Maxwell-Smith v S & E Hall Pty Ltd, in the matter of Maxwell-Smith [2004] FCA 1214

FEDERAL COURT OF AUSTRALIA

Maxwell-Smith v S & E Hall Pty Ltd, in the matter of Maxwell-Smith [2004] FCA 1214

COSTS – application for costs – bankruptcy annulled in earlier judgment – where successful applicants were litigants in person – where earlier judgment stated Trustee entitled to costs of the annulment application – where unsuccessful respondent creditor seeks costs – successful ground of application for annulment not articulated expressly until final hearing of application BANKRUPTCY – purpose of bankruptcy laws

Maxwell-Smith v S & E Hall, in the matter of Maxwell-Smith [2004] FCA 840 referred to EUGENE MAXWELL-SMITH AND INGE MAXWELL-SMITH v S & E HALL PTY LTD IN THE MATTER OF EUGENE MAXWELL-SMITH AND INGE MAXWELL-SMITH N 198 OF 2004 MOORE J 17 SEPTEMBER 2004 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 198 OF 2004

IN THE MATTER OF EUGENE MAXWELL-SMITH AND INGE MAXWELL-SMITH

BETWEEN: EUGENE MAXWELL-SMITH

FIRST APPLICANT

INGE MAXWELL-SMITH

SECOND APPLICANT

AND: S & E HALL PTY LTD

RESPONDENT

JUDGE: MOORE J

DATE OF ORDER: 17 SEPTEMBER 2004

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. There be no order as to costs of the annulment application and this application concerning costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 198 OF 2004

IN THE MATTER OF EUGENE MAXWELL-SMITH AND INGE MAXWELL-SMITH

BETWEEN: EUGENE MAXWELL-SMITH

FIRST APPLICANT

INGE MAXWELL-SMITH

SECOND APPLICANT

AND: S & E HALL PTY LTD

RESPONDENT

JUDGE: MOORE J

DATE: 17 SEPTEMBER 2004

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 2 July 2004 I made orders annulling the bankruptcies of Eugene Maxwell-Smith and Inge Maxwell-Smith ("the applicants"). I gave liberty to the applicants and the Trustee to apply on 7 days notice. The Trustee and the applicants have exercised that liberty. The judgment creditor, S & E Hall Pty Ltd ("the judgment creditor"), has also sought an order that the applicants pay its costs of the annulment application. 2 The Trustee exercised the liberty to apply and sought an order that its costs be paid on an indemnity basis. Counsel for the Trustee later conceded such an order was unnecessary. In the reasons published on 2 July 2004, I said the Trustee was entitled to his costs of the application (see Maxwell-Smith v S & E Hall, in the matter of Maxwell-Smith [2004] FCA 840 at [27]). I did so because the effect of s 154(1)(b) of the Bankruptcy Act 1966 (Cth) ("the Act") was that the Trustee could apply property of the applicants in payment of his costs, charges and expenses of the administration of the bankruptcy including remuneration and expenses. That would include legal costs of preparation and appearances in the annulment application. Counsel for the Trustee submitted that the costs order was sought out of an abundance of caution. If a Trustee takes action and incurs further costs merely out of an abundance of caution to protect his interests, one would doubt whether the action should have been taken. 3 I turn now to consider the position of the applicants and the judgment creditor. Save for one qualification which I refer to below, the application by the judgment creditor for a costs order in its favour is a curious one. The judgment creditor opposed the annulment application and was unsuccessful. In that judgment, I found that the conduct of the judgment creditor contributed to the denial of procedural fairness to the applicants. One would have thought that there would be no expectation on the part of the judgment creditor that it is entitled to its costs in those circumstances. Its position perhaps can be understood by the following submission by counsel on its behalf: Throughout this process [the litigation following judgment in the Consumer Claims Tribunal and in the Supreme Court which resulted in the costs order founding the bankruptcy notices], the judgment creditor, the respondent to the present proceedings, has been saying, as I respectfully submit it is entitled to say, we are entitled to be paid the two judgment debts for which we are still out of pocket after some six years of them being ordered. Under those circumstances, your Honour, I respectfully submit that the judgment creditor should not be put further out of pocket, nor in the least, certainly not by being ordered to pay any part at all of the applicant's costs, given that they are unrepresented and it would be inappropriate to make any order under those circumstances, but also its own costs. 4 This submission appears to have been based on a misapprehension of the nature of proceedings under bankruptcy laws. As Drummond J observed in Re Stubberfield; Ex parte Paradise Grove Pty Ltd (1995) 134 ALR 169 at 172: …proceedings in bankruptcy are not an alternative means of enforcing a money judgment, convenient though they may be for putting pressure on a reluctant but solvent debtor to pay, and inconvenient though ordinary methods of execution may be for the creditor. I have gained the impression that the judgment creditor in this matter has adopted the position that proceedings in bankruptcy can be (and have been) taken for the purpose of requiring a judgment debtor to satisfy an earlier judgment, whether the judgment debtor was solvent in any relevant sense or not. 5 Save for the following matter, I would order the judgment creditor pay the applicants' costs even though, as unrepresented litigants, the costs they might recover are limited: see Cachia v Hanes (1991) 179 CLR 403. The applicants ultimately succeeded in their application for annulment on the basis that they had been denied procedural fairness. That was not a ground raised in the application for annulment. While affidavit evidence filed by the applicants pointed to that matter being raised by them, it was not articulated as a ground until the hearing of their application (on 11 June 2004). At that hearing, written submissions were handed up by the applicants and expressly raised the ground of denial of procedural fairness. 6 In those circumstances, it would not have been obvious to the judgment creditor until the hearing, that denial of procedural fairness was a ground on which the annulment application was made. Indeed written submissions of the judgment creditor focussed on the ground articulated in the application as originally filed, namely that the earlier claims (which gave rise to the judgment debt) were unjustifiable and illegitimate. In my opinion, it would be inappropriate to make an order that the judgment creditor pay the costs of the applicants in circumstances where the point they succeeded on was not raised until the hearing. However, no costs order should be made in favour of the judgment creditor because of the matters referred to in [3] and [4] above. 7 For these reasons, I propose to make no orders as to costs in relation to the costs of the Trustee, the judgment creditor or the applicants. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.