Corex Plastics (Aust) Pty Ltd v Menzel [2000] FCA 954

FEDERAL COURT OF AUSTRALIA

Corex Plastics (Aust) Pty Ltd v Menzel [2000] FCA 954

Bankruptcy Act 1966 (Cth) Re Minister for Immigration and Ethnic Affairs and Another; Ex parte Lai Qin (1997) 143 ALR 1 at 3 COREX PLASTICS (AUST) PTY LTD v GREGORY JAMES MENZEL & ANOR NO. V 7486 of 1999 HEEREY J 6 JULY 2000 MELBOURNE (HEARD IN ADELAIDE)

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY V 7486 of 1999

BETWEEN: COREX PLASTICS (AUST) PTY LTD

Applicant

AND: GREGORY JAMES MENZEL & ANOR

Respondent

JUDGE: HEEREY

DATE OF ORDER: 6 JULY 2000

WHERE MADE: MELBOURNE (HEARD IN ADELAIDE)

THE COURT ORDERS THAT: 1. The application is dismissed. 2. The applicant pay the costs of the second respondent including reserved costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY V 7486 OF 1999

BETWEEN: COREX PLASTICS (AUST) PTY LTD

Applicant

AND: GREGORY JAMES MENZEL & ANOR

Respondent

JUDGE: HEEREY

DATE: 6 JULY 2000

PLACE: MELBOURNE (HEARD IN ADELAIDE)

REASONS FOR JUDGMENT 1 The applicant has brought an application to set aside a composition made under Pt X of the Bankruptcy Act 1966 (Cth) (the Act). I was told that the matter has been resolved as between the applicant and the first respondent by a separate composition which will involve the contribution of funds not otherwise available in the bankruptcy. Initially, counsel for the applicant asked that the matter be adjourned until a date in February next year, so that this new composition could be implemented. However, I agree with counsel for the second respondent, the trustee under the existing composition, that it would be unreasonable to delay the distribution of funds to the existing creditors. 2 Those funds are currently in trust and in the ordinary course of events would be distributed within about a month or so. I think this result should follow even though the dividend to creditors will be very small, less than one cent in the dollar. As a matter of principle, a private arrangement between the applicant and the first respondent is not a valid ground for delaying the ordinary administration of a composition which is prima facie valid unless and until set aside. 3 There is then the question of costs. In my opinion, the applicant should pay the second respondent's costs. I do not accept the applicant's submission that the trustee is not a "real" litigant. It was essential that he be joined, since he was a trustee of the composition sought to be set aside and moreover some substantial allegations of wrongful conduct were made against him. In addition, he had to incur expense in making discovery and taking other interlocutory steps. 4 Now, it is true that there has been no finding on the merits of the claim, but, as McHugh J pointed out in Re Minister for Immigration and Ethnic Affairs and Another; Ex parte Lai Qin (1997) 143 ALR 1 at 3: "In an appropriate case, a court will make an order for costs even where there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra curial action they had avoided." 5 So as between the applicant and the first respondent, the applicant chose to bring this application and make allegations against the trustee. If, for reasons which seemed good to itself, the applicant no longer wishes to proceed with the matter, leaving the issues unresolved, I do not see that it is reasonable that the costs should fall on the trustee, thereby diminishing the meagre returns which will be available to creditors. I will order therefore that the application be dismissed and that the applicant pay the costs of the second respondent, including reserved costs. I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.