Adrian Garfield Barwick v Ross Ian Goodridge

Judgment Background 1The plaintiff, Mr Barwick, sought an order under UCPR r 6.30 that the trustee in bankruptcy for Mr Ross Goodridge ("Trustee") be joined as defendant in the proceedings in place of Mr Goodridge. That application was opposed by Mr Goodridge and was argued before me on 26 and 27 September 2011. Mr Barwick's Counsel informed the Court that, regardless of the outcome of the application, he would seek to discontinue these proceedings. 2On 21 October 2011 I delivered judgment in respect of that application. I held that the rights arising from a judgment of the Supreme Court of New South Wales and two orders of the Local Court of New South Wales arising from costs certificates (the "Rights") were properly characterised as within the implied exclusion arising from Pt 4 Div 4B of the Bankruptcy Act 1966 (Cth) because they would, in the particular circumstances of Mr Goodridge, give rise to after-acquired personal income. Since I was not satisfied that the Rights had passed to the Trustee for the purposes of UCPR r 6.30, I did not permit the amendment under UCPR r 6.30 to join the Trustee as defendant in the proceedings in place of Mr Goodridge. 3I indicated that, subject to hearing from the parties, I would be inclined to order that Mr Barwick and the Trustee pay Mr Goodridge's costs of and incidental to the motion. I noted that it would also be necessary to deal with the costs payable on any discontinuance of the proceedings by Mr Barwick. Each of Mr Goodridge, Mr Barwick and the Trustee have filed written submissions as to costs, although the issues have to some extent narrowed in oral argument before me on 6 December 2011. Orders sought in respect of costs 4Mr Goodridge sought an order in the terms that I had foreshadowed in respect of the costs of and incidental to the motion. Mr Barwick did not oppose that order. 5However, the Trustee opposed any order that he be required to pay the costs of and incidental to the motion. The Trustee submitted that, first, an order for costs should not be made against him because he was not a party to the proceedings and remains a non-party to the motion, and pointed to authorities applicable to the making of costs against non-parties such as litigation funders. I do not consider those authorities to be applicable since the Trustee, although not party to the proceedings, was a person interested in and made extensive submissions in respect of the motion filed by Mr Barwick. 6Second, the Trustee pointed out that he was successful in a substantive issue on the motion, where I accepted his submission that the Court had jurisdiction to determine the matter, although not he was not successful in persuading me that an order should be made substituting him in the proceedings. I do not consider that to be sufficient to displace the ordinary principle that costs follow the event. 7Third, the Trustee also contended that he had adopted a reasonable position in the motion, where he (and Mr Barwick) had formed the view that the Rights, being choses in action with respect to monetary claims, had vested in the Trustee on Mr Goodridge's bankruptcy pursuant to ss 58 and 116 of the Bankruptcy Act 1966 (Cth). In my view, the position adopted by the Trustee in the motion was an entirely reasonable one, where the motion raised novel and difficult issues as to the extent of the implied exclusion for after-acquired income of a bankrupt from the property which vested in the Official Trustee under s 58 of the Bankruptcy Act , the difficulty of which I in turn noted in my judgment. 8The Trustee submitted that an order for costs should not be made against him so far as the contested issues was between the bankrupt and him, where he had adopted a reasonable position in the motion. He referred to observations by Jenkinson J in Re Campbell, Ex parte Official Trustee (1987) 72 ALR 251 which concerned an application as between the bankrupt and his trustee relating to whether the bankrupt should be discharged from bankruptcy. Jenkinson J there noted that the trustee's application was "correctly conceived as the performance of a public duty for the public welfare", and his Honour referred to the general rule set out in Scott Fell v Lloyd [1911] HCA 34; (1911) 13 CLR 230 (which had been approved in Hunter v Official Receiver in Bankruptcy (1980) 33 ALR 457) and observed that: "[A]doption of the principle that trustees in bankruptcy and liquidators should suffer the same consequences, in costs, of failure in litigation as other litigants seems to have been a concern to ensure fairness to adverse parties. That concern, and the reasoning which proceeded from it, did not comprehend, as it seems to me, the bankrupt himself as a party to litigation against his trustee, except in appellate proceedings." (at 255). 9However, in Adsett v Berlouis (1992) 109 ALR 100, the Full Court of the Federal Court (Northrop, Wilcox and Cooper JJ) upheld orders that the trustee of a bankrupt estate pay costs of proceedings which he had brought against the bankrupt, which were not proceeded with, and observed that (at 109): "The obligation of a trustee in bankruptcy to pay costs to another party involved in litigation unsuccessfully instituted or defended by the trustee is a matter distinct from the trustee's entitlement to recoupment out of the bankrupt's estate ... Ordinarily, an unsuccessful trustee will be ordered to pay the costs of the successful party. Such an order imposes a personal obligation on the trustee. In such a case, the question then arises as to whether or not the trustee has a right to be reimbursed out of the trust estate. The latter question arises in the administration of the bankruptcy, not in the original litigation." (emphasis added) In Jackson v Salisbury (No 3) [2000] FCA 1840, Mansfield J noted that the general principle espoused by Griffith CJ in Scott Fell v Lloyd had been adopted and applied by the Full Court of the Federal Court in Adsett v Berlouis . 10I consider that I should adopt the approach endorsed by the High Court in Scott Fell v Lloyd , the Full Court of the Federal Court in Adsett v Berlouis and by Mansfield J in Jackson v Salisbury . I will therefore order that the Trustee pay the costs of and incidental to the motion, and that he be jointly and severally liable with Mr Barwick for those costs as is the usual position where a party succeeds against multiple opponents: Rushcutters Bay Smash Repairs Pty Ltd v H McKenna Netmakers Pty Ltd [2003] NSWSC 670; Scripture Union v Prime Industrial Pty Ltd [2006] NSWSC 38 at [28]-[29]. I should add that the matters to which I have referred above suggest that the Trustee should be entitled to an indemnity for those costs from the assets of the bankrupt estate of Mr Goodridge, as he acted reasonably and properly in adopting the position to which I have referred in respect of the motion, using that term in the manner adopted in Adsett v Berlouis at 107-111 and in Jackson v Salisbury (No 3) at [10]. 11Mr Goodridge initially sought an additional order that the Trustee indemnify Mr Barwick for the costs which he would be required to pay of and incidental to the motion, but did not press that order in oral argument. It is therefore not necessary for me to deal with that matter. 12Mr Goodridge also sought an order that Mr Barwick otherwise pay the costs of the proceedings, including the costs payable on any discontinuance of the proceedings. Upon discontinuance of the proceedings, the discontinuing party must pay the costs of the other party unless the Court otherwise orders: UCPR r 42.19. Mr Barwick did not oppose the orders sought by Mr Goodridge in respect of the costs payable on the discontinuance of the proceedings. Trustee's contention that proceedings should be adjourned 13An additional issue arose before me, as to whether I should grant leave at this stage for Mr Barwick to discontinue the proceedings. The Trustee submitted that it intended to appeal against my judgment and had filed a Notice of Intention to Appeal, and that I should not grant leave to Mr Barwick to discontinue the proceedings at this point and should instead adjourn the proceedings for further directions to a date in May 2012. In particular the Trustee contended that leave should not be granted to discontinue the proceedings because, if Mr Goodridge then enforced the Rights, the Trustee may be deprived of the practical benefit of a settlement which it had negotiated with Mr Barwick if he is placed in bankruptcy. Mr Goodridge sought to address that issue by offering an undertaking to provide reasonable notice of any receipt or dealing with any funds which were paid by Mr Barwick to him as a result of enforcement of the Rights. 14There are, in my view, several difficulties with the course for which the Trustee contended. First, in the ordinary course, a party which does not wish to continue proceedings will be granted leave to discontinue them on the basis that other parties are appropriately compensated as to costs. Second, Mr Barwick submitted that, if he is not granted the leave to discontinue the proceedings which he seeks, the Court should order that he not be liable for any further costs in the proceedings incurred after 5 December 2011. That protection is fairly sought by Mr Barwick so far as the approach urged by the Trustee would require that he remain in proceedings against his will, but would expose Mr Goodridge to potentially unrecoverable costs of any further steps which then need to be taken in the proceedings, including the costs of the further directions sought by the Trustee in May 2012. 15Third, Mr Goodridge opposes the course urged by the Trustee on the basis that it will or may prejudice his ability to rely on a bankruptcy notice which he served on Mr Barwick in January 2011. It appears that, after that bankruptcy notice was served, Mr Barwick filed proceedings in the Federal Magistrates Court of Australia seeking an extension of time to comply with the bankruptcy notice and relied upon these proceedings in support of that application. Mr Goodridge submitted that the Federal Magistrates Court had indicated, when the matter was last listed, that it was unlikely that it would grant a further extension, and Mr Barwick accepted that the Court had at least indicated that it was unlikely to grant such an extension without evidence as to why it should do so. The bankruptcy notice was issued nearly twelve months ago; the course urged by the Trustee would involve a delay of at least a further six months; and there can be no certainty that the Federal Magistrates Court would be prepared to further adjourn the proceedings before it over that period. 16The difficulty to which I have referred above is exacerbated because the matter is next listed in the Federal Magistrates Court tomorrow, 13 December 2011. Although I invited the parties to seek to reach agreement between them as to the terms on which a stay of my judgment could be granted so as to preserve their respective interests, and delayed my judgment to allow them an opportunity to do so, they were unable to reach such an agreement. In these circumstances, I do not consider that I should withhold leave to Mr Barwick to discontinue the proceedings where he has made clear that he does not wish to continue them, or grant the lengthy adjournment sought by the Trustee where there is at least a real risk that course would adversely affect Mr Goodridge's position in the proceedings in the Federal Magistrates Court. Orders 17Accordingly, I order that: 1 Mr Barwick have leave to discontinue the proceedings. 2 Mr Barwick and the Trustee pay Mr Goodridge's costs of and incidental to the motion. 3 Mr Barwick otherwise pay the costs of the proceedings, including the costs payable on any discontinuance of the proceedings. 18I also note Mr Goodridge's undertaking, which I understand to be offered inter partes, to provide reasonable notice to the Trustee of any receipt or dealing with any funds that are paid by Mr Barwick to him as a result of enforcement of the Rights.