Macchia v Nilant

REASONS FOR JUDGMENT 1 On 27 March 2000 I made an order under s 306 of the Bankruptcy Act 1966 (Cth) ("the Act") that a defect or irregularity in compliance with the requirements of s 54(1) of the Act by the applicant be corrected by deeming a statement of affairs presented by the applicant to the Registrar in Bankruptcy on 4 September 1991 to have been made out and filed on 16 September 1991 to comply with the requirements of s 54(1). The minute of proposed orders attached to the reasons for my decision delivered on that day provided that no order be made as to costs, however, leave was given to the parties to the application to file submissions on the question of costs. Submissions were filed by the applicant and by the respondent ("the Trustee") each seeking an order for costs against the other. 2 Ordinarily, a person applying to the Court for an order relieving that person from the consequence of non-compliance with the Act could not expect to obtain an order for costs. However, the applicant, with some strength in the argument, points to the conduct of the Trustee in failing to withdraw a notice the Trustee had lodged objecting to the discharge of the applicant from bankruptcy, such notice having the effect of purportedly extending the applicant's period of bankruptcy under the Act from 22 January 1997 to 22 January 2002. 3 The relevant notice was filed on 8 July 1996 and not withdrawn until 17 December 1999 when the re-hearing of the application stood adjourned, part heard. Upon withdrawal of the notice the period of bankruptcy terminated on 22 January 1997. The act of the Trustee prolonged the period of bankruptcy imposed by the Act upon the applicant by almost three years. The applicant submitted that only the continued prosecution by him of his application for remedial orders caused the Trustee to finally withdraw the notice and that costs in the matter should follow the event, the Trustee having opposed the applicant's application for relief. 4 The Trustee submitted that although the applicant succeeded in obtaining orders opposed by the Trustee, the applicant withdrew and, therefore, did not succeed in that part of his application which had sought to have the Trustee removed. The Trustee claimed that costs had been incurred by him in responding to that part of the application. With regard to the Trustee's withdrawal of the notice of objection to the discharge of the applicant from bankruptcy, the Trustee submitted that the applicant's challenge to the notice in the application to this Court should bring no order for costs, the decision of the Trustee being reviewable under administrative review procedures provided by the Act. The Trustee also submitted that he had withdrawn the notice after receiving legal advice and had acted reasonably in doing so. 5 With regard to the latter submission by the Trustee, doubts as to the validity of the notice were raised when the matter first came before me for hearing on 8 April 1997. Those doubts were carried forward in my reasons delivered on 11 April 1997 (unreported, No 246 of 1997 at 5-6). The validity of the notice was a live issue in this proceeding in that an alternative order sought by the applicant was an order that the bankruptcy ceased on 22 January 1997 by reason of the notice of objection to discharge being of no effect. That the Act provided a method for review of the decision of the Trustee does not answer the question whether an order for costs should be made in this proceeding. It may be noted that if the decision of the Trustee had been reviewed administratively under the Act, an application to this Court for an order of review may have followed in any event. The challenge to the validity of the act of the Trustee in lodging such a notice was properly included in the proceeding and, therefore, was liable to have a consequence in costs. 6 If the Trustee had not opposed the applicant's application and had undertaken to abide by the order of the Court, the applicant could not have expected to obtain an order for costs against the Trustee unless an order was made that the Trustee be removed. The Trustee, however, resisted the applicant's application in all respects, not restricted to opposing the application for removal, and at all times the applicant was at risk that an order could be made that the applicant pay the costs of the Trustee. The Trustee occasioned the applicant unnecessary expense in maintaining reliance for as long as he did on the notice filed objecting to discharge of the applicant from bankruptcy. An order for costs in favour of the applicant therefore may be considered. 7 However, the proceeding conducted by the applicant caused the Trustee to incur unnecessary costs in responding to material relied upon by the applicant to support the application for an order that the Trustee be removed. The application continued for some time with that issue as a live question until abandoned by the applicant at a late stage. Notwithstanding that the order sought by the applicant for the removal of the Trustee would only arise if the applicant failed to obtain a remedial order, the application for the alternative order necessarily caused costs to be incurred in respect of it until abandoned by the applicant. 8 Having considered all relevant matters and the submissions of counsel for the parties, I remain satisfied that the respective interests of the parties in respect of costs are evenly balanced and I have not been persuaded that any order for costs should be made. (See: Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (unreported, Federal Court of Australia, Full Court, No 613 of 1997, 11 July 1997).) 9 The applicant has a liability to pay the Trustee the costs of the appeal, and of the original hearing from which the appeal arose, without the benefit of any off-setting order against the Trustee. Given that the applicant has now succeeded in obtaining the orders opposed by the Trustee and that the acts of the Trustee forced the applicant to incur substantial costs before those orders were obtained, that result may appear to be inequitable. That circumstance is explained in part by the deficiency in the applicant's application as first presented, although it may be said that the deficiency only became apparent on appeal when a construction of the Act that had been applied by the Court in a number of cases decided by judges of the Court at first instance, was held to be wrong in law. 10 Whether the applicant, as respondent to that appeal, may have obtained, or may now obtain, a "costs certificate" under s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) in respect of the appeal proceeding, or under s 8 in respect of the re-hearing of the application, made necessary by the result of that appeal, has not been agitated. (See: Phipson Nominees Pty Ltd v French (1989) 91 ALR 509; Minister for Human Services and Health v Haddad (1995) 39 ALD 557.) I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.