Rotstein & Associates Pty Ltd v Slaveski

REASONS FOR JUDGMENT 1 On 23 April 2009, the applicant ("Rotstein") filed a creditor's petition in the Federal Magistrates Court. By that petition the applicant sought a sequestration order against the estate of the respondent ("Slaveski"). The creditor's petition was founded upon a debt of $7,183.56. The debt relates to a costs order made by the Magistrates Court of Victoria on 1 April 2008 in favour of Rostein ("the judgment debt"). 2 On 20 July 2009, on the application of Rotstein, Federal Magistrate Riley ordered that the creditor's petition be transferred to this Court. 3 A directions hearing was then scheduled for 31 August 2009 but by consent of the parties it was adjourned to 4 November 2009. By further consent orders, the directions hearing was further adjourned to 18 December 2009. 4 On 18 December 2009, over the opposition of Slaveski, the creditor's petition was listed for hearing on 22 December 2009. On that day, the hearing was vacated, including because of my concern as to Slaveski's capacity to manage his respondency to this proceeding. 5 The proceeding was adjourned to 9 February 2010, including for the purpose of hearing submissions from the parties as to whether or not the Court should appoint a litigation guardian for Slaveski and how the proceeding could best be progressed. On 22 December 2009 the Court was also informed that Slaveski was willing to pay off the judgment debt but was seeking to do that by instalments. 6 At the directions hearing on 9 February 2010, evidence was put before me that Slaveski had made an application to the Magistrates Court for an instalment order in relation to the judgment debt. On 27 January 2010 Smith M granted that application. His Honour increased the judgment debt to $8,510.00 to take into account interest on the judgment sum of $1,394.20. An order was made that the interest owing be paid on that day and that Slaveski pay the balance of the debt at the rate of $700 per month, commencing on 25 February 2010. 7 Evidence was also before me that Slaveski had complied with the order made that he pay the interest sum of $1,394.20 on 27 January 2010. Following the making of that payment, Slaveski wrote to Rotstein inviting Rotstein to withdraw the creditor's petition on the basis that he would continue to make payments in accordance with the instalment order. Rotstein rejected that invitation and advised that the instalment order had no effect on the bankruptcy proceedings. 8 On 9 February 2010, Slaveski made an oral application for the creditor's petition to be dismissed or set aside. That application was opposed by Rotstein on the basis that a stay of execution on the making of an instalment order has no effect on a prior act of bankruptcy and is no obstacle to the presentation of a creditor's petition. In the course of hearing submissions on those matters, I raised with the parties the possible exercise of the Court's discretion under s 33 of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act") to adjourn the creditor's petition to a later date, with liberty for Rotstein to apply for the hearing of the creditor's petition, should the instalment order not be complied with by Slaveski. Slaveski supported the making of orders of that kind. Rotstein opposed such orders being made. I provided an opportunity for the parties to file written submissions on that issue and both parties filed extensive submissions. 9 On the application of Rotstein and pursuant to s 52(5) of the Bankruptcy Act, on 21 April 2010 I ordered that the date of expiry of the creditor's petition be extended to 23 April 2011. 10 On 20 May 2010, I published my reasons for judgment (Rotstein & Associates v Slaveski [2010] FCA 493) by which I rejected Rotstein's opposition to the exercise of the Court's discretion in the matter sought by Slaveski. On that day, I made orders including that the matter be listed for a directions hearing on 2 February 2011 and that Rotstein have liberty to apply for the listing of the creditor's petition for hearing, should Slaveski fail to comply with the instalment order made in the Magistrates Court of Victoria on 27 January 2010. 11 The question of whether Slaveski or Rotstein should pay the costs of 9 February 2010 and the applications dealt with in my reasons for judgment of 20 May 2010 was not then dealt with and now needs to be taken into account. 12 The matter next came before me on 2 February 2011. The Court was advised that Slaveski had made payments in accordance with the instalment order but that there remained an issue between the parties as to the costs of the proceeding and a claim by Rotstein for a further payment for interest on the judgment debt. I listed the matter for hearing on the question of costs. 13 The parties agree that the creditor's petition should now be dismissed. The issue that remains is Rotstein's application for an order that Slaveski pay its costs of and incidental to this proceeding to be taxed in default of agreement. 14 Slaveski opposes Rotstein's application for costs. He relies on his own affidavit of 2 March 2011, together with an affidavit of Mrs Slaveski of 16 March 2011. Rotstein relies on an affidavit of Hamish Rotstein of 10 February 2011, together with a further affidavit of Mr Rotstein of 9 March 2011. There are a range of allegations made in those affidavits, however, in my view, only the matters that I will now address are relevant and appropriate to be taken into account 15 In Slaveski's affidavit of 2 March 2011, Slaveksi deposed that he had first made attempts to pay off the judgment debt on 27 February 2009. On that occasion he had offered to pay by instalments of $50 per month. That offer was refused. On 13 April 2009, Slaveski made his first application to the Magistrates Court for an instalment order. Whilst that order was awaiting to be heard, the creditor's petition in this proceeding was filed. Slaveski's first application for an instalment order was refused on the basis that the debt would not be paid within a reasonable time. On 10 July 2009, Slaveski again offered to pay off the debt. On that occasion the offer was for the payment of $200 per month if the creditor's petition was withdrawn. That offer was refused. A second application for an instalment order was made to the Magistrates Court on 24 November 2009 and was refused on 3 December 2009. However on a review of that determination on 27 January 2010, the Magistrates Court made the instalment order to which I have already referred. 16 On 2 February 2010, Slaveski wrote to Rotstein seeking that Rotstein withdraw the creditor's petition. By letter of that date, Slaveski referred to the instalment order made by the Magistrates Court and confirmed that he had already paid Rotstein the interest component of $1,394.25 on 27 January 2010. Slaveski invited Rotstein to withdraw the creditor's petition on the basis that he would be paying off the judgment debt at the rate of $700 per month in accordance with the instalment order. Slaveski made the offer on the basis that it would avoid unnecessary expenses and stated that if the creditor's petition was not withdrawn the offer would be disclosed to the Court. That offer was rejected. There is no evidence before me from Rotstein as to what, if any consideration, was given to that offer and as to why it was rejected. 17 In my view, despite the difficult relations between the parties, serious consideration should have been given to acceptance of the offer made by Slaveski on 2 February 2010. Whilst a reluctance by Rotstein to withdraw the creditor's petition at that time is understandable, in my view, it would have been reasonable in the circumstances for Rotstein to have offered to not proceed with the hearing of the creditor's petition so long as Slaveski complied with the instalment order. When that prospect was raised in proceedings before me on 9 February 2010, Rotstein should have acceded to it rather than unsuccessfully oppose it as it did. 18 Section 32 of the Bankruptcy Act gives the Court a wide discretion as to costs. That discretion must of course be exercised judicially. Ordinarily, costs follow the event and a successful litigant receives its costs in the absence of special circumstances. Rotstein has not succeeded on the creditor's petition as it is to be dismissed. However as Emmett J said in Saville v Romer [2002] FCA 351 at [11]: There is a long standing practice of this Court, and courts previously exercising bankruptcy jurisdiction, to order a debtor to pay a petitioner's costs where the debt upon which a petition is founded is paid in full and the petition is, as a consequence, dismissed. 19 In my view, Rotstein is entitled to some of its costs but not all. It would only be appropriate to order that Slaveski pay the costs incurred by Rotstein up to and including 2 February 2010. In coming to that view, I take into account the offer made by Slaveski on 2 February 2010 and what I have already stated in relation to Rotstein's rejection of that offer. Further, the only costs likely to have been incurred by Rotstein since that time will have related to the matters which I dealt with in my judgment of 20 May 2010 and this application for costs. In relation to the matters dealt with in my earlier judgment, Rotstein was unsuccessful and ought not be awarded costs. In relation to this application for costs, both parties have been successful in part and each should pay their own costs. 20 Accordingly, I will dismiss the creditor's petition and order that Slaveski pay the costs of and incidental to the proceeding incurred by Rotstein up to and including 2 February 2010. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromberg.