Federal Court of Australia Chamberlain (Trustee) v DM & SJ Pty Ltd, in the matter of Romeo [2020] FCA 1192 File number: NSD 1397 of 2019 Judgment of: GRIFFITHS J Date of judgment: 18 August 2020 Legislation: Bankruptcy Act 1966 (Cth) Federal Court of Australia Act 1976 (Cth), s 35A(1)(f) Federal Court Rules 2011 (Cth), Pt 28 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 17 Date of hearing: 18 August 2020 Counsel for the Applicant: Mr J Sleight Solicitor for the Applicant: Neville Hourn & Borg Legal Counsel for the First Respondent: The proceeding against the first respondent was previously dismissed Counsel for the Second and Third Respondents: Mr D Pritchard SC Solicitor for the Second and Third Respondents: Proctor Phair Lawyers ORDERS NSD 1397 of 2019 IN THE MATTER OF THE BANKRUPT ESTATES OF ANNA MARIA ROMEO AND GIUSEPPE ROMEO BETWEEN: CHRISTOPHER CHAMBERLAIN AS TRUSTEE OF THE BANKRUPT ESTATES OF ANNA MARIA ROMEO AND GIUSEPPE ROMEO Applicant AND: DM & SJ PTY LTD (147 550 114) First Respondent ANNA MARIA ROMEO Second Respondent GIUSEPPE ROMEO Third Respondent order made by: GRIFFITHS J DATE OF ORDER: 18 AUGUST 2020 THE COURT ORDERS THAT: 1. The second and third respondents have leave to rely upon the affidavits dated 16 July and 28 July 2020 by Russell Grant Phair and the outline of submissions dated 29 July 2020. 2. The second and third respondents file and serve the interlocutory application which is Annexure A to the second and third respondents' submissions dated 29 July 2020 by 20 August 2020. 3. The applicant file and serve any further submissions in response and any further evidence upon which it intends to rely by 4 September 2020. 4. The second and third respondents are to pay the applicant's costs of the matters referred to in order 3 above and the costs of the mention today. 5. The originating application be dismissed, without prejudice to the parties' position on costs. 6. The issue of costs be referred to a Court mediation under Pt 28 of the Federal Court Rules 2011 (Cth) after 4 September 2020. 7. If the mediation is unsuccessful in resolving all the issues regarding costs, any outstanding issues be referred to a Registrar under s 35A(1)(f) of the Federal Court of Australia Act 1976 (Cth) for determination. 8. Liberty to apply on the giving of 72 hours' notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT GRIFFITHS J: 1 The substantive proceedings were commenced on 26 August 2019. The applicant (the trustee in bankruptcy of the estates of the second and third respondents) claimed that one of the bankrupts entered into an agreement with the first respondent, a company controlled by one of the bankrupt's son-in-law, for the sale of property and a business. The applicant claimed that the sale was for consideration that was less than fair market price and that the sale and agreement are void under the Bankruptcy Act 1966 (Cth). 2 In the events that have occurred, it is unnecessary to determine the originating application. On 12 December 2019, the applicant indicated that he would not prosecute the proceeding against the respondents. By consent orders dated 21 May 2020, the proceeding against the first respondent was dismissed and the applicant was ordered to pay the first respondent's costs in an agreed fixed amount. 3 By an amended interlocutory application dated 7 April 2020, the applicant seeks that the proceedings be either discontinued or dismissed. He also seeks his costs of the proceedings, including the costs he was ordered to pay to the first respondent by the orders dated 21 May 2020, to be paid by the second and third respondents. The applicant also seeks the costs of his amended interlocutory application. 4 By an unfiled interlocutory application dated 29 July 2020, the second and third respondents seek orders that: (a) the applicant pay their costs on an indemnity basis; (b) alternatively, the applicant pay their costs in a lump sum of $84,000; (c) further in the alternative, the applicant pay their costs on an ordinary basis; and (d) the applicant pay their costs of the proposed interlocutory application. 5 The applicant relies upon the second and third respondent's conduct of the proceedings in seeking his costs. In brief, he contends that they unreasonably delayed in providing documents sought by the applicant on 9 October 2019. The documents in question relate to the second and third respondent's claim, which was set out in a letter dated 27 September 2019, that the subject lease and business were subject to a mortgage in the sum of $10m. The applicant made repeated requests throughout November and December 2019 for the relevant documents to be provided. The documents were not provided until 10 December 2019. It appears that the delay in their production relates to their antiquity and the volume of material which had to be searched. 6 As noted above, on 12 December 2019 the applicant notified the respondents that he did not wish to prosecute the proceeding. Nevertheless, he contends that the relevant respondents continued throughout the period 12 December 2019 and 20 March 2020 to defend the proceeding. 7 The applicant also points to the failure of the second and third respondents to comply with the Court's orders dated 15 May 2020. In particular, he relies upon the following matters: (a) there was non-compliance with the Court's order that written submissions be filed by 26 June 2020. This did not occur until 30 July 2020; and (b) affidavits in relation to costs were due by 15 May 2020, but were not filed until 30 July 2020, when two affidavits by the first and second respondents' solicitor, dated 16 July 2020 and 28 July 2020 were filed. 8 The applicant complains that the late filing and service of these materials requires him to incur additional costs in preparing additional affidavit evidence in reply and in providing additional submissions. 9 The applicant opposed leave being granted to the first and second respondents to rely upon their late material. 10 In the light of the applicant's position, the Court had the matter relisted for mention today. 11 The second and third respondents filed an outline of written submissions dated 3 August 2020, in response to the applicant's submissions of the same date, which stated the applicant's position. The solicitor for the second and third respondents also filed an affidavit dated 11 August 2020 in which he apologised to the Court and explained the late filing and serving of the relevant material. The solicitor stated in his affidavit that he would not charge his clients for the costs of today's hearing because they were not in any way responsible for the non-compliance with the Court's orders. The solicitor accepted full responsibility for the defaults. His detailed explanation for the defaults included the unexpected time required to prepare written submissions, the time taken up in conferring with counsel, information technology problems, travel restrictions presented by the pandemic and the need to attend for him to other urgent work matters. The solicitor added that if leave was not granted to rely upon the late filed material, the second and third respondents would request that the matter proceed by way of an oral hearing, as opposed to on the papers, as previously agreed with the applicant. Consideration and determination 12 The non-compliance with the Court's orders dated 15 May 2020 is serious. I accept, however, Mr Phair's explanation for the regrettable delay. 13 It is appropriate in the circumstances that leave be granted for the second and third respondents to rely upon the late filed material, but they should bear the applicant's costs of providing evidence and submissions in response, as well as the applicant's costs of the mention today. The Court assumes that Mr Phair, who has offered personally to bear the second and third respondents' costs of today's hearing, will adopt a similar attitude in respect of the applicant's costs occasioned by him having now to provide additional evidence and submissions in reply. 14 Subject to the dispute as to costs, the Court understands that the parties consent to the proceeding being dismissed. It is desirable that a formal order to that effect be made now by the Court. 15 Having regard to the voluminous material which has been filed to date by the parties on the issue of costs, the Court no longer considers that the matter is suitable to be determined on the papers and without a further oral hearing. The parties' respective submissions raise numerous contentious and difficult issues which do not lend themselves to a determination on the papers. 16 The Court is conscious of the relatively modest amounts of costs at stake and the potentially significant further costs which will be incurred by the parties if there is to be an oral hearing conducted by the Court. In these circumstances, the Court considers that this is an appropriate case in which the issue of costs should be referred to a Court mediation under Pt 28 of the Federal Court Rules 2011 (Cth). If the mediation is unsuccessful, any outstanding issue as to costs will be referred to a Registrar for determination under s 35A(1)(f) of the Federal Court of Australia Act 1976 (Cth). 17 Orders will be made accordingly. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Griffiths. Associate: Dated: 18 August 2020