Citibank Ltd, in the matter of Stivactas v Parker

costs of citibank 6 Costs are at the discretion of the Court but that discretion must be exercised judicially. The general rule is that costs follow the event. There is no special rule as to the costs of an Official Receiver or Trustee in the context of bankruptcy and it is necessary to closely examine the circumstances of each case. 7 As Young J in the Supreme Court of New South Wales observed in Ramirez v Sandor's Trustee (No 2) (23 October 1997, unreported): "… there is no special rule as to the payment of costs to or by an Official Trustee or liquidator. Ordinarily, such people will not sue unless they either have sufficient funds to discharge their obligations in the litigation, or they have an indemnity as to costs from interested creditors. As a general rule, liquidators or Official Trustees who proceed without covering their costs in this way are at risk, see Ex parte Angerstein [1874] 9 Ch App 479." 8 In that case his Honour ordered that the unsuccessful respondent trustee should pay the costs of the plaintiff. The decision of Young J in this respect was upheld by the New South Wales Court of Appeal: see Trustees of the Property of Zoltan Sandor, a Bankrupt v Ramirex [1999] NSW CA 261 at par 71-76. 9 My attention has been directed to authorities where the Court has awarded costs against a trustee in circumstances where a s 139 ZQ Notice has been set aside: see for example Re Wedgwood ; Ex parte Bank of New Zealand (1993) 116 ALR 153. In that case the respondent trustee had argued that he should not have been made a respondent to the application but that the proper respondent was the Official Receiver whose decision to issue the Notice was only reviewable by way of administrative review. Cooper J rejected this argument and said at 161-162: "Section 139ZS of the Act gives to the applicant a right to come to this court to set aside the notice. Where the notice is procured at the initiative of the trustee (s139ZQ(1)(b)) and the trustee is the person to receive the value of the property (s 139ZQ(1) and (7)) and the person entitled to sue for the recovery of it as a debt (s 137ZQ(8), the trustee, is in my view the proper respondent who, being the beneficiary of the notice has the necessary interest to appear and argue in support of validity of the notice. That is what occurred in the instant case. Having failed on the application the trustee ought to pay the applicant's costs." 10 Those observations, in my view, are apposite in the present circumstances. In a subsequent decision of Terry v Official Receiver (Cooper J, 18 September 1998, unreported) his Honour ordered the Official Receiver to pay the costs of a Notice which had been set aside. In that case, the solicitors for the applicant had written to the trustee outlining formal defects in respect of the Notice issued by the Official Receiver and challenging the basis on which it was asserted that the trustee was entitled to have the transaction set aside. In his reasons Cooper J refers to the fact that it was the trustee who had decided not to proceed further in resisting the application. It does not appear that the trustee was a party in Terry and accordingly the only party against whom the costs could have been awarded was the Official Receiver. However, the case is distinguishable from the present where there is no suggestion of any formal defect in the Notice or any fault or oversight on the part of the Official Receiver. 11 In Re Pearson; Ex parte Wamsley v Pearson (1993) 46 FCR 55 a Notice under s 139ZQ was issued by the Official Receiver at the request of a trustee of the bankrupt estate. After hearing argument his Honour made a declaration that the transfer challenged was not void as against the trustee and ordered the trustee to pay costs. More recently in Norton v Halse (Trustee of the Bankrupt Estate of Payne) (1996) 137 ALR 593, Carr J set aside a notice issued by the Official Receiver under s 139ZQ of the Act. The Official Receiver was a respondent. The trustee was also a respondent. Having held that the notice should be set aside his Honour ordered the applicants' costs including any reserved costs were to be paid by the trustee. There was no costs order against the Official Receiver. 12 In the circumstances of this case the normal rule should apply and the costs should follow the event. Citibank should be awarded costs. The question is against whom? The real party with an interest in the issue of the Notice was clearly the Trustee. The Notice was issued on behalf of the Trustee by the Official Receiver and required payment to the Trustee of the moneys claimed under the allegedly void transaction. The Official Receiver made it clear that the Notice was issued at the request of the Trustee. As was appropriate in the circumstances the Official Receiver made it clear that she did not intend to take any active part in the proceedings. The authorities to which I have referred to above proceeded on the basis that the Trustee is the real party with an interest in the proceedings and in my view the present is not a case where the Official Receiver should be ordered to pay costs. Although the Act provides that the issue of a Notice under s 139ZQ is discretionary (by using the word "may") it does not follow that the Official Receiver ought to suffer the burden of costs where the Notice is issued and the Trustee is unable to make out the position for which he contends. The position may be otherwise in circumstances where it could be shown that there was some default on the part of the Official Receiver, such as issuing a notice in an incorrect form, which led to its being set aside or where it was manifest on the facts set out as part of the Notice that there was no basis for the claim to be made out. However, it is not necessary, in my view, for the Official Receiver to embark on a detailed investigation as to the factual or legal merits of the claim which forms the basis of the request for the Notice. 13 Therefore I consider that costs should be awarded in favour of Citibank against the Trustee but not against the Official Receiver.

costs of official receiver 14 The Official Receiver submitted that as a result of the way in which the matter was conducted, necessitating additional work on her behalf, she should recover her costs from either Citibank or the Trustee. I am not satisfied that any ground has been made out for such a conclusion. There is an assertion in the correspondence that it was only through the persistent communication from the solicitors for Citibank that the Official Receiver was obliged to appear beyond its submitting appearance. However it was not necessary for the Official Receiver to accede to these proposals. In my view neither Citibank nor the Trustee should have to pay any part of the costs of the Official Receiver. 15 Therefore I order that the Trustee pay the costs of Citibank in relation to the application to set aside the s 139ZQ Notice.

I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Counsel for the Respondent: Sullivans Solicitors

Solicitor for the Respondent: Australian Government Solicitor