THE COURT:
1 On 15 November 2019, we published our reasons for allowing these four appeals and setting aside the sequestration orders against the estates of the four appellants: Endresz v Commonwealth of Australia [2019] FCAFC 197. We made orders that allowed the appellants' trustees in bankruptcy, who had not appeared at the hearing of the appeals, to file and serve submissions on or before 22 November 2019 in respect of any orders the trustees sought in dealing with any costs incurred and claims for remuneration from 15 March 2019, being the date of the making of sequestration orders.
2 In addition, we granted the parties leave to file and serve written submissions to oppose the making of the orders that Rares and Markovic JJ had proposed provisionally would be made with effect from 2 December 2019, in the form of order 5, namely (Endresz [2019] FCAFC 197 at [137]):
5. If no submissions are filed in accordance with Orders 2 or 3 the following orders be made with effect from 2 December 2019:
(a) The appeal be allowed.
(b) Order 4 made by the Federal Circuit Court of Australia on 18 May 2018 in proceeding [in the Federal Circuit Court] and orders 1, 2 and 3 made by the Court on 15 March 2019 in proceeding [in this Court] be set aside and in lieu thereof the following orders be made:
(i) The Court declares that the Creditor's Petition filed on 12 April 2017 lapsed on 11 April 2018 pursuant to s 52(4) of the Bankruptcy Act 1966 (Cth).
(ii) There be no order as to costs.
(c) The respondent pay 50% of the appellant's costs of the appeal.
3 On 20 November 2019, the Official Trustee in Bankruptcy wrote to the Court stating that it would not be filing any submissions.
4 On 29 November 2019, the appellants made submissions in which they sought orders in lieu of those proposed in order 5 that the Commonwealth pay their costs of:
(a) the proceedings below (the trial costs); and
(b) the appeals on a party and party basis up to 31 May 2019 and, thereafter, on an indemnity basis (the appeal costs).
The appellants' submissions
5 The appellants argued that the Commonwealth should have accepted the offer that they had made in a letter sent on 31 May 2019, on the basis of Calderbank v Calderbank [1976] Fam 93, in which they proposed that the sequestration orders be set aside by consent with no order as to costs. The letter stated, without elaboration, that, based on their then four grounds of appeal, they "consider that they have good prospects of success".
6 The Commonwealth responded on 6 June 2019 and rejected the offer, observing that the appellants' letter had "not put with sufficient particularity the reasons why" the Commonwealth ought to have accepted it.
7 The appellants noted that:
on 15 July 2019, in their outline of submissions for the appeal, they abandoned one of their grounds of appeal; and
on 22 July 2019, the Commonwealth, in turn, abandoned its argument in support of its objections as to competency of the first ground of the appeals that it had filed on 18 April 2019.
8 The appellants contended that the Commonwealth had been unreasonable in refusing their 31 May 2019 offer and that they had a high prospect of overturning the decision of the Federal Circuit Court to apply the slip rule so as, retrospectively, to extend the life of the creditor's petitions after they had lapsed pursuant to s 52(4) of the Bankruptcy Act 1966 (Cth). They argued that their offer was a real and substantial compromise. They submitted that there were no exceptional circumstances to warrant a departure from the "usual rule" that costs should follow the event. They contended that they had been wholly successful in defending against the orders sought in the creditor's petitions and that the grounds on which they failed were not so disproportionate as to warrant a departure from the "usual rule" as to costs.
Consideration
9 The costs of a proceeding are in the discretion of the Court pursuant to s 43(1) of the Federal Court of Australia Act 1976 (Cth). Moreover, s 43(3)(b), (c) and (e) contemplate that the Court may make different awards as to costs in relation to different parts of a proceeding, order the parties to bear costs in specified proportions and or award costs in favour of, or against, a party regardless of that party's success in the proceeding.
10 The appellants' submissions should be rejected. First, the 31 May 2019 offer gave no elaboration of why the appellants' four grounds of appeal might have had good prospects of success. They had failed on three of those grounds before the primary judge. Those three grounds involved the parties in considerable time and effort requiring each side to prepare written submissions and to engage in oral argument both before the primary judge (who did not hear argument on the slip rule) and in the appeal. Whilst those three grounds may have been arguable, it would be difficult to characterise them as having "good prospects of success", especially when the appellants abandoned one when filing their submissions in support of their appeals. The three grounds were all discrete from the one concerning the availability of the slip rule on which the appeals were allowed. The Commonwealth negated all three of the failed grounds before the primary judge and the two that were pressed before us.
11 Secondly, the appeals could not have been allowed by consent as a mere formality. In order to allow an appeal, by consent, from a judgment, the Court must be satisfied that there is an arguable appealable error by the judge at first instance: Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64 at 77 [51] per French, Weinberg and Greenwood JJ; Sims v Chong (2015) 230 FCR 346 at 355-356 [39] per Mansfield, Siopis and Rares JJ; Smits v Lillas & Loel Lawyers Pty Ltd [2016] FCAFC 143 at [10] per Rares, Collier and Markovic JJ. The question of whether the Federal Circuit Court judge had been correct to apply the slip rule was an issue that was by no means clear cut. It could not have been dealt with in the absence of a substantive argument of the kind that occurred on the hearing of the appeals.
12 In those circumstances, it would not be just to order that the Commonwealth recover nothing and pay whatever the amount of the trial costs that the appellants, who were then unrepresented, might be entitled to recover.
13 In our opinion, the Commonwealth wholly succeeded in the part of the trial before the primary judge that occurred after the Federal Circuit Court had transferred the proceedings to this Court. The Commonwealth should have been unsuccessful only in the part of the trial in the Federal Circuit Court. Given that the appellants, as litigants in person, incurred no, and had no right to recover any, amount of any substance in the proceedings below, justice will be done by ordering, as we proposed in order 5(b)(ii), that there be no order as to costs of the trial proceeding.
14 For the same reasons, we are not persuaded to depart from proposed order 5(c) that the Commonwealth pay 50% of the appellants' costs of the appeal. In all of the circumstances the appellants have not established that it was unreasonable for the Commonwealth to reject their 31 May 2019 offer. The appellants failed on, or abandoned, all of their grounds save for the one on which they succeeded. They had raised those failed grounds, no doubt, to provide what they had hoped would be a fall back were their argument on the slip rule not to succeed. The proposed order reflects the partial success of the appeals but also recognises that the Commonwealth was put to substantial expense in dealing with the unrelated grounds that failed.
Conclusion
15 For the reasons above, the orders as to costs proposed in order 5 made on 15 November 2019 should be made. The appellants should pay the costs of their applications to vary those proposed orders.
I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Rares, Markovic and Charlesworth.