Saville v Romer

REASONS FOR JUDGMENT 1 On 31 August 2001, Pauline Marie Saville ("the Petitioner") presented to the Court a creditor's petition under s 244 of the Bankruptcy Act 1966 (Cth) ("the Act"). The petition related to the estate of the Petitioner's former husband, Osmond James Saville ("the Deceased"). The respondent to the petition was Dianne Lenore Romer, the executrix of the will of the Deceased ("the Executrix"). The Petitioner claimed that the Deceased was indebted to her in the sum of $27,282.62 plus interest pursuant to orders for costs made in favour of the Petitioner by the Family Court of Australia on 24 May 1990 and 14 May 1992. 2 On 19 October 2001, the petition was set down for hearing on 22 November 2001 before Katz J. However, on 25 October 2001, the full amount of the debt claimed, together with interest to the date of payment, was paid to the Petitioner. Accordingly, when the petition came on for hearing before Katz J on 22 November 2001, the Petitioner indicated that she would consent to the dismissal of the petition subject to the question of the costs of the petition. 3 His Honour heard full argument on the question of costs. However, His Honour will now not in a position to give judgment and the parties have agreed that I decide the question of costs on the papers and on the basis of further written submissions by the parties. I have now had the benefit of submissions on behalf of the Petitioner dated 8 and 21 March 2002 and submissions on behalf of the Executrix dated 14 March 2002. 4 The debt owed by the Deceased to the Petitioner arose out of Family Court proceedings between them following their separation and the dissolution of their marriage. It is unnecessary to examine all the circumstances that gave rise to those orders. However, on 13 July 1985, after an order nisi dissolving the marriage had been pronounced on 4 February 1985, the Petitioner commenced proceedings in the Family Court of Australia for orders relating to property. It was as a result of those proceedings, including an appeal, that the orders for costs were made in favour of the Petitioner against the Deceased. 5 When he died on 22 April 2001, the Deceased had not paid the costs. Probate of the will of the Deceased was granted to the Executrix on 22 June 2001 and on 30 July 2001 a certificate of taxation in respect of the costs orders was forwarded to the solicitors for the Executrix by Messrs Ebsworth and Ebsworth ("Ebsworths"). On 24 August 2001, after further correspondence, the Executrix's solicitors returned the certificate of taxation to Ebsworths, saying that the document should be "served upon the solicitor on the record" in the Family Court proceeding. On 27 August 2001, Ebsworths forwarded the certificate of taxation direct to the Executrix by post. 6 On 31 August 2001 Ebsworths wrote to the Executrix's solicitors demanding payment of the sum of $27,294.01 plus interest at the rate of $3.80 per day. The letter ended by saying that if payment was not received by 5 pm on 7 September 2001, "action will be taken to recover this debt". On the same day the petition was presented to the Court. There was no response to the letter of 31 August 2001 and there was no payment of the amount demanded. The petition was served on the Executrix personally on 14 September 2001. 7 The return date of the petition was 5 October 2001. On that day, a registrar stood the petition over for directions before Katz J on 12 October 2001. Katz J stood the petition over to 12 October 2001, when his Honour set the petition down for hearing on 22 November 2001. The Petitioner contended before Katz J that she should have an order in her favour. The contention of the Executrix was that it would be appropriate for His Honour to make no order as to the costs of the petition. 8 Ordinarily, costs are in the discretion of the Court. Section 32 of the Act provides that the Court may, in any proceedings before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit. Further, under s 43 of the Federal Court of Australia Act 1976 (Cth), the Court has a general jurisdiction to award costs in all proceedings before the Court. The award of costs in any proceeding is in the discretion of the Court. 9 In the course of argument before Katz J, His Honour raised the question of the applicability of s 51 of the Act. Sections 51 and 109(1)(a) relevantly provide as follows: "51 Costs of prosecuting creditor's petition Subject to section 109, the prosecution of a creditor's petition to and including the making of a sequestration order on the petition shall be at the expense of the creditor. ……………………… 109 Priority payments (1) Subject to this Act, the trustee must, before applying the proceeds of the property of the bankrupt in making any other payments, apply those proceeds in the following order: (a) first, in the order prescribed by the regulations, in payment of the taxed costs of the petitioning creditor and the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee and the costs of any audit carried out under section 175;…" 10 I do not consider that s 51 is concerned with the discretion of the Court to order a party to pay the costs of another party. It simply provides that a debtor is not to be liable for costs incurred in relation to the administration of the estate, as a consequence of the actions of a creditor. That is to say, solicitors and counsel retained by a creditor have no claim on a debtor in respect of when a petition is presented. On the other hand, a creditor who has incurred liability to solicitors and counsel in respect of a petition will be entitled, pursuant to s 109, to be paid out of the estate of a bankrupt the amount of costs incurred by the creditor in bringing about the sequestration and the administration of the estate for the benefit of all creditors. Section 109 of course says nothing about costs when a petition is dismissed. 11 Where, as in the present case, a petition has been dismissed, the question is whether the Court should, in the exercise of the discretion conferred upon it, require a debtor to pay the costs of a petitioner, notwithstanding that the petition has been dismissed. 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. Ordinarily, in such circumstances, the petition will be based upon an act of bankruptcy. If, of course, there were no act of bankruptcy and therefore no ground for presenting a petition in the first place, the debtor would be entitled to an order for costs upon dismissal of the petition. 12 The petition in the present case, however, was not based upon an act of bankruptcy. Section 244 has no such prerequisite. Section 244 appears in Part XI of the Act, which is concerned with the administration of estates of deceased persons in bankruptcy. Section 244(1)(a) provides that, subject to s 244, where a debt of not less than $2,000 was owing by a deceased person at the time of his death to a creditor, the creditor to whom the debt is owing may present a petition to the Court for an order for the administration of the estate of the deceased person under Part XI. 13 Under s 244(11), at the hearing of the petition, the Court must require proof of: · the matters stated in the petition; · service of the petition; and · the fact that the debt to which the petition relates is still owing.