FEDERAL COURT OF AUSTRALIA Osborne v Gangemi (No 3) [2012] FCA 188 Citation: Osborne v Gangemi (No 3) [2012] FCA 188 Parties: RICHARD OSBORNE and KOUROSH JAFARI v ANTONIO GANGEMI, STEPHEN ROBERT DIXON (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR) and JOHN ADAMS (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR) File number: VID 742 of 2009 Judge: BROMBERG J Date of judgment: 6 March 2012 Catchwords: COSTS – application to set aside a Personal Insolvency Agreement – whether allegations were made against Trustees personally sufficient to justify a costs order in favour of Trustees where Trustees were unsuccessful in their opposition to the application. Legislation: Bankruptcy Act 1966 (Cth) Part X Cases cited: Osborne v Gangemi [2011] FCA 1252 Date of hearing: Heard on the papers Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 18 Counsel for the Second Applicant: Mr M Gronow Solicitor for the Second Applicant: Christopher Bunnett Solicitor Counsel for the Third Applicant: Mr M Strang Solicitor for the Third Applicant: Melbourne Legal Partners Counsel for the First Respondent: Mr S Minahan Solicitor for the First Respondent: Abrahams Meese Lawyers Counsel for the Second and Third Respondent: Mr P Agardy Solicitor for the Second and Third Respondent: Lewis Holdway Lawyers Solicitor for Mr Pasquale Lanciana: NA Young & Co IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 742 of 2009 BETWEEN: RICHARD OSBORNE Second Applicant KOUROSH JAFARI Third Applicant AND: ANTONIO GANGEMI First Respondent STEPHEN ROBERT DIXON (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR) Second Respondent JOHN ADAMS (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR) Third Respondent JUDGE: BROMBERG J DATE OF ORDER: 6 March 2012 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application of the second and third respondents for costs be dismissed. 2. The second and third respondents pay the applicants' costs of the application and those of Pasquale Lanciana. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 742 of 2009 BETWEEN: RICHARD OSBORNE Second Applicant KOUROSH JAFARI Third Applicant AND: ANTONIO GANGEMI First Respondent STEPHEN ROBERT DIXON (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR) Second Respondent JOHN ADAMS (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR) Third Respondent JUDGE: BROMBERG J DATE: 6 March 2012 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 4 November 2011, I made orders including the setting aside of the Personal Insolvency Agreement made by Antonio Gangemi ("Gangemi") under Part X of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act"). My reasons for judgment were also delivered on that day and are published as Osborne v Gangemi [2011] FCA 1252. 2 The orders that were made on 4 November 2011 reserved the question of the legal costs of the second and third respondents ("the Trustees"). An application has been made by the Trustees for an order for their costs. A costs order is sought against the second applicant ("Osborne"), the third applicant ("Jafari") and also against Pasquale Lanciana ("Lanciana"). 3 On 14 October 2009, Lanciana commenced this application and was initially the sole applicant in the proceeding. On 4 February 2011, Lanciana was given leave to withdraw as an applicant. The question of whether Lanciana should pay the Trustees' costs was then reserved. 4 Earlier and on 19 April 2010, Lanciana informed the Court that he did not intend to continue with his application. On that day and on the application of Osborne and Jafari, orders were made that Osborne and Jafari be joined as applicants. Lanciana took no further part in the proceedings after 19 April 2010, other than as a witness called under subpoena by Osborne. 5 Each of Osborne, Jafari and Lanciana resist the Trustees' application for costs. 6 For the reasons that follow, I have determined that the application should be dismissed. should a cost order be made against lanciana? 7 The Trustees' application, including for cost orders adverse to Osborne and Jafari, is based upon the Trustees' contention that allegations were made against the Trustees and their staff by the originating application ("the Application") and its accompanying affidavit in support. The Trustees assert that as a result of the allegations made against them, they were compelled to take a more active role in the proceeding, including an unsuccessful mediation held on 5 August 2010 and preparation for a full trial. 8 The Application filed by Lanciana sought no orders against the Trustees other than an order for costs which was sought against both Gangemi and the Trustees. The affidavit in support of the Application was an affidavit made by Lanciana. Whilst the Application set out the relief sought, including that the Personal Insolvency Agreement made by Gangemi be set aside, the affidavit in support did not expressly identify the grounds upon which Lanciana sought the relief specified by his Application. Lanciana's affidavit dealt with a range of facts relevant to the determination of the Application. In doing so, the affidavit described various communications exchanged between Lanciana and the Trustees and their staff. It is fair to say that by the affidavit, Lanciana was critical of the Trustees. However, no specific allegation of any breach of the Bankruptcy Act or of any legal obligation owed by the Trustees was made against the Trustees. On 16 November 2009, a Notice Stating Grounds of Opposition to Application was filed by the Trustees together with an affidavit in support. The Trustees opposed Lanciana's Application and in the affidavit in support of their Notice of Opposition, the Trustees responded to some of the matters referred to by Lanciana in his affidavit. 9 Lanciana resists an order for costs against him on the basis that the Application he issued was ultimately successful and that at least to some extent, the matters referred to by him in his affidavit in support (including his criticism of the Trustees' conduct) were matters upon which the Court relied upon in coming to its decision to set aside Gangemi's Personal Insolvency Agreement. 10 The difficulty with that argument is that whilst Lanciana issued the Application, it was not on his application that orders (including an order setting aside the Personal Insolvency Agreement) were made. It cannot be said that he was a successful applicant in the proceeding against whom no order for costs ought be made. Lanciana brought the proceeding and for whatever reasons he may have had, decided to withdraw. In bringing the proceeding and pressing his Application at least until 19 April 2010, Lanciana put the Trustees to some expense. 11 However, the Trustees opposed the Application and were unsuccessful parties to the litigation which, after Lanciana's withdrawal, was continued by Osborne and Jafari. In those circumstances they should not recover costs against Lanciana for any step, taken by them prior to Lanciana's effective discontinuance on 19 April 2012, that they continued to rely upon in opposition to the Application. In other words, the Trustees should only recover any expense incurred by them to 19 April 2010 additional to that which was otherwise incurred in resisting the claims for relief of Osborne and Jafari. No such additional costs have been identified by the Trustees. In those circumstances, their claim for costs against Lanciana should be dismissed and an order should be made that they pay Lanciana's costs of this application. Should Osborne and Jafari be ordered to pay the trustees' costs? 12 The Trustees contend that their costs incurred after 19 April 2010 and until the first day of the trial should be paid by Osborne and Jafari. The Trustees' submission is premised on the proposition that Osborne and Jafari adopted allegations made against the Trustees and their staff by Lanciana and did not withdraw those allegations until the first day of the trial. 13 The Trustees application for costs was accompanied by copies of correspondence flowing between Osborne's solicitors and the solicitors for the Trustees ("the correspondence"). Although not formally tendered, each of the parties have relied upon the correspondence and none have raised any objection to this application being determined by reference to it. 14 Osborne and Jafari were successful applicants. The usual principle is that a successful party is not ordered to pay costs. An order of costs is discretionary, but good reason needs to be identified to substantiate an order for costs made against a successful party. In my view, no sufficient reason has been established by the Trustees to warrant a cost order being made against Osborne or Jafari. 15 Firstly, as I have described at [8], Lanciana made no specific allegation of wrongdoing against the Trustees or their staff although his affidavit was critical of them. Secondly, the basis upon which the Trustees contend that they were right to apprehend that such criticism was necessarily adopted by Osborne and Jafari is not clear. Thirdly, when Contentions were filed by Osborne on 2 July 2010, no allegations personal to the Trustees or their staff were made. Fourthly, a fair reading of the correspondence exchanged between Osborne's solicitors and those of the Trustees shows that from at least 23 July 2012 Osborne's solicitors advised the Trustees that Osborne was not pursuing any allegations against the Trustees or their staff and that to their knowledge no other party to the proceeding was so engaged. 16 For all those reasons, it seems to me that any assumption made by the Trustees that Osborne and Jafari were making allegations against them which compelled their participation in the proceeding (beyond that necessitated by their opposition to the relief sought) was an assumption made without a proper foundation. The costs consequences (if any) are fairly to be born by the Trustees and not Osborne or Jafari. 17 Accordingly, I decline to make any cost orders adverse to Osborne or Jafari. The Trustees should pay the costs of Osborne and Jafari incurred in responding to this application. 18 The Court will make orders as follows: 1. The application of the second and third respondents for costs be dismissed. 2. The second and third respondents pay the applicants' costs of the application and those of Pasquale Lanciana. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromberg. Associate: Dated: 6 March 2012