Principal Strategic Options Pty Ltd, in the matter of Coshott v Coshott

INTRODUCTION 1 These reasons for decision are concerned solely with issues of costs which have arisen in the circumstances set out below. 2 In 1999 Principal Strategic Options Pty Limited ("Strategic Options") commenced a proceeding in the Supreme Court of New South Wales ("the Supreme Court") against Robert Gilbert Coshott ("Mr Coshott"). Strategic Options succeeded in obtaining relief against Mr Coshott in its Supreme Court proceeding. One aspect of that relief was an order dated 28 March 2000 for judgment against Mr Coshott for the sum of $1,355,239.74 ("the judgment debt"). 3 On 14 April 2000 Mr Coshott filed a Notice of Appeal in respect of the judgment of the Supreme Court. He did not at that time make an application for an order that execution of the judgment be stayed. 4 On 1 June 2000 Strategic Options caused a Bankruptcy Notice to be served on Mr Coshott requiring payment of the judgment debt plus interest accrued since the date of judgment. 5 Mr Coshott did not comply with the Bankruptcy Notice or apply to have it set aside. He thus committed an act of bankruptcy. 6 On 28 June 2000 Strategic Options presented to the Court a petition dated 27 June 2000 seeking the making of a sequestration order against the estate of Mr Coshott ("the bankruptcy proceeding"). On the same day that the bankruptcy proceeding was commenced, Strategic Options filed an application in the Court seeking an order under s 50 of the Bankruptcy Act 1966 (Cth) ("the Act") for a trustee to take control of certain property of Mr Coshott and for certain additional orders in relation to Mr Coshott's property ("the s 50 proceeding"). By order of the Court made on 28 June 2000 the application in the s 50 proceeding was made returnable before the Court on 29 June 2000 at 10.00am. 7 No appearance was announced on behalf of Mr Coshott when the application in the s 50 proceeding was called for hearing on 29 June 2000. Upon Strategic Options giving the "usual undertaking as to damages", the Court made the following orders: "1. Hugh Thomas as Trustee take control of half of the proceeds of sale of 5 Gilliver Avenue, Vaucluse, a property of which the Respondent Debtor is a joint tenant with his wife; 2. Hugh Thomas as Trustee receive half of the proceeds of sale and place them into an account with the trading bank in the joint names of the Respondent Debtor and Hugh Thomas and arrange that monies may be withdrawn from that account only upon the authority of Hugh Thomas; 3. Hugh Thomas furnish to the Respondent Debtor and to the Applicant Creditor details of the account within 24 hours of the account being opened; 4. The Respondent Debtor deposit to the credit of that account, all monies, cheques, negotiable instruments and other documents and instruments representing money received by the Respondent Debtor on or after the date of the order for remuneration for services or other income (whether before or after the date of the order); 5. The Respondent Debtor keep adequate records of all monies, cheques, negotiable instruments and other documents and instruments representing monies to which the previous order relates and deliver such records to the Trustee whenever requested; 6. The Trustee be authorised to make payment from the account for such business and reasonable living expenses of the Respondent Debtor as the Trustee shall approve; 7. The Respondent Debtor deliver to the Trustee within 7 days all books, documents, papers and writings in his or her possession or power relating to his dealings, property or affairs; 8. The Respondent Debtor be restrained without the approval of the Court from paying, lending or depositing any money with or transferring or delivering any property to a person or a company unless so authorised by the Trustee; 9. The Respondent Debtor be restrained without the prior approval of the Court from remitting, transferring, sending or taking monies or other property out of Australia; 10. The Trustee's remuneration be at the rate set by the Insolvency Practitioners Association of Australia; 11. The Applicant Creditor deposit with the Trustee the sum of $2,000 as security for the Trustee's expenses and remuneration; 12. The parties have liberty to apply on such notice, if any, as a judge may allow; 13. The matter be stood over to 21 July 2000 before the Deputy Registrar; The Court Directs That: 14. The Applicant Creditor to provide the Respondent Debtor with a copy of today's transcript as soon as practicable." 8 The "usual undertaking as to damages" in relation to an interlocutory order made by the Court is an undertaking: "(a) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order or undertaking or any continuation (with or without variation) thereof; and (b) to pay the compensation referred to in (a) to the person there referred to." 9 Between 18 August 2000 and 10 April 2001 appearances were filed in the bankruptcy proceeding by a number of supporting creditors, including Shipton Thoroughbreds Pty Limited ("Shipton Thoroughbreds"). 10 On 13 July 2000, Mr Coshott filed an application seeking an order from the New South Wales Court of Appeal ("the Court of Appeal") staying execution of the judgment of the Supreme Court. In the events that happened, a "stay" order was not obtained but an order expediting the hearing of Mr Coshott's appeal was made. The appeal was fixed for hearing on 29 November 2000. 11 On 7 September 2000 a Registrar of the Court ordered that Shipton Thoroughbreds be substituted as the petitioning creditor in the bankruptcy proceeding. On 20 October 2000 Shipton Thoroughbreds filed an amended creditor's petition in the bankruptcy proceeding. The amended petition relied on a final judgment obtained in the Local Court of New South Wales in Manly on 7 July 1999 plus interest accrued thereon. 12 On 2 April 2001 Mr Coshott filed in the Court a Notice of Intention to Oppose Creditor's Petition. The ground of opposition was that the Court ought not in the exercise of its discretion make a sequestration order. On 4 May 2001 Mr Coshott filed an amended notice adding the additional ground that the petition should be dismissed pursuant to s 52(2)(a) of the Act on the basis that Mr Coshott was able to pay his debts. 13 In the meantime, on 24 April 2001, the Court of Appeal had allowed Mr Coshott's appeal and the judgment of the Supreme Court dated 28 March 2000 had been set aside. 14 It is accepted by all parties that, the judgment of the Supreme Court having been set aside, Mr Coshott is solvent. 15 On 8 May 2001 an order of the Court was made whereby the petition against Mr Coshott was dismissed. The question of the costs of the bankruptcy proceeding was reserved. On 10 May 2001 orders were made resolving all outstanding matters in the s 50 proceeding and providing for the making of payments to the supporting creditors in the bankruptcy proceeding. Again the question of the costs of the proceeding was reserved.