Ferella v Official Trustee in Bankruptcy

1. The application for an extension of time within which to appeal be dismissed.
2. The applicants pay the respondent's costs of the application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

NICHOLAS J: 1 Before me is an application for an extension of time within which to appeal against order 3 made by Yates J on 8 September 2015 (Ferella v Official Trustee in Bankruptcy (No 5) [2015] FCA 983). On that date his Honour made a declaration that in the course of administering the applicants' bankrupt estates, the respondent was not justified in not disclosing to the applicants, on or after 22 October 2008, the letter dated 16 July 2008 from the Australian Taxation Office or its contents. The additional orders made by his Honour were purely concerned with the costs of the principal proceeding in which the applicants sought orders under s 179(1) of the Bankruptcy Act 1966 (Cth) ("the Act") for an inquiry in relation to the conduct of the respondent in relation to the applicants' bankruptcies. 2 The costs orders made by his Honour on 8 September 2015 were as follows: 2. In relation to the costs of and incidental to the hearing on 2 June 2010, there be no order as to costs. 3. In relation to the costs of and incidental to the hearing on 25 to 28 October 2010: (a) the applicants pay ten-elevenths of the respondent's costs; and (b) the respondent's right of indemnity from the applicants' bankrupt estates be limited to ten-elevenths of its costs. 4. In relation to the costs of and incidental to the hearing on 6 August 2014, 8 September 2014 and 31 August 2015, the respondent pay the applicants' costs, such costs, as well as its own costs, to be borne by the respondent personally with no right of indemnity from the applicants' bankrupt estates. 5. In relation to the costs of and incidental to the proceeding not addressed by Orders 2 to 4, the applicants pay the respondent's costs. 3 As I have said, the applicants seek an extension of time to appeal against order 3. Their proposed notice of appeal includes the following grounds: 1. The discretion of the judge below miscarried in that His Honour erroneously assumed the Respondent was successful in respect of 10 out of 11 separate and discrete issues when there were only seven such separate and discrete issues. 2. The discretion of the judge below miscarried in that His Honour erred in treating each of the various iterations of issues dealt with in his earlier decision on 6 June 2011 in Ferella v Official Trustee in Bankruptcy (No.2) [2011] FCA 619 as having equal weight for the purposes of apportioning costs between the parties. 3. The judge below erred in not taking into account that issue number 10 was not treated as a separate head of inquiry in the earlier decision of the judge below on 6 June 2011 cited as Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619. 4. The judge below erred in not giving proper weight to only one separate issue having been pursued to a final hearing after the decision of the Full Court in Ferella v Official Trustee in Bankruptcy [2013] FCAFC 43 and on that issue the Appellants were successful. 4 The relief sought in the proposed notice of appeal is as follows: 1. In lieu of order 3 of 8 September 2015 the following order be made: "In relation to the costs of and incidental to the hearing on 25 to 28 October 2010: (a) the applicants pay fifty percent of the respondent's costs; and (b) the respondents right of indemnity from the applicants' bankrupt estates be limited to fifty percent of its costs." 2. The Respondent pay the Appellants' costs of this appeal. 5 Mr Newton appeared for the applicants at the hearing of the present application. He said that the applicants will seek an order that they should be required to pay six-sevenths (86%) of the respondent's costs rather than the ten-elevenths (91%) that the primary judge awarded and that the respondent's right of indemnity should also be limited by the same amount. Mr Newton accepted that the difference between what is now sought by the applicants and what the primary judge ordered is likely to be in the order of $12,500 if the respondent's party/party costs are approximately equal to the applicants' party/party costs of and incidental to the 25 to 28 October 2010 hearing. 6 The reference to "the 10 out of 11 separate discreet issues" referred to in the proposed grounds of appeal is to various issues identified in the primary judge's principal judgment of 6 June 2011 (Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619. An appeal against his Honour's judgment of 6 June 2011 was dismissed: see Ferella v Official Trustee in Bankruptcy [2013] FCAFC 43). 7 The following 11 issues are identified in [155] of the principal judgment: [155] The applicants seek an inquiry on the issues raised by the following 11 questions they have propounded: 1. From the commencement of the Supreme Court proceedings in [September] 2006 until [their] final resolution in August 2009, has the respondent engaged in litigation on a substantially misconceived basis and in a manner which was unnecessary and extravagant? 2. Has the respondent unduly delayed the administration of the two estates? 3. Has the respondent, contrary to section 140(1) of the [Bankruptcy] Act, failed to pay dividends with all convenient speed, despite there being large surpluses in the estates? 4. Has the respondent become preoccupied with and intermeddled with the affairs of the Ferella family trust [i.e. the Cavallino Unit Trust]? 5. Agusta Pty Ltd having commenced the proceedings as trustee of the trust to recover funds held by the respondent, was the respondent's defence inappropriate, in circumstances where it knew of the trust and was uncertain only as to the identity of the trustee, and in circumstances where it could have, at the least, interpleaded or sought judicial advice pursuant to section 134(4) of the [Bankruptcy] Act? 6. Did the respondent understand the nature and extent - and limit - of the bankrupt trustees' right of indemnity which had vested in it? 7. Why did the respondent take no steps to inform anyone, at any time, that the ATO on [16 July 2008] advised that assessments to the bankrupts for [capital gains tax] on the sale of the Point Piper [land] would not issue, and why did the respondents maintain that the ATO was a contingent creditor until pressed by the Court of Appeal on [8 May 2009]? 8. Why did the respondent ever assert a right over the funds held by it in relation to a debt allegedly owed by the trustee to the ATO? 9. Why did the respondent assert wrongly that the Ferella family trust funds held by it, did not bear interest? (Alternatively, why, on the assumption that the assertion was correct, did the respondent not take steps to ensure that the funds were put in an interest bearing account?) 10. Whether by reason of the foregoing matters: (a) the bankrupt estates remain unadministered; (b) interest has not yet been paid to creditors; and (c) the respondent has incurred unnecessary costs, expenses and remuneration, including its own costs in the Supreme Court and Court of Appeal and the costs of the Ferella family (including the applicants) that it was ordered to pay? 11. Whether the administration of the estates and the conduct of the Supreme Court proceedings and these proceedings, have been marked by unnecessary aggression and obstruction by the respondent? 8 In subsequent paragraphs of the principal judgment, his Honour reduced the 11 issues down to 9 specific questions (see [157]-[225] of the principal judgment). 9 The applicants' delay in lodging their appeal is substantial. The time within which they were to have filed their appeal against the primary judge's orders expired on 29 September 2015. The application for an extension of time was not filed until more than 12 months after this. 10 The evidence relied upon in support of the application was an affidavit of the first applicant, Mr Angelo Ferella. According to Mr Ferella's evidence, there "were only truly 7 separate issues in respect of which an inquiry was sought". That appears to me to contradict what is recorded in the primary judge's reasons at [155] where his Honour refers to the 11 issues propounded by the applicants. But it is what Mr Ferella's affidavit says on the issue of delay that is of most significance. 11 Mr Ferella sought to explain the delay in his affidavit as follows: When I read the said costs orders shortly after they were made I did not correctly appreciate their effect. After reading the said costs orders I caused a bill of costs ("the applicants' bill of costs") to be prepared for taxation of the applicants' costs which I then considered were payable by the respondent. A copy of the applicants' bill of costs marked "AF1" is annexed hereto at pages 4 to 121. The applicants' bill of costs was filed with the Court on 19 February 2016. 12 The annexures to Mr Ferella's affidavit include a memorandum of fees issued by Mr Newton dated 31 October 2015 for an appearance before Yates J to take judgment on 8 September 2015 followed by a thirty minute telephone conference with Mr Ferella that evidently took place on the same date. In the absence of evidence to the contrary I infer that this last item covers the costs of Mr Newton's telephone attendance on Mr Ferella to explain his Honour's judgment. 13 Although Mr Ferella claims in his affidavit not to have appreciated the effect of his Honour's costs orders, he does not explain what his actual understanding of them was. However, when one reads the bill of costs attached to his affidavit it is clear that it was prepared on the basis that the applicants were required to pay only 50% of the respondent's costs of and incidental to the hearing on 25 to 28 October 2010. I do not understand how Mr Ferella could have read order 3 and believed it to have that effect. The terms of the order are perfectly clear. 14 I do not accept the applicants' explanation for their delay. In particular, I do not accept that Mr Ferella could have understood order 3 to mean anything other than what it clearly states. The applicants' considerable delay has not been satisfactorily explained. The explanation proffered is wholly implausible. 15 Mr Newton submitted that the respondent had not been prejudiced by the delay. Assuming that to be so, I still do not consider that there should be any extension of time in this case. The amount of money at stake in the proposed appeal is likely to be relatively small, and the delay that has occurred is substantial. All things considered, I think this is a clear case in which the interests of justice require that an extension of time should be refused. The applicants must pay the respondent's costs of the application. 16 Orders accordingly. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.