Supreme Court New South Wales Medium Neutral Citation: Fong v Douglas (No 2) [2024] NSWSC 220 Hearing dates: 6 March 2024 Date of orders: 6 March 2024 Decision date: 06 March 2024 Jurisdiction: Equity Before: Parker J Decision: See [10] Catchwords: COSTS — claim for debt — defendant made bankrupt before final orders made — proceedings stayed — stay does not prevent costs order being made — whether plaintiff would have succeeded in the proceedings — defendant ordered to pay costs Legislation Cited: Bankruptcy Act 1966 (Cth) Cases Cited: Fong v Douglas [2023] NSWSC 1577 Foots v South Cross Mine Management Pty Ltd and Others [2007] 234 CLR 52 Statue Pty Ltd v Hayson [2014] NSWSC at 1558 Texts Cited: Nil Category: Costs Parties: Sandra Fong (First Plaintiff) Maurice Pakhoon Wong (Second Plaintiff) Troy Pestano Douglas (First Defendant) SFMW Pty Limited (Fourth Defendant) Representation: Counsel: J Horowitz SC (Plaintiffs) M Bennett (Amicus Curiae) Solicitors: Yau & Wang Lawyers (Plaintiffs) File Number(s): 2021/226747 Publication restriction: Nil JUDGMENT Revised from transcript; issued on 6 March 2024 1. This is an application for costs consequent upon the proceedings being stayed as a result of the relevant defendant becoming bankrupt. The proceedings were complicated ones involving a number of cross-claims. Most of the claims by the parties were resolved by a judgment I delivered in December last year: Fong v Douglas [2023] NSWSC 1577. The judgment left for determination a claim for debt against the first defendant, Mr Douglas, and the fourth defendant, formally SFMW Pty Limited ("SFMW"), a company controlled by him which was also a defendant to that claim. 2. The plaintiffs did not allege that SFMW was liable in debt. The debt claim was made solely against Mr Douglas. In the course of last year's hearing, counsel appearing for Mr Douglas made concessions, the effect of which were that he was, prima facie, liable in debt as claimed by the plaintiffs. 3. Counsel, however, wished to raise the contention that a deed of settlement and release between the plaintiff and other parties in the proceedings operated in whole or part to bar the claim on the basis of prior recovery. This contention was controversial, and I think it is fair to say that in the course of the hearing I expressed some scepticism about it. 4. Following the delivery of my December judgment, a copy of the deed of settlement was produced to the Court, effectively by way of notice to produce, and I directed it be included in the court book for tender at the further hearing. I also directed that counsel for Mr Douglas file and serve any written submissions in defence of the claim by 9 February. That date passed without any submissions being filed. 5. I am informed today that on 22 February Mr Douglas became bankrupt. It is common ground that the debt claimed by the plaintiffs is a provable debt in Mr Douglas' bankruptcy and, accordingly, the proceedings are stayed pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth). 6. The plaintiffs' claim again Mr Douglas, therefore, cannot proceed and the Court will make a notation to that effect. 7. Counsel for the plaintiffs, however, sought an order that Mr Douglas pay the plaintiffs' costs of the proceedings against him. 8. In support of that application, counsel referred me to the decision of Davies J in Statue Pty Ltd v Hayson [2014] NSWSC at 1558. In that case, in similar circumstances to the present, his Honour held, following a statement of principle by Gleeson CJ, Gummow, Kirby, Hayne and Crennan JJ in Foots v South Cross Mine Management Pty Ltd and Others [2007] 234 CLR 52 at [67], that any costs order would not be a provable debt and, accordingly, that the stay in s 58(3) of the Bankruptcy Act did not prevent the making of a costs order. His Honour noted that the result of such a stay is that proceedings against the bankrupt defendant will not be disposed of on their merits, but considered that if the court could be satisfied, on the probabilities, that the plaintiff would have succeeded, a costs order should be made. I find myself in the same position. As I have noted, I had some scepticism about the only ground of defence which had been articulated and, in the event, no submissions were put forward in support of that ground in accordance with the timetable laid down by the Court. 9. Accordingly, I will make an order that Mr Douglas pay the costs of the proceedings against him. Counsel for the plaintiffs has not sought any costs order (or any other relief) against SFMW and has invited me to dismiss those proceedings, which I will do. Orders 1. The orders of the Court are: 1. Order that the deed of settlement and release dated 1 November 2023 be removed from part 3 of the court book and that any copies of the deed held by the Court be destroyed or returned. 2. Order that the first and fourth defendants, by themselves, their servants, and agents, are not to use any copy of that deed, which they may have received in the course of these proceedings, for any purpose other than the conduct of the proceedings. 3. Note that the first defendant became bankrupt on 22 February 2024, and the plaintiffs' proceedings against the first defendant were thereupon stayed by force of s 58(3) of the Bankruptcy Act 1966 (Cth). 4. Order that the first defendant pay the plaintiffs' costs of their claims against him. 5. Order that the plaintiffs' proceedings against the fourth defendant be dismissed. ********** Amendments 07 March 2024 - Typographical Error on cover sheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 March 2024