Federal Court of Australia Coleman v Veale (No 2) [2023] FCA 1219 File number: NSD 333 of 2023 Judgment of: KENNETT J Date of judgment: 13 October 2023 Catchwords: COSTS – Application relating to costs of successful application to set aside a bankruptcy notice – whether respondent should bear costs of jurisdiction issue which he did not raise or agitate – whether respondent should bear costs in relation to ground on which applicant was unsuccessful – whether applicant should otherwise be deprived of part of his costs because of lack of engagement in discussions or injustice resulting from deficiencies in bankruptcy notice prescribed form – whether costs should be awarded on a lump sum or percentage basis Legislation: Bankruptcy Act 1966 (Cth) Civil Dispute Resolution Act 2011 (Cth) s 6 Federal Court of Australia Act 1976 (Cth) ss 37M, 37N Bankruptcy Regulations 2021 (Cth) s 12 Cases cited: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Coleman v Gannaway [2023] FCA 224 Coleman v Veale [2023] FCA 1023 Michael Wilson & Partners Ltd v Porter (No 3) [2022] FCA 998 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 20 Date of last submissions: 21 September 2023 Date of hearing: Determined on the papers Counsel for the applicant: T Smartt Solicitor for the applicant: Shiff & Company Lawyers Counsel for the respondent: J Mee Solicitor for the respondent: Campbell Paton and Taylor Solicitors ORDERS NSD 333 of 2023 BETWEEN: DAVID COLEMAN Applicant AND: ANDREW WILLIAM VEALE Respondent order made by: KENNETT J DATE OF ORDER: 13 October 2023 THE COURT ORDERS THAT: 1. The respondent is to pay 85 percent of the applicant's costs of the proceeding as agreed or assessed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT KENNETT J: introduction 1 The applicant sought an order setting aside a bankruptcy notice issued at the request of the respondent. I delivered judgment on 29 August 2023, granting the relief sought (Coleman v Veale [2023] FCA 1023). The parties filed written submissions on costs, followed by further written submissions in response to each other. 2 The applicant, having succeeded, sought his costs of the proceeding. The respondent sought an order requiring him to pay only 30 percent of the applicant's taxed costs. 3 Three issues arose in the substantive proceeding. 4 First, when the originating application was accepted for filing, the Registry drew attention to the fact that that acceptance had occurred outside the relevant limitation period. There was therefore, potentially, a question as to the competency of the application. The applicant addressed this issue (the jurisdiction point) in submissions. The respondent did not address it, apart from noting that the Court would need to be satisfied as to its jurisdiction. I concluded that the application had been filed within time and the Court had jurisdiction: at [15]. 5 Secondly, by ground 1 of the originating application, the applicant alleged that the bankruptcy notice was vitiated by the failure of the notice to make allowance for a sum which was owed to the applicant by the respondent arising from a costs order in an earlier proceeding. I rejected this argument (at [33]-[39]). 6 Thirdly, by ground 2 of the originating application, the applicant alleged that the notice failed to comply with s 12(2)(a)(ii) and (b) of the Bankruptcy Regulations 2021 (Cth) (the Regulations). The bankruptcy notice relied on a judgment debt that was expressed in US dollars. Section 12(2) required the notice to set out a statement identifying "the equivalent amount of Australian currency" and "the conversion calculation for the equivalent amount of Australian currency". 7 I held that the bankruptcy notice failed to comply with these requirements (at [55]) and that that failure led to its invalidity (at [60]). The non-compliance arose from the fact that the form provided by the website of the Australian Financial Security Authority (AFSA) required the entry of the relevant foreign currency amount and then the "RBA exchange rate", with the latter only able to be stated to two decimal places. Use of the form almost inevitably leads to either an inaccurate Australian dollar amount or a calculation that is wrong on its face. This is because the exchange rates published by the Reserve Bank of Australia are expressed to four decimal places, and because those published rates are for conversions in the other direction (so that the calculation must use the inverse of the published rate, and any rounding to a certain number of decimal places produces a small degree of inaccuracy). proper scope of the costs order 8 The respondent makes four points in relation to costs. (a) He should not have to bear the costs of the jurisdiction point, not having raised or agitated that issue. (b) He should not have to bear any costs in relation to ground 1, on which the applicant did not succeed. (c) The applicant did not take genuine steps to try to resolve the issues, or engage with the respondent on the ground that ultimately succeeded, before commencing proceedings. (d) The applicant's success on ground 2 involved injustice, because the bankruptcy notice used a prescribed form for which there was no alternative. 9 As to the first point, I agree that the respondent should not be required to pay the costs of the applicant in relation to the jurisdiction point. The Court must always satisfy itself that it has jurisdiction in a matter, and will naturally look to the moving party for assistance if there is doubt. It is the moving party who has an interest in establishing the existence of jurisdiction. By observing that the applicant needed to satisfy the Court that it had jurisdiction, the respondent was not putting the point in issue. 10 As to the second point, the applicant correctly points out that costs ordinarily follow the event and are awarded on a broad brush basis. It is not usually considered appropriate to disaggregate the costs of a proceeding by reference to particular issues or grounds, unless the party who achieved overall success has failed on a genuinely discrete issue that consumed significant time and resources (see, eg, Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA)). Here, in terms of relief, the applicant succeeded completely. Ground 1 involved legal argument, on uncontroversial facts, in a hearing which in total took less than a day. This is not a case that calls for costs to be divided up according to success or failure on particular grounds. 11 As to the third point, evidence filed on the costs application shows that the applicant filed a genuine steps statement (as required by s 6 of the Civil Dispute Resolution Act 2011 (Cth)) on the day that his failure to do so was raised with him by the respondent. In any event, such a statement records, rather than constituting, steps taken to resolve the issues in dispute. Without more, the failure to file a genuine steps statement at the proper time is not a reason to depart from the usual order as to costs. 12 The more substantive aspect of the third point is an argument that the applicant did not (or did not sufficiently) engage in discussions with the respondent. This behaviour is said to be contrary to s 37N(1) of the Federal Court of Australia Act 1976 (Cth). Section 37N(1) requires parties to conduct proceedings and settlement negotiations in a way that is consistent with the "overarching purpose" in s 37M. That purpose is the just resolution of disputes (a) according to law and (b) as quickly, inexpensively and efficiently as possible. A failure to comply with the obligation in s 37N(1) must be taken into account in exercising the discretion to award costs (s 37N(4)). 13 In so far as this argument is put in relation to ground 1, it is suggested that proper engagement between the parties would likely have led to the applicant realising that the ground was unmeritorious and abandoning it. I do not think that this argument assists the respondent. (a) Although I rejected ground 1, I do not think it follows that the point was without merit. Analysis of relevant provisions of the Bankruptcy Act 1966 (Cth) and relevant authorities was required. The point was clearly arguable. (b) It is thus somewhat hopeful to suggest that further correspondence between the parties would have led to the ground being dropped. If the applicant had sought advice from counsel on the point, the advice would probably have been that the point was arguable and should be run. (c) On the other hand, if the applicant had been persuaded not to run the point, that decision would probably have required further consideration, advice, and further correspondence. These processes would have generated costs which the respondent would ultimately have to pay. (d) There was some correspondence between the solicitors for the parties concerning ground 1. It is fair to say that the solicitor for the applicant was not in a position to explain the applicant's position to any great extent. The exchange ended with the applicant's solicitor saying that the answer to the respondent's question would be a matter for final submissions in due course. No doubt this left something to be desired. However, s 37N(1) should not be regarded as being breached, so as to engage s 37N(4), whenever solicitors for the parties fall short of perfection in their dealings with each other. 14 In so far as the argument is put in relation to ground 2, it is said that the applicant did not raise this ground with the respondent prior to commencing the proceedings. Whether this engages either of the statutory provisions referred to above is doubtful. No complaint appears to be directed at the conduct of negotiations once proceedings had commenced. The lack of correspondence between the parties concerning this ground before the proceedings were commenced may have something to do with the fact that the applicant's argument built on observations in Coleman v Gannaway [2023] FCA 224, which had been handed down around four weeks before the originating application was filed (which, in turn, was only five days before the time for filing expired). The ground was articulated in the affidavit that was filed in support of the originating application. After this time (noting that the point was ultimately a winning one), it was the respondent who had the capacity to avoid unnecessary costs by making appropriate concessions. 15 As to the fourth point, I observed in my reasons for decision (at [54]) that it was possible to infer that AFSA's online portal was the only means available for the respondent to apply for a bankruptcy notice. That made it appropriate to express sympathy for the respondent's solicitor, who had done the best he could (at [54]), and regard the outcome of the case as involving injustice (at [59]). However, I do not consider that this is a basis upon which to depart from the usual order as to costs. In a proceeding in bankruptcy, the applicant was entitled to stand on his legal rights and to take whatever advantage arose from non-compliance by the bankruptcy notice with statutory requirements. 16 The limitations of the online portal left the respondent in an impossible position because of the language of s 12(2) of the Regulations and the authorities which required me to hold that those requirements were essential. The exercise of discretion in relation to costs is not the occasion to question the appropriateness of those sources of law. Nor should the applicant, having succeeded in the face of opposition, be deprived of part of his costs on the basis that the respondent may have cause for complaint against AFSA. 17 In my view, therefore, the respondent should pay the applicant's costs assessed on the usual party-party basis, discounted by an amount that reflects an estimate of the costs attributable to the jurisdiction point. quantum 18 The applicant contended that the considerations referred to by Stewart J in Michael Wilson & Partners Ltd v Porter (No 3) [2022] FCA 998 at [22] support the making of a lump-sum costs order. The respondent disagreed. 19 While there is a great deal to be said for resolving the question of costs in a way that avoids the further expense of a potentially complex process of taxation (especially in the light of the small amount that is in issue), I am not satisfied that I have before me the materials that would allow that to be done on a reliable basis. Further, there is disagreement between the parties concerning a range of issues as to the quantum of costs, ranging from points of principle and practice to granular factual detail. Resolving these issues would require the filing of further evidence and another oral hearing, and is not an appropriate use of judicial time. 20 I will therefore order that the respondent pay 85 percent of the costs of the applicant (including the costs of the submissions on costs) as agreed or assessed. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kennett. Associate: Dated: 13 October 2023