FEDERAL COURT OF AUSTRALIA Deputy Commissioner of Taxation v Wily [1999] FCA 881 BANKRUPTCY – costs order Cobbs Hill (Tasmania) Meat Supplies Pty Ltd (In Liquidation) & Anor v El Moustafa & Anor (1998) 83 FCR 403, cited DEPUTY COMISSION OF TAXATION v ANDREW HUGH JENNER WILY and FREDERICK ANTONIUS MARE NG 7017 of 1998 DEPUTY COMMISSION OF TAXATION v ANDREW HUGH JENNER WILY and JACQUELINE ANNE STEADMAN NG 7018 of 1998 O'CONNOR J SYDNEY 30 JUNE 1999 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 7017 of 1998 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: ANDREW HUGH JENNER WILY First Respondent FREDERICK ANTONIUS MARE Second Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 7018 of 1998 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: ANDREW HUGH JENNER WILY First Respondent JACQUELINE ANNE STEADMAN Second Respondent JUDGE: O'CONNOR J DATE: 30 JUNE 1999 PLACE: SYDNEY THE COURT ORDERS THAT: 1. The second respondent in proceedings NG 7017 of 1998, Frederick Antonius Mare, pay the costs of the applicant in those proceedings. 2. The second respondent in proceedings NG 7018 of 1998, Jacqueline Anne Steadman, pay the costs of the applicant in those proceedings. 3. In relation to the applicant and the first respondent in proceedings NG 7017 and NG 7018 of 1998, that there be no order as to costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 7017 of 1998 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: ANDREW HUGH JENNER WILY First Respondent FREDERICK ANTONIUS MARE Second Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 7018 of 1998 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: ANDREW HUGH JENNER WILY First Respondent JACQUELINE ANNE STEADMAN Second Respondent JUDGE: O'CONNOR J DATE: 30 JUNE 1999 PLACE: SYDNEY REASONS FOR JUDGMENT ON COSTS 1 In this matter the applicant has been successful against the other parties. 2 Judgment was delivered on 26 March 1999 and on that day the parties were invited to make submissions in relation to costs. The applicant submitted the following as alternatives: 1. That each of the respondents should be required to pay the applicant's costs and that as respondents, whatever the burden of those costs are a matter for others to make submissions; 2. That the applicant would have costs against the second respondents in each proceedings (ie Mr Federick Antonius Mare, and Ms Jacqueline Steadman) and that if there is any controversy on costs as against the trustee (ie Mr Andrew Jenner Wily), that as between the applicant and the trustee, the applicant and the trustee should bear their own costs. 3. That the applicant be given relief in the nature of a Sanderson or Bullock order in respect of any costs that are ordered to be paid in respect of the trustee's costs, should the trustee be successful in persuading the Court there should be an order for costs against the applicants. 3 The applicant referred to the unreported judgment of Marshall J in Cobbs Hill (Tasmania) Meat Supplies Pty Ltd (In Liquidation) & Anor v El Moustafa & Anor (1998) 83 FCR 403 and argued that that case was analogous to the situation before this Court because the deficiencies in the trustee's report strongly supported the applicant's decision to bring the proceedings against the trustee and, so far as the trustee was concerned, to actively pursue the trustee to highlight those deficiencies. As a result, the costs have been triggered by the misconceived role the trustee as identified in submissions. 4 Counsel for the trustee made the following submissions in reply: 1. That the trustee should have a cost order against the applicant, limited to those occasions on which he appeared; and 2. Alternatively that there be no order as to costs as between the applicant and the trustee. 5 The trustee submitted that the applicant had failed to establish the inadequacy of the controlling trustee's report and the findings made in my judgment in this matter highlighted a funding issue which was that until Mr Wily was in the witness box the issue of funding did not become apparent. The trustee submitted that the role of the trustee in the case before the Court was dramatically different to that of the trustee in Moustafa. 6 Counsel for the second respondents conceded that his clients should pay the costs of the main proceedings but submitted that no order should be made for them to pay the costs of the trustee. 7 The trustee in this case had conceded that his approach to the composition had been pragmatic, influenced primarily by the absence of funding available, at that stage, from any of the creditors. He fairly conceded that the commitment to funding an investigation in bankruptcy by the applicant made at the hearing, was crucial to the issues to be determined in these proceedings. Whatever the deficiencies in the trustee's report, the fundamental reason for proceeding as he did, at that stage, was the funding situation. The applicant had an opportunity to offer this funding at an earlier stage but did not do so. In these circumstances, I do not consider that an order for costs is warranted against the first respondent even though the decision of the Court was in favour of the applicant. 8 Having considered the submissions of the parties I make the following orders: 1. That the second respondent in proceedings NG 7017 of 1998, Frederick Antonius Mare, pay the costs of the applicant in those proceedings. 2. That the second respondent in proceedings NG 7018 of 1998, Jacqueline Anne Steadman, pay the costs of the applicant in those proceedings. 3. In relation to the applicant and the first respondent in proceedings NG 7017 and NG 7018 of 1998, that there be no order as to costs. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Connor. Associate: Dated: 30 June 1999 Counsel for the Applicant: D McGovern Solicitor for the Applicant: Australian Government Solicitor Counsel for the First Respondent: B Skinner Solicitor for the First Respondent: Bowles & Associates Counsel for the Second Respondents: J K Chippindall Solicitor for the Second Respondents: M D Nikolaidis & Co Date of Hearing: 14-16 December 1998, 21-22 January 1999, 1 and 10 February 1999 Date of Judgment: 30 June 1999