FEDERAL COURT OF AUSTRALIA Chancliff Holdings Pty Ltd v Bell [1999] FCA 1783 COSTS – whether order for costs should be made in circumstances hen successful party received legal assistance under a "pro bono" scheme Federal Court Rules, O 80 Bankruptcy Act 1966 (Cth) c.58, Part VI Federal Court Rules O 80 rr 4, 9, 9(2) CHANCLIFF HOLDINGS PTY LTD v SONJA ALICJA BELL LEE J 17 DECEMBER 1999 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAG 7137 OF 1999 BETWEEN: CHANCLIFF HOLDINGS PTY LTD Applicant AND: SONJA ALICJA BELL Respondent JUDGE: LEE J DATE OF ORDER: 17 DECEMBER 1999 WHERE MADE: PERTH THE COURT ORDERS THAT: Pursuant to O 80 r 9 of the Federal Court Rules the applicant pay the respondent's costs fixed at the sum of $7,000.00, and disbursements. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAG 7137 OF 1999 BETWEEN: CHANCLIFF HOLDINGS PTY LTD Applicant AND: SONJA ALICJA BELL Respondent JUDGE: LEE J DATE: 17 DECEMBER 1999 PLACE: PERTH REASONS 1 On 8 December 1999 orders were made in this matter that the sequestration order made against the estate of the respondent ("Ms Bell") on 19 January 1999 be set aside and that the petition for bankruptcy filed by the applicant ("Chancliff") be dismissed. Counsel for the parties were given leave to file submissions on the appropriate order for the costs of the petition and of the application to review the decision of the Registrar to make a sequestration order. 2 Submissions have been filed and these reasons explain the order to be made on costs after consideration of those submissions. The submissions are directed to the effect of the provisions for the recovery of fees by practitioners under the "pro bono" scheme operating under O 80 of the Federal Court Rules ("the Rules"). 3 The relevant provisions of O 80 are as follows: "Referral to a legal practitioner 4. (1) The Court or a Judge may, if it is in the interests of the administration of justice, refer a litigant to the Registrar for referral to a legal practitioner on the Pro Bono Panel for legal assistance. (2) For subrule (1), the Court or Judge may take into account: (a) the means of the litigant; and (b) the capacity of the litigant to obtain legal assistance outside the scheme; and (c) the nature and complexity of the proceeding; and (d) any other matter that the Court, or Judge, considers appropriate. (3) A referral to the Registrar is effected by the issue of a Referral Certificate in accordance with Form 161 in relation to the litigant. (4) If a Referral Certificate has been issued, the Registrar must attempt to arrange for the legal assistance mentioned in the certificate to be provided to the litigant by a legal practitioner on the Pro Bono Panel. (5) However, the Registrar may refer a litigant to a particular legal practitioner only if the practitioner has agreed to accept the referral. … Professional fees 9. (1) Subject to rule 10, a legal practitioner who provides legal assistance to a litigant under the scheme must not seek or recover any professional fees or disbursements for the legal assistance. (2) However, if an order for costs is made in favour of a litigant who is assisted under the scheme, the legal practitioner who has provided the legal assistance is entitled to recover the amount of fees and disbursements that another party is required to pay under the order." 4 On 17 March 1999 an order was made pursuant to O 80 r 4 that Ms Bell be referred to a legal practitioner to obtain legal advice and assistance in respect of orders made by the Court on 12 March 1999. Those orders required Ms Bell to file affidavits and an outline of submissions. On 24 June 1999, a further order was made under O 80 r 4 that Ms Bell be referred to a legal practitioner to obtain legal advice and assistance with respect to the preparation and presentation of a case at the hearing. Pursuant to those referrals, Ms Bell received assistance from a solicitor and from counsel. 5 Counsel for Chancliff, whilst acknowledging that any order for costs was in the Court's discretion, submitted that no order for costs should be made. The nub of Chancliff's argument was that if the Court had not made a direction that Ms Bell receive legal advice and be represented by a legal practitioner under the "pro bono" scheme under O 80, Chancliff would not have been exposed to a costs order in pursuing its petition for a sequestration order against Ms Bell. Put another way, Chancliff contends that Ms Bell carried no financial risk in the litigation and equity requires that Chancliff should not be required to pay the costs of litigation in which it failed to obtain the orders it sought. 6 Counsel for Ms Bell submitted that a costs order would have been made in her favour to indemnify her for the costs incurred if she had engaged a legal practitioner to act on her behalf and, therefore, an appropriate order should be made in this matter under O 80 r 9. 7 If litigation is commenced against a party who does not have sufficient means to retain a legal practitioner that circumstance is not a valuable right held by the party prosecuting the litigation. If the respondent in such litigation obtains representation under a legal aid scheme, or assistance from a legal practitioner under a "pro bono" scheme, the party instituting litigation may, thereafter, incur a liability to pay costs the practitioner may be entitled to recover pursuant to the provisions of the legal aid, or "pro bono", scheme. 8 That the respondent may have no liability, or a limited liability, to pay the costs of that practitioner, unless the respondent succeeds in obtaining an order for costs against the applicant, will not determine whether an order for costs should be made in favour of the assisted respondent if the applicant fails in the litigation it has brought against that party. The fact that such an order may be made is a risk an applicant must take into account in continuing its litigation. 9 Counsel for Chancliff further submitted that it was relevant to the consideration of the question whether an order for costs should be made against Chancliff, that Chancliff had not been heard on the question whether Ms Bell should be referred to a legal practitioner under O 80. 10 Chancliff could not, and did not, submit that it was entitled to be heard on whether Ms Bell should have been referred to a practitioner willing to provided services under the "pro bono" scheme. It appeared to be submitting that because the provision of legal advice and representation for Ms Bell was beyond Chancliff's control after Chancliff commenced the litigation against her such a circumstance was a matter to be taken into account with the fact that Ms Bell would not bear the impact of an order for costs if Chancliff had obtained such an order against her. In other words Chancliff was at risk for costs but Ms Bell was not and that was an important consideration in determining what order, if any, was to be made in respect of costs. 11 The submission, in part, depends on the assumption if an order for costs had been made against Ms Bell it would also have been ordered that her estate be sequestrated and, that she would have incurred no "personal" liability for costs. Without assessing the potential of the estate in bankruptcy if a sequestration order were made it does not follow that Ms Bell would have had no "personal" liability for those costs. It would be her property, or entitlement to property, (including future acquired property) that would be sequestrated and vested in a trustee to be made available to creditors. A bankrupt has obligations to the trustee in the bankruptcy, some of which may transcend discharge from bankruptcy, and recovers so much of his or her property, if any, that remains after orderly payment of creditors has been effected in full, or in part. In some cases the extra burden of an order for costs may be of little moment to a bankrupt in a hopelessly insolvent estate, but in other cases it may be. 12 In the present case some regard may be given to fact that Chancliff may not have recovered the whole of any costs awarded against Ms Bell if Chancliff had succeeded in obtaining the orders it sought against her, but it is not a supervening consideration. 13 In the ordinary course costs will follow the event and Chancliff, as the unsuccessful party, would have been required to pay the costs incurred by Ms Bell. In this case the costs incurred by Ms Bell, in effect, are limited to the amount set by the court under O 80 r 9(2), such sum to be recovered by the practitioners to whom Ms Bell was referred, in lieu of the fees and costs they may have rendered to Ms Bell had they not been prevented from doing so under the "pro bono" scheme. 14 Order 80 serves the public interest by encouraging practitioners to render public service by providing advice and representation free of charge to indigent parties engaged in litigation in the court. In part, the services are provided by practitioners in performance of a duty to assist the administration of law that arises out of rights and privileges practitioners obtain upon being admitted to practice, or upon being registered as entitled to practice, by a superior court. 15 Order 80 has been included in the Rules in response to a marked increase in the number of litigants in person who appear in this Court, a number which continues to expand. If practitioners withdrew from participation in the "pro bono" scheme which operates under O 80 there would be a real risk that efficient disposal of the work of the Court would suffer. Furthermore, in endeavouring to fairly administer the law in circumstances where a party is unable to properly present its case, the impartiality of the Court may appear to be compromised. 16 Both consequences have a corrosive effect on the administration of justice and are antithetical to the public interest. The object of O 80 r 9 is to make it clear to practitioners that if, in ordinary circumstances, it would be appropriate for a party to be ordered to pay the costs of the party for whom the practitioner appears an order will be made that will provide some remuneration to the practitioner notwithstanding that the practitioner is not entitled to recover fees from the party the practitioner represents. It is to be noted that a practitioner providing "pro bono" services undertakes similar duties and responsibilities to the party represented, and to the court, as a practitioner instructed by a client who retains the services of a practitioner for reward. 17 It does not follow, however, that the amount of fees the court orders a party to pay, and to be recoverable by the practitioner under O 80 r 9, will be the full fees ordinarily rendered by the practitioner. The amount will be a sum set by the court after having regard to various matters, being an amount that appears to be a fair sum in all the circumstances. 18 In the present matter Chancliff did not succeed in its litigation against Ms Bell and I am satisfied that in all the circumstances it should pay the "contingent" costs incurred by Ms Bell as a result of those proceedings. 19 The hearing of the review occupied two full days and involved an important issue in bankruptcy proceedings. I propose to fix the amount of fees to be paid under O 80 r 9 at $7,000.00 and to order that Chancliff pay that sum, and disbursements incurred by Ms Bell or by practitioners on her behalf. The distribution of that sum between the legal practitioners to whom Ms Bell was referred is to be determined by the taxing officer, if necessary. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons herein of the Honourable Justice Lee. Associate: Dated: 17 December 1999 Counsel for the Applicant: JC Vaughan Solicitor for the Applicant: Deacons Graham James Counsel for the Respondent: PR Eaton Written submissions filed: 13, 15 December 1999 Date of Judgment: 17 December 1999