matters. If the appeal succeeds, which must be acknowledged as a real possibility, then even though delayed a little longer, the bankrupt's present creditors may be much better off than as at the present, with the bankrupt's application dismissed. I do not know whether or not they will be, but the extent of the potential benefit to them is such that, in my opinion, it 1s in their interests that the appeal should go on. The bankrupt's application for an injunction was brought on on extremely short notice and those representing Mr and Mrs Huttley were able to argue the matter fully. I was asked by counsel for Mr and Mrs Huttley to provide, if I was minded to grant the injunction sought, that they might come back to argue that the order should be discharged if so advised once their position had been properly considered; for example, if it appeared that the injunction might be productive of considerable damage to them, say, by causing them to lose a sale of the property. Mr Cooper, for the bankrupt, did not, as I understood the position, object to this course, and I propose to grant an injunction on that basis. Consistently with that course, I do not propose, at this stage, to impose a condition requiring the bankrupt to support his undertaking as to damages by a bond -10- or other security. However, it must be clearly understood that it is open to Mr and Mrs Huttley to make application either to set aside or vary the injunction, or to seek the imposition of additional or other conditions, and that 1f any such application is made I will treat the proceedings on that occasion as a fresh application by the bankrupt for an injunction; at will remain for the bankrupt to establish why an injunction ought to be granted. In other words, although I do not suggest that such a course was deliberately adopted, and on the contrary feel confident that that was not so, I am not prepared to let the bankrupt reverse the onus by bringing an application for an injunction on such short notice that the other parties were unable to prepare properly and so are, 1n point of fact, left later to apply for a discharge or variation of the order if so advised. Further, I am not prepared to grant the injunction unconditionally. Worthless though it may be, the bankrupt must give an undertaking as to damages. It is a possibility, on the material before me, that there will be something left in the estate for the bankrupt even if he fails and, in my opinion, it is only just that his potential interest 1n the estate should stand at risk to support his claim for an injunction. -ll- The bankrupt must prosecute the appeal with the utmost diligence. I was informed that the appeal papers have to be settled by the Registrar on Thursday next week, 20 May 1982. There 1s no doubt in my mind that he will be able to obtain a hearing of the appeal at the Brisbane Sittings of the Full Court commencing on 2 August 1982, if not before. I do not think that I should grant any injunction at this point which will go beyond the conclusion of the hearing of the appeal. The application for an injunction can be renewed to the Full Court which hears the appeal. It will be able to assess more accurately how long judgment on the appeal is likely to take and what the prospects are; the bankrupt and the other parties will all be able to point to matters affecting the balance of convenience at that point. Further, in my opinion, the bankrupt ought as a condition of the injunction pay into court the sum of $3,000, to abide the result of the appeal and to be available, if the appeal fails, to satisfy the claims for costs at first instance and on appeal of Mr and Mrs Huttley. It is not in my opinion a satisfactory solution to make an order for the Huttleys' costs which relates them to the estate; that may reduce the amount available to creditors if the appeal fails. -12- The bankrupt's other application for a stay of the order that he pay the costs of the proceedings before me was only briefly mentioned in argument. The response of counsel for Mr and Mrs Huttley was that an undertaking by their solicitors that the costs would be repaid in the event of the bankrupt succeeding on the appeal and it being ordered on the appeal that they should pay the costs of the proceedings before me would be satisfactory. However, in all the circumstances, and particularly taking into account my expectation that the appeal will be able to be disposed of expeditiously and the proposed payment into Court, I think it is preferable to stay the order for costs which I made on 28 April 1982. It was not suggested that I do not have power to do so. The orders of the court are that on the usual undertaking as to damages by the bankrupt through his counsel and on conditions that the bankrupt prosecute the appeal diligently and pay into court within 14 days the sum of $3,000, to be available to satisfy any order for costs in favour of Mr and Mrs Huttley in respect of the proceedings at first instance or on appeal, an injunction is granted to restrain the trustee and Mr and Mrs Huttley by themselves, their servants or agents or otherwise howsoever until the conclusion of the Brisbane sittings of the Full Federal Court in August 1982, or the conclusion of the hearing of the appeal, whichever is the earlier, or until further order, -13- from entering into or carrying into effect any option to purchase or agreement for the sale of certain leasehold land more particularly described as perpetual lease selection 2591, portion 103, District of Cairns, Parish of Tinaroo, County of Nares, area 252.8805 hectares and perpetual lease selection 2592, portions 98V, 99V and 10lvV, District ef Cairns, Parish of Tinaroo, County of Nares, area 256.7807 hectares, and other property described in the sub-lease in these proceedings, and that the order made on 28 April 1982 that the bankrupt pay the costs of the trustee and Mr and Mrs Huttley, of and incidental to the application before me dismissed on 7 April 1982, including reserved costs, be stayed until 30 June 1982 or the conclusion of the hearing of the appeal or further earlier order. These applications are incidental to the hearing of the appeal. In the circumstances, it seems to me to be appropriate to reserve the costs of these proceedings for the determination of the court which disposes of the appeal and I so order. | certify that this and the 12 preceding pages are a true copy of the reasons for Judgment herein of the Court 19. S-9X sociate Bated