Culleton v Balwyn Nominees Pty Ltd

1. Order 2 of the Full Court made on 3 February 2017 be varied by substituting the following for the order made on 3 February 2017: The appeal be dismissed and the respondent's costs on appeal (including reserved costs) be taxed and paid out of the estate of the appellant in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 The Full Court delivered judgment in this appeal on 3 February 2017: Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8. The orders of the Full Court were: 1. Paragraphs 13, 14 and 17 of the affidavit of the appellant dated 11 January 2017, the whole of the affidavit of the appellant dated 18 January 2017 and the whole of the affidavit of Ioanna Culleton dated 18 January 2017 be rejected. 2. The appeal be dismissed with costs. 3. All proceedings under the sequestration order made on 23 December 2016 against Rodney Norman Culleton be stayed until midnight (Australian Eastern Daylight Savings Time) on Monday 6 February 2017. 2 These orders were varied by an order made by the Chief Justice in Chambers later on 3 February 2017, after consultation with the other judges that determined the appeal. This order was as follows: 1. Order 3 of the Full Court is varied by extending the stay to 4:15PM Australian Eastern Daylight Saving Time on Wednesday 8 February. 2. Leave is granted to the respondent to argue to oppose such extension at a time to be arranged on Monday 6 February by arrangement with the chambers of the Chief Justice in Sydney. 3 On 6 February 2017, the Chief Justice's associate emailed the parties to confirm whether or not the respondent had any objection to the variation of the orders of the Full Court. The respondent replied stating: The Respondent's position is that, although the Appellant's position is without merit, it does not oppose the extension of the stay until 4.15pm on Wednesday 8 February 2017. However, in the event an application for special leave to appeal to the High Court is filed before that time and an application is made for a further stay, our client respectfully requests to be heard in opposition to that further stay application. Further, we respectfully request that Order 2 of the Orders made by the Full Court on 3 February 2017 be varied for the avoidance of doubt,, [sic] in so far as it deals with costs, to reflect that the petitioning creditor's costs on the appeal be treated as a priority in the bankruptcy pursuant to the Bankruptcy Act, consistent with the costs order made by Barker J below. We respectfully request that the order be varied to read as follows: "The appeal be dismissed and the Respondent's costs on appeal (including reserved costs) be taxed and paid out of the estate of Rodney Norman Culleton in accordance with the statute." 4 The Chief Justice's associate then contacted the solicitors for the appellant regarding the variation sought by the respondent. The response from the appellant's solicitors was as follows: I understand that the costs of the petitioning creditor upon the making of a sequestration order are normally ordered to be paid on a priority basis, however, I am not sure that the same principle applies to the costs in relation to an appeal. This question is best left to the Full Court to decide. 5 The respondent's solicitors noted in reply that: The respondent respectfully submits that it is the usual order that the costs of a petitioning creditor successfully defending an appeal be taxed and paid out of the bankrupt estate in accordance with section 109(1)(a) of the Bankruptcy Act. 6 In support of this contention, the respondent referred to the following cases: Mearns v Australian Litigation Fund Pty Ltd [2006] FCAFC 168 at [4]; Joossé v Deputy Commissioner of Taxation [2004] FCAFC 245; 137 FCR 576 at [82]; Guss v Johnstone [2000] FCA 1584 at [7] and Stankiewicz v Plata [2000] FCA 1185. 7 Section 109(1)(a) of the Bankruptcy Act 1966 (Cth) relevantly provides: (1) Subject to this Act, the trustee must, before applying the proceeds of the property of the bankrupt in making any other payments, apply those proceeds in the following order: (a) first, in the order prescribed by the regulations, in payment of the taxed costs of the petitioning creditor and the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee and the costs of any audit carried out under section 175 … 8 In Guss v Johnstone [2000] FCA 1584, Drummond, Sackville and Dowsett JJ stated (at [7]): It is appropriate that the costs of the [creditor] on the appeal should be dealt with in the same way as its costs in the proceedings determined at first instance, that is, the [creditor's] costs of the appeal including reserved costs, should be taxed and paid out of the appellant's estate in accordance with s 109(1)(a) of the Bankruptcy Act. 9 As was submitted, such an approach was adopted in Stankiewicz v Plata [2000] FCA 1185 at [33] by the same bench, in Joossé v Deputy Commissioner of Taxation [2004] FCAFC 245 at [82] by North, Finkelstein and Jacobson JJ and in Mearns v Australian Litigation Fund Pty Ltd [2006] FCAFC 168 at [4] by Nicholson, Conti and Downes JJ where such an order for the payment of costs out of the appellant's estate was described as "a usual order". According priority under the Bankruptcy Act 1966 (Cth) to the costs of the creditor on appeal appears from the authorities to be the standard course. 10 The submissions of the respondent as to the variation of the orders of the Full Court should therefore be accepted. We make the following order: