Goyan v Motyka

REASONS FOR JUDGMENT 1 These reasons deal with the costs of two proceedings in the Court. In the first proceeding (No SAD 93 of 2008), Mrs Maria Goyan sought orders against Mr Wolodymyr Motyka in relation to a bankruptcy notice served on her by Mr Motyka on 10 April 2008. In the second proceeding (No SAD 94 of 2008), Mr Michael Goyan (Mrs Maria Goyan's husband) sought orders against Mr Wolodymyr Motyka in relation to a bankruptcy notice served on him by Mr Motyka on 10 April 2008. 2 Each proceeding was instituted in the Federal Magistrates Court on 29 April 2008 and transferred to this Court by order made by the Federal Magistrates Court on 9 July 2008. From 29 April 2008 to 13 February 2009, the proceedings have proceeded together and the applicants have been represented by the same solicitors and counsel. On 13 February 2009, the solicitors and counsel previously acting for both applicants announced that they no longer had instructions to act for Mrs Goyan. They were given leave to cease acting for her. Counsel for Mr Goyan then indicated that Mr Goyan was no longer pressing his application and I made an order that it be dismissed. The question of costs was reserved. Mrs Goyan, who was now unrepresented, pursued her application to hearing but was unsuccessful: Goyan v Motyka [2009] FCA 776 ("Goyan v Motyka"). Her application was dismissed on 24 July 2009. 3 The respondent seeks an order in each proceeding that his costs be paid by the applicant and that the costs be assessed on an indemnity basis. Mr Goyan does not oppose an order that he pay the respondent's costs on a party and party basis, but he opposes an order that the costs be assessed on an indemnity basis. Mrs Goyan opposes any order for costs and I heard her on the respondent's application for costs on 24 July 2009. 4 In each proceeding, I have had regard to the history of the proceeding, both before the Federal Magistrates Court and this Court. I have also considered the evidence put forward by the parties. In my reasons in Goyan v Motyka, I summarised the history of the proceedings (at [1]-[22]) and I will not repeat what I said in those reasons. Since delivering my reasons, the following evidence and submissions have been put before the Court: 1. Affidavit of Mardi Conduit sworn on 13 August 2009. 2. Respondent's Submissions on Costs dated 13 August 2009. 3. Respondent's Supplementary Submissions on Costs dated 20 August 2009. 4. Outline of Submissions on behalf of Michael Goyan dated 4 September 2009. 5. Affidavit of Michael Goyan sworn on 7 September 2009. 6. Additional Submission on Behalf of Michael Goyan dated 7 September 2009. 7. Respondent's Submissions in Reply dated 15 September 2009. 5 In the circumstances, I think it is appropriate to consider the submissions made on behalf of Mr Goyan as if they were also made on behalf of Mrs Goyan. 6 As I have said, each proceeding was commenced in the Federal Magistrates Court on 29 April 2008 and each was transferred to this Court on 9 July 2008. Mr Goyan did not suggest that this Court could not make a costs order which included the costs incurred by the respondent in the Federal Magistrates Court and I think this Court does have the power to make such an order (see Federal Court of Australia Act 1975 (Cth) s 43; Federal Court Rules O 62 r 5, O 82 r 3). In the ordinary case, the costs actually fixed in a proceeding of this nature will be the same whether the proceeding be in this Court or in the Federal Magistrates Court (Federal Court (Bankruptcy) Rules 2005 r 13.01; Federal Magistrates Court (Bankruptcy) Rules 2006 r 13.01). 7 In my opinion, the respondent is entitled to his costs in both proceedings and I reject Mrs Goyan's argument that the respondent is not entitled to an order for costs against her. The only question is as to the basis upon which the costs should be assessed. 8 The Court's power to award costs on an indemnity basis is not in doubt (Federal Court of Australia Act 1976 (Cth) s 43; Federal Court Rules O 62 r 4). The principles governing the exercise of the power have been discussed in numerous cases and it is sufficient for the purposes of this case to refer to the following: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Jianshe Southern Pty Ltd v Turnbull Cooktown Pty Ltd (No 2) [2007] FCA 903 at [32]). The starting point is that, in the ordinary case, costs are assessed and paid on a party and party basis. There are various categories of cases where a Court will make an order that a party pay costs assessed on another basis, whether it be on a solicitor and client basis or an indemnity basis. The authorities establish that the categories of cases in which such orders may be made are not closed. The respondent did not seek to identify a new category for the purposes of his applications, and the principal categories, in terms of the categories to be considered in this case, are the pursuit of a case where a party, properly advised, should have known the case had no chance of success and the imprudent refusal of a settlement offer by a party. 9 In my opinion, the same order as to costs should be made in each proceeding and that order should be as follows: The applicant pay the respondent's costs of the applicant's application dated 29 April 2008 assessed on the following basis:

1. from 29 April 2008 to 20 November 2008, on a party and party basis, save and except for the costs of the applicant's application for questions of fact to be tried by a jury pursuant to s 30(3) of the Bankruptcy Act 1966 (Cth) which costs are to be assessed and paid on an indemnity basis;
2. from 21 November 2008, on an indemnity basis. 10 My principal conclusions in relation to the submissions made to me are as follows. First, I reject the respondent's submission that in each proceeding he should receive all of his costs assessed on an indemnity basis. Secondly, I reject a submission by Mr Goyan that, as he relied on legal advice throughout the proceeding, he should not be required to pay costs beyond costs assessed on a party and party basis. Thirdly, I find that the application by each applicant for certain questions of fact to be tried by jury was pursued in circumstances where, properly advised, each of them should have known that the application had no chance of success. In addition, or in the alternative, the application prolonged the proceeding and involved groundless contentions. On either ground, the costs of the application should be assessed and paid on an indemnity basis. Fourthly, I find that the applicants' rejection of an offer of compromise made by the respondent on or about 20 November 2008 was an imprudent refusal of an offer of compromise and costs should be assessed and paid on an indemnity basis after that date. 11 I turn now to explain my reasons for reaching those conclusions.

(1988) 81 ALR 397

(1993) 46 FCR 225

[2007] FCA 903