FEDERAL COURT OF AUSTRALIA Parsons and Parsons v McBain [2001] FCA 885 COSTS – where appellants partly successful on appeal – whether costs of the trial should fall as they lie – whether costs certificate should be granted to respondent Federal Proceedings (Costs) Act 1981 (Cth) s 6 BRONWYN ALICE PARSONS v ROGER GEOFFREY McBAIN Trustee of the estate of PETER FREDERICK PARSONS (a bankrupt) CATHRYN MAREE PARSONS v ROGER GEOFFREY McBAIN Trustee of the estate of GEOFFREY JAMES PARSONS (a bankrupt) T 16 of 2000 BLACK CJ, KIEFEL & FINKELSTEIN JJ 12 JULY 2001 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY T 16 of 2000 On appeal from a single judge of the Federal Court of Australia BETWEEN: BRONWYN ALICE PARSONS Appellant AND: ROGER GEOFFREY McBAIN Trustee of the estate of PETER FREDERICK PARSONS (a bankrupt) Respondent JUDGES: BLACK CJ, KIEFEL & FINKELSTEIN JJ DATE OF ORDER: 12 JULY 2001 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The Orders made on 5 April 2001 be varied by substituting for Order 4 an Order that the respondent pay the appellant's costs of the appeal and that there be no Order as to the costs of the proceeding at first instance. 2. A certificate be granted to the respondent pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) with respect to the costs of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY T 16 of 2000 On appeal from a single judge of the Federal Court of Australia BETWEEN: CATHRYN MAREE PARSONS Appellant AND: ROGER GEOFFREY McBAIN Trustee of the estate of GEOFFREY JAMES PARSONS (a bankrupt) Respondent JUDGES: BLACK CJ, KIEFEL & FINKELSTEIN JJ DATE OF ORDER: 12 JULY 2001 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The Orders made on 5 April 2001 be varied by substituting for Order 4 an Order that the respondent pay the appellant's costs of the appeal and that there be no Order as to the costs of the proceeding at first instance. 2. A certificate be granted to the respondent pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) with respect to the costs of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY T 16 of 2000 On appeal from a single judge of the Federal Court of Australia BETWEEN: BRONWYN ALICE PARSONS Appellant AND: ROGER GEOFFREY McBAIN Trustee of the estate of PETER FREDERICK PARSONS (a bankrupt) Respondent AND BETWEEN: CATHRYN MAREE PARSONS Appellant AND: ROGER GEOFFREY McBAIN Trustee of the estate of GEOFFREY JAMES PARSONS (a bankrupt) Respondent JUDGES: BLACK CJ, KIEFEL & FINKELSTEIN JJ DATE: 12 JULY 2001 PLACE: MELBOURNE REASONS FOR JUDGMENT THE COURT: 1 The matter that brought the parties to court were claims by the trustee in bankruptcy to recover a parcel of land that had been transferred by Peter Parsons, a bankrupt, to his wife Bronwyn, and to recover a parcel of land that had been transferred by Geoffrey Parsons, a bankrupt, to his wife Cathryn, at a time when each bankrupt was unable to pay his debts as and when they fell due for payment. At trial, orders were made in favour of the trustee in each case. One such order was that each appellant transfer to the trustee the land that she had received from her husband. Another order required each appellant to indemnify the trustee in respect of a loan that she had obtained on the security of the land that had been transferred to her. 2 It was held on appeal that each appellant is entitled to retain only a one half interest in the land, but is to be exonerated by the trustee in respect of a mortgage over the land to raise funds for her husband's business. The order that each appellant indemnify the trustee in respect of the mortgage she obtained for her own purposes was not disturbed. In consequence the two bankrupt estates will obtain some benefit from the litigation, though not to the extent ordered by the trial judge. Put another way, in financial terms, the success by the trustee at trial has been reduced, but not eliminated, by the orders of the Full Court. 3 The outstanding issue that must be resolved is what order should be made with respect to the costs of the trial. The trustee accepts that the appellants should have their costs of the appeals, they having been successful in respect of most issues that were litigated. But the trustee says that because he retains the benefit of a number of orders made at trial, it would be reasonable that the parties bear their own costs of that proceeding. 4 In support of this submission the trustee makes a number of other points. They can be stated briefly. First, the trustee points to the fact that at trial the appellants had put in issue, and were ultimately unsuccessful on, a number of important factual matters. These include the solvency of each bankrupt at the time of the transfer, whether the purpose of each transfer was to defeat creditors, and whether each appellant had given consideration for the transfer. Some of these matters were resolved against the appellants after the trial judge ruled on contested evidence. Other issues, for example the solvency of the bankrupts, were conceded at trial. In each case the trustee was put to considerable expense in gathering relevant evidence. Second, the trustee points to the fact that he succeeded in defeating the appellants' claims that their respective equities of exoneration defeated their husbands' interest in the land. Finally, the trustee refers to his attempt to settle the dispute on reasonable terms, though not on terms that were as favourable to the appellants as they obtained in the litigation. 5 The nature of these submissions highlights the difficulty confronting a court, particularly a court of appeal, that is asked to look closely at the conduct of a proceeding for the purpose of determining whether it is appropriate to depart from the usual costs order. That amounts to an invitation to consider whether a trial has been unnecessarily or unreasonably lengthened by one party and whether an offer to compromise was unreasonably refused. It will often not be possible for a court to resolve such issues in the absence of evidence. Even when it can be done without evidence, it is a most undesirable course, which should only be undertaken in exceptional cases. This is not a case in which it is appropriate to examine in detail the conduct of the proceeding. 6 We think that it is nevertheless appropriate in this case to depart from the general rule with respect to costs, but not for all the reasons put forward by the trustee. Although the Full Court allowed the appeals in part, the trustee has retained a measure of his success at trial. The fact that there is a benefit to the two bankrupt estates as a result of the litigation suggests that no order for costs of the trial could be made in favour of the appellants. On the other hand, in view of the failure by the trustee to succeed on his principal claims, it is appropriate that the costs of the trial lie where they fall. Orders to that effect will be made. 7 The trustee also asks for a certificate under s 6 of the Federal Proceedings (Costs) Act 1981 (Cth), in respect of his costs of the two appeals. The trustee points out that on the appeals, the Full Court overruled Re Osborn; Ex parte Trustee of the Property of Osborn (A bankrupt) v Osborn (1989) 25 FCR 547, the case upon which the trial judge had founded his decision, and also clarified comments made in Secretary, Department of Social Security v Agnew (2000) 96 FCR 357. The grounds for the grant of a certificate are made out and it is appropriate that a certificate be granted. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Full Court. Associate: Dated: 12 July 2001 Counsel for the Appellants: Mr G Bigmore QC Solicitors for the Appellants: McLean Phillips & Bartlett Counsel for the Respondent: Mr S McElwaine Solicitors for the Respondent: Mr S McElwaine Date of Decision: 12 July 2001