The Full Court decision of 7 November 1996
On 7 November 1996, the appeal from the judgment of Heerey J and the application for leave to appeal from the judgment of Kiefel J came on for hearing before the Court as presently constituted. Mr Theo appeared in person. Mr Hack appeared for the Official Trustee. The trustees for sale, not being parties to either the appeal in the application for leave to appeal, did not appear.
On that day we delivered a judgment in which we held that it was not open to Heerey J to rely on the doctrine of issue estoppel in order to make findings of fact adverse to Mr and Mrs Theo. We pointed out that, since the Official Trustee had been unsuccessful in the proceedings against Mr and Mrs Theo, the findings of fact made by Cooper J were not legally indispensable to the conclusions reached by his Honour. Thus the doctrine could not be invoked so as to rely on those findings in the later proceedings before Heerey J.
In response to a submission by Mr Hack that the matter should be remitted for a further hearing we said this:
"In these circumstances, we consider that it would not be appropriate to remit the matter for rehearing. The Official Trustee has elected to rely upon the conclusive effect of findings which it knew were contested. It has been unsuccessful in this endeavour. It should not have the opportunity yet again to proceed against Mr and Mrs Theo. Whatever the factual findings that might be made on any further hearing, the point has been reached where an end must be brought to this litigation."
We expressed our conclusion as follows:
"The appeal should be allowed. The declarations and orders made by the trial Judge must be set aside. The Official Trustee's application must be dismissed. The Official Trustee must pay the costs of the first appellant here and below. The application for leave to appeal from the orders of Kiefel J refusing a stay is refused on the basis that it is unnecessary in view of the other orders we have made. We reserve liberty to the trustees for sale to apply within 21 days or such further time as the Court allows."
We then made the following orders:
"1. The appeal be allowed.
2. The declarations and orders of the trial Judge be set aside.
3. The respondent's application be dismissed.
4. The respondent pay the costs of the first appellant before the trial Judge and on appeal.
5. The application for leave to appeal from the orders of Kiefel J refusing a stay be dismissed.
6. Liberty be reserved to the trustees for sale appointed by the orders of the trial Judge to apply to the Court within 21 days or such further time as the Court may order."
Order No 6 was added at the request of Mr Hack, who asked that the trustees for sale have liberty to apply to a Judge of the Court "in the event there are issues involving them which need to be worked out".
The litigation, despite our observations, has not reached an end. Following the judgment of 7 November 1996, it continued unabated.
Dismissal of the application for leave from the orders of 3 October 1996
On 20 December 1996, Mr Theo appeared before Kiefel J in relation to a claim for damages brought by him against the Official Trustee, the Official Receiver and the trustees for sale. On that day, Mr Hack appeared for the Official Trustee and Official Receiver and Mrs Mullins for the trustees for sale. While the proceedings appear to have been listed to deal with Mr Theo's claim for damages, he sought to withdraw his application for leave to appeal against the orders of 3 October 1996. Kiefel J, after some discussion, dismissed the application for leave to appeal from the orders made on 3 October 1996, reserving only the question of costs as between Mr Theo and the Official Trustee. No order as to costs was made as between Mr Theo and the trustees for sale.
The Full Court decision of 28 April 1997
Not to be daunted, Mr Theo filed a further motion seeking leave to appeal from the orders made by Kiefel J on 20 December 1996. This application apparently retained the number QG 182 of 1996 given to Mr Theo's motion for leave to appeal against the directions made on 3 October 1996. By a separate motion (No 216 of 1996) Mr Theo moved the Court
"for clarification orders in regard to the Full Court of the Federal Court of Australia order of the 7.11.96 and, in particular, paragraph 5 of the relevant orders...".
The two motions were heard on 28 April 1997 by a Full Court comprising Burchett, Drummond and Mansfield JJ. In a judgment delivered on that day, their Honours held that the orders made by Kiefel J on 20 December 1996 were an exercise of the Court's appellate jurisdiction and there was no right of appeal to a Full Court from those orders. Accordingly, the motion for leave to appeal in respect of the orders made on 20 December 1996 had to be dismissed as incompetent. In any event, there was nothing to suggest that the discretion exercised by Kiefel J had miscarried.
The Court said that the second motion amounted to a claim by Mr Theo that the Full Court had made a mistake in the judgment given on 7 November 1996. However, there was no jurisdiction for one Full Court to hear an appeal from an earlier Full Court. That was a matter for the High Court, should it grant special leave to appeal. The Full Court nonetheless made these additional observations:
"The orders of the Full Court have been duly entered. Of course, it retains certain limited powers of correction of errors under the slip rule. But there is no reason to think that anything of that nature occurred in the present case. A grant of leave to appeal against what was simply an exercise of discretion by a judge at first instance in relation to a costs order would be a comparatively rare event. Kiefel J was certainly aware on 2 September 1996 that it was possible the appeal might succeed; she nevertheless thought that in the circumstances, the application for a stay having been brought on a misconceived basis, Mr Theo should be ordered to pay the costs of it. In such a case, the success of the appeal does not lead to the conclusion that there should be leave to bring yet another appeal against her Honour's exercise of discretion. Mr Theo's ultimate escape, by virtue of the Official Trustee's mistakes, from the consequences of the findings of fraud made against him by Cooper J does not in this case entitle him to be permitted to go back for his hat. It should not be overlooked that the Full Court, in refusing the Official trustee a remittal of the principal proceeding for rehearing, expressly exercised a discretion on the basis that 'the point has been reached where an end must be brought to this litigation'. That statement in the Court's reasons was followed, almost immediately, by its refusal of leave to Mr Theo. Although the Court commented that its orders made the allowance of a stay 'unnecessary', there is no reason to think it had changed its mind about the need for finality, and no reason to think it saw anything to question in Kiefel J's exercise of her discretion. Nor was there any convincing ground to see it as unjust that Mr Theo, who had in two substantial proceedings profited by legal errors on the part of the Official Trustee, should himself be held to a costs order made in an application which he had based inappropriately upon a proposition not sustainable in law."
Mr Theo's special leave application to the High Court
In the meantime, Mr Theo had sought special leave to appeal to the High Court from Order No 5, made by us on 7 November 1996. That application was heard by the High Court (Gaudron, McHugh and Kirby JJ) on 5 December 1997. In the course of the hearing, Gaudron J expressed the view that the statement made by us in the judgment of 7 November 1996, that it was unnecessary to consider the special leave application, appeared to have been wrong. The transcript of the argument shows that Mr Hack, who appeared for the Official Trustee, conceded that an error had been made, and that McHugh and Kirby JJ seemed to accept that the concession had been correctly made. It is somewhat curious that, although Mr Theo made a brief and incomplete reference to the motions heard by the Full Court on 28 April 1997, the judgment given by that Full Court appears not to have been drawn to the attention of the High Court.
In the result, the High Court ordered that the application for special leave be stood over
"to enable Mr Theo to make written application to the Registrar of the Federal Court to have the matters relisted before the Full Court...attaching a transcript of today's proceedings and serving notice of that application on the trustees for sale together with notice that Mr Theo will be applying to have them joined as parties in the proceedings in the Full Court should they be listed. We would reserve to both parties, in that event, leave to apply to this Court on seven days' notice."
Mr Hack stated to the High Court that, if the matter were returned to the Full Court, the Official Trustee would not argue that any application by Mr Theo did not come within the slip rule. He also indicated that no action would be taken by the Official Trustee to enforce the costs order pending this Court's consideration of the matter. The High Court reserved the costs of the application for special leave to appeal.
On 7 December 1997, Mr Theo requested that his application for leave to appeal from Order No 5 be relisted before the same Full Court as had determined the appeal from Heerey J. It was this request that led the Court to be reconvened.
The Official Trustee's offer
On 28 January 1998 the Official Trustee wrote an open letter to Mr Theo, in the following terms:
"I refer to earlier dealings in relation to your application to have the Full Court of the Federal Court re-consider the Orders made by it on 7 November 1996 and in particular your complaint that the Full Court ought to have set aside the Order made by Kiefel J on 2 September 1996 whereby you were ordered to pay my client's costs of, and incidental to, the motion seeking a stay.
2. My client is concerned that the costs involved in having the matter reconsidered by the Full Court are likely to be far in excess of the amount of the costs encompassed by the Order. My client wishes to avoid the incurring of unnecessary costs, not only legal costs but also the costs incurred in having the Full Court re-convened.
3. Accordingly, my client, the Official Trustee, has instructed me to advise you that he will undertake not to enforce the Order for costs made in his favour by Kiefel J on 2 September 1996 and not to seek to recover the amount of those costs. To that end I suggest that a Consent Order be filed varying the Order made on 2 September 1996 by deleting the obligation to pay the Official Trustee's costs of and incidental to the motion.
4. Consistent with this approach, my client would propose that the application for special leave to appeal be dismissed by consent with no order as to costs.
5. I should stress:-
(a) that this proposal does not affect the Order for costs made against you on 2 September 1996 in favour of the trustees for sale, Mr Bennett and Mr Philip [sic];
(b) that this proposal does not affect any other costs Order made in favour of my client.
Please let me have your response in writing."
Mr Theo responded on 13 February 1998, declining the offer. Mr Theo included among his reasons for declining the offer that he wished to amend the order made by Cooper J on 24 August 1995 that Mr and Mrs Theo pay 80 per cent of the Official Trustee's costs of those proceedings. Mr Theo took this position notwithstanding that a Full Court had dismissed an appeal from Cooper J's orders and that the High Court had refused Mr and Mrs Theo's application for special leave to appeal from the judgment of the Full Court.
The application under the slip rule
The first question is whether we should accede to Mr Theo's application to set aside Order No 5, in order to correct a mistake in the judgment or order arising from an accidental slip or omission: FCR, O 35, r 7(2). The authorities make it clear that the jurisdiction is to be exercised with great caution. Generally speaking, the power is not to be exercised unless the applicant can show that by accident and without fault on his or her part the order was made without the applicant being heard: Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300, at 302, per Mason CJ. His Honour, however, made these further observations (at 303):
"[I]t must be emphasised that the jurisdiction is not to be exercised for the purpose of re-agitating arguments already considered by the Court; nor is it to be exercised simply because the party seeking a rehearing has failed to present the argument in all its aspects or as well as it might have been put. What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide a backdoor method by which unsuccessful litigants can seek to reargue their cases."
We think it fair to say we proceeded on 7 November 1996 under a misapprehension, namely, that the costs orders made by Kiefel J on 2 September 1996 had been made in favour of parties to the proceedings. It was not pointed out to us, and we did not appreciate, that the trustees for sale had not been joined as parties. Nor did we appreciate that the trustees for sale had provided no evidence adduced on the stay application. Accordingly, we overlooked that Kiefel J's order that Mr Theo pay their costs was an exercise of power in favour of non-parties, who had not provided material assistance on the application before the Court. Thus we did not consider whether the costs order made in favour of the trustees for sale was an appropriate exercise of the Court's power under s 43 of the Federal Court of Australia Act 1976 (Cth) "to award costs in all proceedings before the Court". We should add that our misapprehension was not a matter of which the Full Court considering the application for leave to appeal from Kiefel J's orders of 20 December 1996 was or could have been aware.
Had Mr Theo been represented at the hearing of the appeal before us, it would have been hard to deny that the failure to bring the fact of a non-party order to our attention was his own fault. However, he is and has been unrepresented. While Mr Theo has received his share of procedural indulgences in this litigation, we think that it would be too harsh to attribute our misapprehension solely to his neglect or default.
It is regrettable that these prolonged and confused proceedings should require yet another chapter to be added to them. Especially is this so when the issue is merely one of a costs order made in the course of one of many interlocutory applications. Nonetheless, it is clear enough that we proceeded under a misapprehension when making Order No 5 and that the High Court has taken the view that Mr Theo should have the opportunity to apply to this Court under the slip rule. In these circumstances, we think that the appropriate course is to re-open Mr Theo's application for leave to appeal to the extent that it relates to the costs orders made by Kiefel J on 2 September 1996. There is no occasion for us to reconsider her Honour's refusal to grant the stay, since that refusal was overtaken by subsequent events. Nonetheless, her Honour's reasons for taking that course may bear on the costs orders made by her.
We therefore set aside Order No 5 and proceed to reconsider Mr Theo's application for leave to appeal insofar as it relates to the costs orders made on 2 September 1996. As we have noted, the trustees for sale consented to be joined as parties to the leave application. Accordingly, we direct that they be joined as respondents to Mr Theo's application for leave to appeal.
The costs order in favour of the Official Trustee
The Official Trustee was, of course, a party to the stay application determined by Kiefel J on 2 September 1996 and actively opposed that application. The costs order in favour of the Official Trustee therefore does not give rise to the same issues as the order that Mr Theo pay the costs of the trustees for sale. Furthermore, ground 8 of Mr Theo's notice of appeal (incorporated into the application for leave to appeal) specifically challenged only the order for costs in favour of the trustees for sale.
We are, however, relieved from the need to consider this aspect of the costs order further by a concession made by the Official Trustee in his written submissions. As Mr Hack explained, the Official Trustee is and, since 28 January 1998, has been prepared to consent to orders varying the costs order made by Kiefel J on 2 September 1996, by deleting Mr Theo's obligation to pay the Official Trustee's costs of and incidental to the motion. In the circumstances, we propose to make orders that will bring about this result. These will include granting leave to appeal and allowing the appeal to the extent necessary to delete the costs order in favour of the Official Trustee.
The Official Trustee's costs of the application for leave to appeal and the appeal
Mr Hack submitted that, since Mr Theo had refused to agree to the proposal put in the open letter of 28 January 1996, Mr Theo should pay the Official Trustee's costs of and incidental to the application for leave to appeal and of the appeal (if leave were granted). He submitted that, having regard to Mr Theo's refusal, the Official Trustee should have costs on an indemnity basis after 28 January 1996.
In our view, the Official Trustee's letter of 28 January 1996 offered Mr Theo all that he could reasonably have expected to achieve on his application for leave to appeal from the costs orders of Kiefel J made on 2 September 1996, insofar as those orders related to the Official Trustee. Indeed, Mr Theo made it clear in his oral submissions that, as against the Official Trustee, he sought only removal of the order that he pay the Official Trustee's costs of the stay application determined on 2 September 1996. Moreover, the reasons given by Mr Theo, in his letter of 13 February 1998, for not accepting the Official Trustee's offer were untenable. As will be seen, there was no proper basis for Mr Theo seeking to reopen the costs order made by Cooper J on 24 August 1995. Nor was there any proper basis for Mr Theo attempting to link the costs orders of 3 October 1996 to his application for leave to appeal from Kiefel J's costs orders of 2 September 1996. The Full Court, in its judgment of 28 April 1997, had refused to disturb the orders of 3 October 1996.
Having regard to the Official Trustee's concession, in the ordinary course Mr Theo would have his costs as against the Official Trustee of the application for leave to appeal from the orders of Kiefel J made on 2 September 1996 (insofar as the application relates to the costs orders made on that day) up to and including 28 January 1998. But the Official Trustee would have the costs of the application for leave to appeal and of the appeal after that day (including the costs of Mr Theo's application under the slip rule). In view of the history of this matter, we do not think that, in the ordinary course, the Official Trustee would have received costs on an indemnity basis, notwithstanding the untenable reasons given by Mr Theo for rejecting the Official Trustee's open offer.
In our view, however, orders in the form referred to in the previous paragraph should not be made. While the orders would not precisely cancel each other out, each side would have the benefit of costs orders. Having regard not only to the history of the litigation but the need for finality to which we referred, perhaps unduly optimistically, in our judgment of 7 November 1996, we think the appropriate course as between Mr Theo and the Official Trustee, is that there be no order for costs on the application under the slip rule, the application for leave to appeal, or the appeal.
The costs order in favour of the trustees for sale
There is no reason to doubt that Kiefel J had jurisdiction to award costs of the stay application in favour of the trustees for sale, notwithstanding that they were not parties to that application and did not seek to be joined: see Bent v Gough (1992) 36 FCR 204 (FC); Knight v F P Special Assets Ltd (1992) 174 CLR 178; Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 (FC); Rice Growers Co-Operative Ltd v ABC Containerline Nv (1996) 138 ALR 480 (FCA/Tamberlin J), at 485.
The trustees, quite properly, adopted a position of neutrality in relation to the stay application. There was no need for them to appear on that application, notwithstanding that they had been served with the notice of motion. They might well have chosen to submit to any order of the Court, but to have reserved their right to make an application in the proceedings for any costs incurred by them in carrying out the orders made by Heerey J on 1 August 1996. Indeed, Order No 6 made by us on 7 November 1996 was designed to protect the trustees' position, although we have been told in these proceedings that the trustees did not need to exercise the liberty reserved to them.
As we have noted, her Honour did not give reasons for making the costs order in favour of the trustees for sale. But it would seem likely that her Honour made the order largely because she formed the view (receiving no assistance on the issue estoppel point from the legal representatives) that Mr Theo had little prospect of succeeding on the appeal from the judgment of Heerey J. It is true that on 2 September 1996, the trustees for sale came to Court armed with affidavits, but Kiefel J rightly pointed out that the affidavits had no material bearing on the stay application. Her Honour should not be taken to have based the costs order on actions that she regarded as irrelevant to the application made by Mr Theo and with which she dealt.
As subsequent events have made clear, as at 2 September 1996 Mr Theo had very good prospects of success on his appeal. Doubtless, her Honour would have reached this conclusion had she been alerted to the issue estoppel question. But because the costs order in favour of the trustees for sale was based on an erroneous view of Mr Theo's prospects on the appeal we think that her Honour's discretion miscarried.
In these circumstances, we think the appropriate course is to exercise afresh the discretionary power in relation to costs. Mrs Mullins submitted that the trustees for sale should have been awarded their costs of the stay application because they endeavoured to assist the Court by filing affidavit evidence to rebut complaints they assumed Mr Theo would make. On the material before us, however, there is nothing to indicate that it was necessary or reasonable for the trustees to adopt the course they did. Kiefel J did not allow the affidavits to be read and Mrs Mullins did not suggest that they were relevant to the stay application itself. There is nothing in the evidence to suggest that any complaints made by Mr Theo required the trustees to place evidence before the Court. Whatever the position in other cases, in this instance the trustees took it on themselves to prepare material that turned out to be irrelevant. There were other means for the trustees to protect their own position and to ensure that, if the Court required information, it would be provided. (We should add that the parties seemed to have assumed that the costs order made by Kiefel J covered the costs of preparation of the three affidavits filed in Court by the trustees on 2 September 1996. It is not obvious that the orders made by Kiefel J had that effect. However, nothing turns on this question for present purposes.)
For these reasons, we think that the appropriate course is to grant Mr Theo's application for leave to appeal from the costs orders made by Kiefel J in favour of the trustees, allow the appeal and delete the order for costs. We were told that Mr Theo had paid the trustees for sale the costs in accordance with Kiefel J's orders of 2 September 1996. We were not asked to make any further orders by reason of that fact. Doubtless the trustees will repay the appropriate sum.
While Mr Theo has succeeded in setting aside the costs order made by Kiefel J, we think that in the present proceedings as between Mr Theo and the trustees for sale, no order for costs should be made. Mr Theo is partly responsible for the procedural difficulties that have arisen. For example, had he joined the trustees for sale on his application for leave to appeal against the orders made by Kiefel J, it is unlikely that we would have misapprehended the position on 7 November 1996. Moreover, it is difficult to see how Mr Theo could have incurred any substantial costs and, in any event, we think it is important (so far as we can) to minimise the opportunities for further disputation between the parties.
The motion to set aside the costs orders made by Cooper J
Mr Theo contended that the costs orders made by Cooper J did not accurately reflect his Honour's reasons, in that Mr and Mrs Theo should have been ordered only to pay 80 per cent of the costs of the hearing, rather than 80 per cent of the costs of and incidental to the application. We think that this submission misunderstands Cooper J's reasoning. His Honour clearly made the orders he intended to make; those orders flowed from his reasoning.
In any event, this Court has no jurisdiction to entertain any application to modify the orders made by Cooper J. An appeal from Cooper J's judgment was dismissed by a differently constituted Full Court, while the High Court dismissed an application for special leave to appeal. The proceedings have therefore concluded.
This application took up very little time. It should not be the subject of a costs order.