Doolan v Newitt [2003] FCA 1507

FEDERAL COURT OF AUSTRALIA

Doolan v Newitt [2003] FCA 1507 PRACTICE & PROCEDURE – COSTS – where consent orders filed disposing of matter but reserving costs - whether costs should be awarded Bankruptcy Act 1966 (Cth) s 30, s 178 Federal Court of Australia Act 1976 (Cth) s 43(1) Re MIEA Ex Parte Lai Quin (1997) 143 ALR 1 followed WILLIAM EDWARD DOOLAN v ALAN GRAHAM NEWITT trading as BUILDING MAINTENANCE SERVICES and TRACEY JOY DARE No Q 7020 of 2002 SPENDER J BRISBANE 19 DECEMBER 2003

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 7020 OF 2002

BETWEEN: WILLIAM EDWARD DOOLAN

APPLICANT

AND: ALAN GRAHAM NEWITT trading as BUILDING MAINTENANCE SERVICES

FIRST RESPONDENT

TRACEY JOY DARE

SECOND RESPONDENT

JUDGE: SPENDER J

DATE OF ORDER: 19 DECEMBER 2003

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. In respect of the costs that were reserved by Deputy District Registrar Baldwin on 23 January 2003, there be no order as to costs. 2. There be no order as to the costs concerning the application for costs. 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 Q 7020 OF 2002

BETWEEN: WILLIAM EDWARD DOOLAN

APPLICANT

AND: ALAN GRAHAM NEWITT trading as BUILDING MAINTENANCE SERVICES

FIRST RESPONDENT

TRACEY JOY DARE

SECOND RESPONDENT

JUDGE: SPENDER J

DATE: 19 DECEMBER 2003

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 On 12 November 2002, William Edward Doolan filed an application which sought relief under s 30 of the Bankruptcy Act 1966 (Cth) ("the Act") in respect of the proof of debt in his bankrupt estate of a creditor, Building Maintenance Services, to be expunged or the amount of the admitted debt reduced. Alternatively, Mr Doolan sought orders under s 178 of the Act for the trustee's determination and admission of the proof of debt to be overturned or reduced. 2 The proceedings against the first respondent, Alan Newitt, were discontinued by consent on 4 December 2002, with no order as to costs. On 23 January 2003 when the matter came before Deputy District Registrar Baldwin for directions, the parties advised the Registrar that they had reached an agreement that the application be dismissed, with the costs of the application being reserved other than the costs of 23 January 2003. It was further agreed by consent that the trustee pay the costs of Mr Doolan of 23 January 2003. Mr Doolan's trustee in bankruptcy, Ms Tracey Dare, the second respondent, gave an undertaking to the Court not to rely on the resolutions which had been passed at a meeting of creditors on 5 August 2002. Mr Doolan now seeks a decision in relation to the costs of the application that had been reserved. 3 The matter was listed before Deputy District Registrar Baldwin for argument on costs on 23 July 2003. Mr Doolan, who was not legally represented in the proceedings, was questioned by Registrar Baldwin concerning the costs that he could expect to recover, and enquired as to whether there was any purpose in the seeking of a costs order. Mr Doolan indicated that he had sought advice from counsel and that his application had been drafted by counsel, and he had incurred disbursements which he would be claiming on taxation. The matter was not taken further by Registrar Baldwin because, amongst other things, whether those disbursements would be allowed on taxation would be a matter for the taxing officer. 4 On 23 July 2003 Mr Doolan sought to read and file a lengthy affidavit which had been sworn by him on 23 July 2003. The filing was opposed by the solicitor for the second respondent on the basis of irrelevancy. Deputy District Registrar Baldwin was concerned to avoid unnecessary costs being incurred, and thus did not determine whether the affidavit should be filed, but decided to consider the question in the course of determining the matter of costs. After hearing argument, it appeared to Deputy District Registrar Baldwin that the orders sought in the substantive application were outside the delegation which she had received, and accordingly, she could not deal with the question of costs unless there was a consent order concerning costs. The application by the applicant for costs is opposed by the respondent trustee. The respondent filed written submissions in that regard. The Deputy District Registrar invited the applicant to file written submissions. The applicant's written submissions concerning costs were filed on 30 July 2003, and a further version on the following day. 5 Both parties have been advised by Deputy District Registrar Baldwin that in the light of the limitation of her delegation, she had referred the question of costs to a judge for determination. Both parties have indicated that they would be happy for the question of costs to proceed on the papers, having regard to the affidavits and written submissions filed. 6 I turn now to consider the matter of costs on the papers as lodged. 7 Extensive written submissions concerning costs have been filed by Hollingworth and Spencer, who say in that document that they are solicitors for Mr Doolan. Mr Doolan was acting for himself when, on 23 January 2003, the Court ordered by consent that: '1. The application be dismissed; 2. Costs of the application are reserved, other than the costs of today; 3. The Second Respondent pay the Applicant's costs of today, to be taxed if not agreed.' Nothing has been filed concerning the circumstance that Mr Doolan, previously not legally represented, now, it seems, having solicitors acting for him. In particular, no change of address for service has been notified to the Court. 8 The Court's power to order costs derives from s 43(1) of the Federal Court of Australia Act 1976 (Cth) which provides: '(1) Subject to subsection (1A), the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.' 9 One difficulty concerning the applicant's written submissions on costs is that it descends in great detail to arguments as to the merits of Mr Newitt's right to vote at a creditors' meeting. In an argumentative and acrimonious way, it is submitted on Mr Doolan's behalf that: 'Dare is a Chartered Accountant and partner of KPMG. She is a registered trustee and claims considerable remuneration for her services. As such, she is responsible for having permitted Newitt to vote in circumstances where she knew Newitt's debt was crucial to approve her fees yet she did not properly consider the materials relied upon to support that debt by exercising her power to adjourn the meeting (without penalty).' It was further submitted on Mr Doolan's behalf: 'It is clear that Dare took an unnecessary active defensive part in the proceedings – against the request of Doolan.' And: 'It is further submitted that Dare was defending her own personal position and therefore ought to pay the costs of doing so and not be entitled to indemnity from the estate.' 10 In support of a claim for indemnity costs, Mr Doolan's written submissions refer to offers of settlement made on 21 November and two on 29 November 2002. It was submitted on Mr Doolan's behalf: 'The relevant circumstances in this case are that at the time of the first offer Dare had rejected enough of Newitt's proof of debt such that it was apparent that had the appropriate ruling been made at the meeting the resolution approving Dare's fees would have been rejected. At the time of the second and third offers Dare also then knew that Newitt had withdrawn his proof of debt and was not a creditor.' 11 All of these submissions ignore two significant factors, in my view. The first is that Mr Doolan was acting on his own behalf. Were an order for costs to be made in Mr Doolan's behalf in respect of the costs of the application that were reserved, the costs awarded to Mr Doolan would extend only to those costs which he had incurred to lawyers in respect of his application, if there were any, and any outgoings such as filing fees or hearing costs which he was obliged to pay. The application filed 12 November 2002 contains a notation that filing fees were waived. 12 Concerning the present application, the observations by McHugh J in Re MIEA Ex Parte Lai Quin (1997) 143 ALR 1 are particularly relevant. McHugh J said at p 3: 'In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when 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. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action … Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried … But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.' 13 The orders of 23 January 2003 dismissing the application and reserving the costs of the application were by consent. In my view, where an application has been resolved by the making of consent orders, it is not appropriate on a consideration of where the costs of the application might fall, to conduct essentially a mini trial as to the merits of the application and to determine what might be the appropriate order as to costs had the matter not been resolved. 14 I am quite conscious that there are other applications involving Mr Doolan and Ms Dare, including application Q7004/2003 and BZ82/2003, which applications involve some aspects which were the subject of application Q7020/2002. 15 In all of the circumstances of the case, including but not limited to the particular matters to which I have made reference, I think that the appropriate order as to costs in respect of the costs that were reserved by Deputy District Registrar Baldwin on 23 January 2003 is that there be no order as to those reserved costs. There should also, in my view, be no order as to the costs concerning the application for costs. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender .