• Lawyers in Sydney
• Lawyers in Melbourne
• Lawyers in Brisbane
• Lawyers in Perth
• Family lawyers
• Employment lawyers
• Criminal lawyers
• Wills and estates lawyers
• Find a lawyer

THAWLEY J: 1 These proceedings were commenced in the Supreme Court of New South Wales on 19 October 2017 (the Supreme Court proceedings). The plaintiff, Daniel Behman, sought, amongst other things, declarations that the transfer of 46 Oliver Street, Bexley North (the property), by Tarek Behman (Daniel's father) to Mark and Andrew Behman (two of Daniel's brothers) was made with intent to defraud creditors and void under s 37A of the Conveyancing Act 1919 (NSW). He also sought orders setting aside the transfer of the property. Daniel joined Macquarie Bank Limited, the first mortgagee of the property, as the fourth defendant to the proceedings. 2 On 28 February 2018, Tarek became bankrupt. 3 On 16 August 2018 the trustee of the bankrupt estate of Tarek Behman commenced proceedings in this Court seeking relief under ss 120 and 121 of the Bankruptcy Act 1966 (Cth) and, alternatively, under s 37A of the Conveyancing Act (the trustee proceedings). Daniel was the main if not only creditor of the estate. The underlying factual matrix for the trustee proceedings was identical to that of the Supreme Court proceedings. 4 On 19 October 2018 the Supreme Court proceedings were transferred to this Court under s 5(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW). The proceedings were numbered NSD 545 of 2019 and were allocated to my docket. 5 On 29 May 2019 the Supreme Court proceedings which had been transferred (namely these proceedings) were stayed pending the outcome of the trustee proceedings. 6 The trustee proceedings were the subject of reasons delivered on 1 November 2019: see Shepard (Trustee) v Behman [2019] FCA 1801 (Shepard v Behman). Orders giving effect to those reasons were made on 22 November 2019. The trustee in those proceedings was successful in having the transfer set aside under ss 120 and 121 of the Bankruptcy Act. In the reasons for decision I also concluded that s 37A of the Conveyancing Act would have been engaged, had I not concluded that s 121(1) of the Bankruptcy Act applied: see Shepard v Behman at [140]. 7 In the trustee proceedings each party had a measure of success because Mark and Andrew successfully claimed, in a cross-claim, that they each held an equitable interest in the property. In those proceedings the costs orders were to the effect that Mark and Andrew pay the trustee's costs of the trustee's claim, and the trustee pay Mark and Andrew's costs of their cross-claim. In Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 (Ex Parte Qin), McHugh J said at 625 (footnotes omitted): If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. 8 In this case, the applicants contend that this expression of a general rule should be departed from because in the trustee proceedings, Daniel's s 37A claim was, in substance, vindicated. It is correct that, as a matter of substance, Daniel's s 37A claim was found to be successful. 9 Mark and Andrew on the other hand say that one cannot tell what would have occurred in the Supreme Court proceedings, and submitted that they might have, for example, instituted a cross-claim. The only cross-claim that Mark and Andrew might have commenced in the Supreme Court proceedings was a cross-claim against Tarek in order to vindicate what they contended to be their equitable interest in the property. No other cross-claim was suggested in submissions. In light of the reasons delivered in the trustee's proceedings, Mark and Andrew may have been successful in such a cross-claim. However, it is clear that such a cross-claim could not have been made against Daniel. Indeed, the kind of cross-claim identified could have been brought as a separate proceeding against Tarek. 10 In the somewhat peculiar circumstances of this case, the Supreme Court proceedings were rendered futile when the bankruptcy trustee, in substance, took over the case which Daniel had brought. Given the reasons I delivered on 1 November 2019, it seems to me the Court is in a position to determine that Daniel's case would have been successful. Accordingly, in my view the principled exercise of the discretion does not require or warrant the Court following the general rule expressed by McHugh J in Ex Parte Qin. 11 Mark and Andrew sought costs on the basis of offers of settlement which they had made by way of communications dated 27 November 2017 and 5 February 2018. In substance, Andrew offered to have the transfer set aside and for there to be no order as to costs. 12 In those communications, Andrew indicated that Tarek and Mark were agreeable to the terms of the offer. However, he also made it clear that he did not have instructions to represent them in making the offer. Daniel, by his solicitors, sought clarification as to whether Andrew represented Tarek and Mark and whether he was capable of making an offer on their behalf. Andrew clarified that he was not. Daniel's solicitors sought a telephone number and email address for Tarek and Mark, but the evidence does not disclose whether there was any response. 13 In any event, there were unresolved issues between the parties with respect to the offers of settlement. In particular, there was debate about the precise terms which would be adopted and whether stamp duty would have been payable. Indeed, in a communication from Andrew to Daniel's solicitor on 27 February 2018 which responded to a counter-offer which had been made by Daniel's solicitor, Andrew stated that he had previously discussed a regime in the event that stamp duty was payable. The evidence does not disclose what that regime was. 14 There was also an issue with respect to the costs of Macquarie Bank, which wanted its costs payable. No agreement in that respect had been reached. 15 Accordingly, it seems to me that the parties were in negotiations which seemed to be progressing well, but no agreement had been reached, at the time when Tarek became bankrupt on 28 February 2018 and his bankruptcy brought an end to the negotiations in that form. 16 There was no unreasonable failure to accept the offers in the letters of 27 November 2017 and 5 February 2018 before the bankruptcy. There are two main reasons why that is so: first, neither was an offer capable of acceptance in circumstances where there was no formal indication from Tarek and Mark that they were agreeable to the offer or that it was being made on their behalf and Andrew had made clear that he did not act for them; secondly, and more importantly, Daniel's failure to accept those offers was not unreasonable because the terms of them were too uncertain. The parties continued to negotiate with each other in good faith and neither party acted unreasonably before the bankruptcy commenced. 17 So far as concerns the applicant's costs in the Supreme Court proceedings, in my view, there should be an order for the costs of those proceedings up until the point in time when those proceedings were stayed in this Court. 18 Macquarie Bank submitted that it was not a necessary party to these proceedings and should have an order for costs in its favour. 19 Daniel submitted that, although no cause of action was sought against Macquarie Bank, as a matter of precaution it was appropriate to have Macquarie Bank joined to the proceedings. Daniel referred to Patel v Lal [2011] NSWSC 603. 20 I am not satisfied that Macquarie Bank was a necessary party to the Supreme Court proceedings, and I don't understand Patel to indicate otherwise. The evidence before me reveals that there were discussions between Daniel's representatives and Macquarie Bank's representatives shortly after the Supreme Court proceedings were commenced. I infer, from the communications, that Macquarie Bank raised as an issue the question of whether it was a proper party or necessary party to the proceedings. 21 That query resulted in an email from Daniel's solicitor to Macquarie Bank's representative indicating that her client's "Counsel's concern is that if the bank is released, we may have trouble with final orders if the Trial Judge forms the view that the Bank should have been involved". The solicitor suggested to Macquarie Bank that they file a submitting appearance save as to costs, and perhaps save as to any order in relation to its security, on the basis of Daniel's solicitor providing an undertaking to keep the bank informed of developments as the matter progressed. 22 About 10 days later, the solicitor again contacted Macquarie Bank and referred to her email and to a forthcoming directions hearing and asked Macquarie Bank whether it had instructions to file a submitting notice. The solicitors for Macquarie Bank responded to that letter indicating that they were seeking instructions and would respond shortly. 23 The evidence does not disclose any further communication with respect to Macquarie Bank's position in this regard. 24 The applicant also made a submission that, if costs were to be ordered in favour of the fourth defendant, then a Sanderson or Bullock order should be made such that the second and third respondents bear those costs. In my view, neither of those lines of authority apply to the present circumstances for the reason that I do not believe that Macquarie Bank was a necessary party and I do not believe that a principled exercise of discretion would, in those circumstances, require the party which did not join the unnecessary party to pay for those costs. 25 Having regard to all of the circumstances, it seems to me that the applicant should pay some of Macquarie Bank's costs. 26 However, the applicant behaved reasonably and responsibly in seeking to minimise those costs. In particular, the applicant had suggested a course of Macquarie Bank filing a submitting appearance, and had offered to keep Macquarie Bank informed about the conduct and progression of the proceedings. 27 The applicant also submitted that it was always open to Macquarie Bank to have applied to the Court to be removed from the proceedings, or for the proceedings to be dismissed as against Macquarie Bank. There is some substance to the applicant's position in this regard in circumstances where it had offered to keep the bank informed and suggested the bank file a submitting appearance. If Macquarie Bank had pursued this approach, it may well have been that the applicant would have agreed to releasing the bank from the proceedings. 28 Accordingly, while I propose to make a costs order in favour of Macquarie Bank it will be limited to what is reasonable in the particular circumstances, including whether it was reasonable for Macquarie Bank to attend at case management hearings and the like. The evidence suggested that Macquarie Bank's costs were $20,000. At first blush, that seems remarkably high in the circumstances, and whilst I intend to make an order for Macquarie Bank's costs, those orders will include a regime for the costs to be identified clearly and for there to be an adequate explanation of why those costs were reasonably incurred in the course of this litigation. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Thawley.