Lindsay v Meissner

1. The creditor's petition filed on 16 November 2018 is dismissed.
2. The respondent is to pay the applicant's costs of the proceeding on a party-party basis as taxed or agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

STEWART J: 1 There are two issues before me today. The first is that the applicant seeks costs on a party-party basis as provided for in r 40.01 of the Federal Court Rules 2011 (Cth) (FCR). The second is that the applicant applies for a lump sum costs order pursuant to r 40.02 of the FCR. During the course of argument, when it became apparent that the evidence that the applicant adduced in support of the lump sum costs order was, in certain respects, confusing and insufficient, the applicant withdrew the application for the lump sum costs order, leaving only the question of the costs of the proceeding to be decided. 2 By a creditor's petition filed on 16 November 2018, the applicant sought the sequestration of the estate of the respondent under s 43 of the Bankruptcy Act 1966 (Cth). That order was sought on the basis that the respondent owes the applicant the sum of $112,674.56 for moneys due under a judgment of the Supreme Court of New South Wales dated 22 June 2018. That judgment was made in relation to a costs order made against the respondent for proceedings he commenced against the estate of the late Sharon Meissner. The reasons for the judgment which gave rise to the costs order are reported as Meissner v Lindsay [2016] NSWSC 790 (the Supreme Court proceedings). 3 On receipt of the costs judgment sounding in money, the applicant commenced bankruptcy proceedings against the respondent. To that end, a bankruptcy notice dated 17 July 2018 was issued. In September and October 2018, numerous efforts were made to effect service of the bankruptcy notice on the respondent at his residential address in Windsor, NSW, and by email and other methods. One of those attempts at service was by email on 26 September 2018 to an email address used by the respondent previously in communications between him and the applicant or the applicant's solicitor in relation to the Supreme Court proceedings. 4 There is credible evidence suggesting that the respondent sought to avoid service of the bankruptcy notice. The respondent, however, denies that. It is not necessary for me to resolve whether or not the respondent did avoid service of the bankruptcy notice. The creditor's petition was filed on 16 November 2018 and efforts were thereafter made to serve it on the respondent. There is, once again, some dispute with regard to those efforts and their success, but in any event the respondent accepts that he had received service of the creditor's petition by 2 February 2019. 5 By affidavit dated 19 March 2019, the respondent raised various defences to the creditor's petition, particularly relating to questions of service of the bankruptcy notice as well as a dispute with regard to the underlying debt. In the latter respect, the respondent says that the costs in the Supreme Court proceedings were over-assessed to the extent of approximately $26,000. 6 The matter came before court on several occasions for case management, in particular for dealing with the question of service of evidence by the applicant on the respondent, and was eventually listed for final hearing for Monday 17 June 2019. 7 When it was called on that day, it turned out that the respondent had, on either the Thursday or Friday the previous week, paid the underlying debt by way of one bank cheque and two cheques drawn by a private company. The result was that when the matter was called on 17 June 2019 it was not yet known whether the company cheques would be paid and time was required to enable them to be cleared in the banking system. I therefore adjourned the matter on that occasion until today to determine what should thereafter occur in the matter. 8 When the matter was called today, I was advised by counsel for the applicant that the cheques had cleared, with the result that the underlying debt has now been paid. Counsel for the applicant therefore sought an order that the creditor's petition be dismissed. The respondent, who appeared in person, accepted that dismissal was the appropriate relief. 9 Given that the respondent has paid the underlying debt and did so shortly before the final hearing, in the ordinary course the respondent should pay the costs of the proceeding - he had raised some defences which prolonged the proceedings but which he ultimately abandoned. I approach the matter on the basis that since the debt has been paid and the defences have been abandoned, they were ultimately without merit. It would certainly be inappropriate for me to now go into the details of the merits of the claim and the defences merely in order to decide the costs. 10 The position the respondent takes is that since, as he says, the bankruptcy notice was not served on him, he did not have the opportunity to pay the debt at that stage and, had it been served on him, he would have done so. The difficulty with regard to that submission is that the respondent has had the creditor's petition since at least early February of this year and did not pay the debt until the middle of June, and in the meantime raised a number of defences, now abandoned. That rather undermines his submission that, had he received service of the bankruptcy notice, he would have paid the debt on that occasion and thereby avoided the subsequent costs of the creditor's petition. I therefore find that even if, as the respondent claims, he did not receive the bankruptcy notice before he received the creditor's petition, which I need not decide, he would still have resisted paying the debt, as he actually did, up until the point of final hearing. 11 The respondent has caused this matter to come back before court repeatedly and he has filed many documents. That has all taken up the time and attention of the Court and of the applicant's legal representatives. In respect of the respondent's underlying complaint about the amount of the Supreme Court judgment against him, he accepts that he has not taken any steps to revisit the judgment other than to report the matter to the police. However, he said that he did not report the matter to the police until after he filed his affidavit of 19 March 2019 in these proceedings. This shows that service of the bankruptcy notice, or the creditor's petition, was not an immediate catalyst for the complaint to the police and confirms the appropriateness of the approach to the question of costs being on the basis that the respondent had no valid defence to the petition.