Brott v Grey [2000] FCA 1836

FEDERAL COURT OF AUSTRALIA

Brott v Grey [2000] FCA 1836 PRACTICE AND PROCEDURE - Costs - should the costs follow the event - whether there are any special circumstances to justify another order as to costs. Cummings v Lewis (1993) 41 FCR 559 Foll Re Williamson; Ex parte Wearne (1980) 43 FLR 305 Cited Re Tripodi Ex parte Col Johnson Pty Ltd (Unreported, 22 January 1987, Burchett J (W219 of 1984) para 61) Appr Scobie v Deputy Commissioner of Taxation (1995) 95 ATC 4525 Cited ISSAC ALEXANDER BROTT v MICHAEL JOHN GREY AND PAUL DESMOND SWEENEY QG7286 OF 1998 COOPER J BRISBANE 14 DECEMBER 2000

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QG7286 OF 1998

BETWEEN: ISSAC ALEXANDER BROTT

APPLICANT

AND: MICHAEL JOHN GREY

FIRST RESPONDENT

PAUL DESMOND SWEENEY

SECOND RESPONDENT

JUDGE: COOPER J

DATE OF ORDER: 14 DECEMBER 2000

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. The order as to costs made on 29 November 2000 take effect forthwith. 2. The applicant pay the respondents' costs of and incidental to the further issue of costs and of the appearance today. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QG7286 OF 1998

BETWEEN: ISSAC ALEXANDER BROTT

APPLICANT

AND: MICHAEL JOHN GREY

FIRST RESPONDENT

PAUL DESMOND SWEENEY

SECOND RESPONDENT

JUDGE: COOPER J

DATE: 14 DECEMBER 2000

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 On 29 November 2000 the applicant's application to set aside a deed of arrangement dated 14 May 1992 was dismissed. At the request of the applicant I stayed the costs order made against the applicant to enable him to make submissions as to why the order should not be made, and, what orders as to costs should be made in the circumstances. 2 The applicant submits that he succeeded on the principal substantive question, which was whether the deed of arrangement was entered into in accordance with Part X of the Bankruptcy Act 1966 (Cth). His application was dismissed for discretionary considerations. In those circumstances, he submits that he should recover his costs from the debtor or at worst there ought to be no order as to costs. He further submits that the trustee under the deed was not a party to the application. Rather, he submits, the trustee proceeded to involve himself in the application when he should have left the matter to the debtor and merely abided the order of the Court. 3 Finally, the applicant submits that the reserved costs should be considered on their merits. He submits that the reserved costs of the adjournments on 2 October 1998 and 30 November 1998, and of the attendances relating to the debtor's defaults, should be ordered against the debtor in favour of the applicant. 4 In Cummings v Lewis (1993) 41 FCR 559, as a member of a Full Court of this Court, I set out the nature of the discretion of a judge of this Court to award costs. I said (at 602 - 603) : "The nature of the discretion vested in a trial judge as to the award of costs and the principles which guide the exercise of the discretion are set out by Toohey J in Hughes v Western Australian Cricket Association (Inc) at 48,136: 'Subsection 43(2) of the Federal Court of Australia Act 1976 (Cth) vests the award of costs "in the discretion of the Court of Judge". The Federal Court Rules 1979 (Cth) do not purport to qualify that discretion. The only rule to which reference is necessary is O 62, r 15 whereby, when costs are reserved, those costs follow the event "unless the Court or a Judge otherwise orders". The discretion must of course be exercised judicially. There are decisions, both of Australian and English courts, that throw light on the way in which the discretion is to be exercised. I shall not refer to those decisions in any detail; I shall simply set out in a summary way what I understand to be their effect. 1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v Godfrey [1920] 2 KB 47. 2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v Farquhar [1893] 1 QB 564. 3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, 'issue' does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v Lombardi (1975) 13 SASR 4 at 12.' This statement of principle was approved by the Full Court in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 17 FCR 211 at 222. It is within the discretion of a trial judge to award only a proportion of a successfully party's costs if the conduct of that party in the trial was such as to unreasonably prolong the proceedings (Latoudis v Casey (supra) at 544, 565; Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at 1214, 1217; [1993] 1 All ER 232 at 237, 240)." 5 This statement was agreed in by the other members of the bench hearing the appeal: at 568. 6 In the present case the successful litigants are the debtor and the trustee who were both made respondents to the application by the applicant, notwithstanding the erroneous contention of the applicant that the trustee unnecessarily involved himself in the application when he was not a party to it. 7 The question is whether there are special circumstances justifying some order other than costs follow the event. There is nothing in the conduct of the debtor or the trustee which would justify either of them having to pay the applicant's costs of the application when he has failed: Re Williamson; Ex parte Wearne (1980) 43 FLR 305 at 315; Re Tripodi Ex parte Col Johnson Pty Ltd (Unreported, 22 January 1987, Burchett J (W219 of 1984) para 61). 8 The trustee was a necessary party who was joined by the applicant as a respondent. The other creditors who have a right to prove for a dividend under the deed should not have the worth of that dividend diminished by the trustee having to look to those funds to cover his costs and expenses. The justice of the situation requires that the unsuccessful applicant pay the trustee his costs to be taxed if not agreed: Re Tripodi para 61. 9 Although the applicant secured a finding that Howick Investments Pty Ltd was not a creditor entitled to vote a debt to the value of $505,069.86 at the creditor's meeting on 12 May 1992, he failed to secure other findings which he sought in order to establish that the deed was not entered into in accordance with Part X of the Act. Having regard to the time which had passed since the exemption of the deed by the debtor, there was always a live issue of the existence of discretionary grounds for which the application would be refused. The discretionary grounds in the present case which led to a refusal are based upon the conduct of the applicant in failing to initiate and prosecute the application in a timely way. It is the failure of the applicant on the other bases he argued, and, his own conduct which gave rise to the discretionary ground, which distinguishes this case from Scobie v Deputy Commissioner of Taxation (1995) 95 ATC 4525. 10 In my view the fact that the debtor lost on the issue of the entitlement of Howick Investments Pty Ltd to vote at the meeting of creditors is not, of itself, a sufficient reason to deny the debtor his costs. It is not a matter that extended or protracted the proceedings. It was a matter which was capable of being dealt with in short compass. The length and course of the hearing was fashioned by the cross-examination of the debtor by counsel for the applicant. 11 There are, in my view, no special reasons why the debtor should be denied the costs of litigation in which he was successful. 12 I turn to the question of reserved costs. Consent orders were made on 31 July 1998, 2 October 1998 and 2 December 1998. None of these orders reserved the question of costs. On 30 November 1998 the directions hearing was adjourned to 2 December 1998 with any question of costs to be dealt with on 2 December 1998. The consent order made on that date made no provision for costs. Orders made on 26 February 1999, 5 November 1999 and 21 February 2000 included orders that the costs of each appearance were to be costs in the cause or costs in the proceeding. 13 The only order reserving costs was made by consent on 5 February 1999 when the directions hearing was adjourned at the request of the applicant. The applicant has shown no basis why the debtor and the trustee should be denied such costs, if any, as flow from the adjournment of the directions hearing on 5 February 1999 I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.