In the matter of Rose, a bankrupt; Whitton v Regis Towers Real Estate Pty Ltd

REASONS FOR JUDGMENT 1 On 10, 11, 12, 13, 16, 17, 18 and 19 October, two matters were before the Court. One was a cross-application in proceedings NSD 641 of 2006 and the other was an application for review under s 104 of the Bankruptcy Act 1966 (Cth) in proceedings NSD 1657 of 2006. The cross-application in proceedings NSD 641 of 2006 was the subject of amendment during the course of the hearing and of further amendment. 2 In the result, the Second Further Amended Cross-Application filed 17 October 2006 in proceedings NSD 641 of 2006 was dismissed on 17 November 2006 and the decision of the Trustee to reject the applicant's proof of debt, lodged with the Trustee under cover of the applicant's letter dated 20 March 2006, which was the subject of the application for review in proceedings NSD 1657 of 2006, was confirmed on 17 November 2006. Both the cross-application in NSD 641 of 2006 and the application in NSD 1657 of 2006 were heard together. 3 At the request of the parties, costs were reserved. On 17 November I ordered that, failing agreement on costs, the matters be re-listed for hearing at 9:30 am today. I have now received evidence in the form of letters of offer that passed between the parties bearing date 17 May 2006 and 6 October 2006 and had the benefit of submissions from counsel for the respective parties on the issue of costs. I have also had the advantage of receiving from counsel for the parties written submissions on the question of costs. 4 As I said at [19] of my reasons for judgment of 17 November 2006 ([2006] FCA 1553): 'Expressed in the simplest of terms, the proceedings before the Court require determinations to be made as to whether certain assets should inure for the benefit of the creditors of Regis Towers [Regis Towers Real Estate Pty Limited (In administration) ('Regis Towers')] or for the benefit of the creditors of the bankrupt [John Emmanuel Rose]'. The competing protagonists were the Administrator of Regis Towers and the Trustee of the bankrupt estate of John Emmanuel Rose. 5 I observed that each had 'pursued his case with appropriate vigour'. At times I felt some concern that, given the nature of the proceedings and the competing interests and the positions of the Administrator and the Trustee, there may have been perhaps a greater degree of vigour brought to bear than was necessarily appropriate. Be that as it may, the proceedings were brought in circumstances where both the Administrator and the Trustee were at a disadvantage in that neither of them had access to all of the relevant records. Much of the documentary material, which was extensive, which was placed before the Court was drawn from sources other than the company in administration and the bankrupt which had been obtained on subpoena. 6 It is also important to bear in mind that the resources available to the parties to enable them to properly fight the matters were not unlimited. It would seem that the funds available to the Administrator of Regis Towers were more extensive than those available to the Trustee. There was evidence of a sale or proposed sale of Caretaker Management Rights which had a value, so it would seem, in an amount well in excess of one million dollars. In a letter from the solicitors for Regis Towers to Phillips Fox, the then solicitors for the Trustee, dated 17 May 2006 the solicitors for Regis Towers said: 'We are mindful of the fact that the Trustee in Bankruptcy does not have funds and that any costs order would be against him personally.' 7 Effectively, both parties lost their respective claims in the two proceedings. Apart from the extensive documentary evidence, the Administrator of Regis Towers and the Trustee of the bankrupt estate both gave evidence, along with a former accountant of Regis Towers and the bankrupt. To enable the issues to be finally determined, it was necessary for the Court to ascertain what was the substratum of facts out of which the respective claims were made. 8 My sense is that much of the hearing time was devoted to establishing what that substratum was to the extent to which it was not apparent from the documents which the parties presented to the Court, at least in part, as an agreed bundle of documents. Regis Towers in effect seeks all of the costs of the hearing save for one day and concedes an entitlement on behalf of the Trustee to an order for costs in the Trustee's favour for one hearing day together with those costs referrable to proceedings NSD 1657 of 2006 which pre-dated the order of the Court that the matters be heard together. 9 The Trustee argues for an order that Regis Towers pay the costs of the Trustee of both proceedings. As a fallback position, it is urged that Regis Towers should pay one-half of the Trustee's costs and, as a further fallback position, that there should be no order as to costs in either matter. In support of the Trustee's submissions, reliance has been placed upon the facsimiles of 6 October 2006 which were expressed to have been written in accordance with the principles in Calderbank v Calderbank [1975] All ER 333. Having analysed the correspondence between the parties carefully, I am of the opinion that no clear-cut decision for costs is compelled by reference to the correspondence. 10 It should be borne in mind that in relation to the letter of 17 May 2006, that that letter was written more than two months before a challenge to the Trustee's rejection of Regis Towers' proof of debt was initiated. 11 At the end of the day, in a matter such as this, the appropriate decision as to costs is one which should be derived from the Court's overall impression of the documentary material, the oral evidence, the time taken to advance that evidence and the importance of, in this case, obtaining a proper understanding of the substratum of facts upon which the decision in each matter was based. 12 I am conscious of the fact that there were significant changes to the cross-application made on 10 October 2006 and again on 17 October 2006 and I am also conscious of the fact that there were significant changes made by the Administrator of Regis Towers in the manner in which he sought to reason that there was, in fact, an indebtedness from the bankrupt to the company. Doing the best that I can, I am of the opinion that this is a case where there should be no order as to costs in respect of either proceeding. 13 Accordingly, the order that I make in respect of costs is that in each matter there be no order as to costs and I think as to the costs of today, it is not appropriate that there should be any order as to costs. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham.