Sheikholeslami v Tolcher

REASONS FOR JUDGMENT 1 In Sheikholeslami v Tolcher [2011] FCA 1050 the Court found that, contrary to the position adopted by the respondent, who is the trustee of the bankrupt estate of Roya Sheikholeslami, the applicant, who is the bankrupt's sister, was the beneficial owner of a home unit at 609/168 Kent Street, Sydney, New South Wales, which the respondent had claimed as part of the bankrupt's estate. 2 The question of costs is the only matter that remains to be determined in the proceeding.

The parties' submissions 3 The applicant's position is that, in accordance with usual practice, costs should follow the event. She submits that, as she was successful in the proceeding, the respondent should pay her costs. Moreover, she submits that her costs should be paid on an indemnity basis from 19 January 2010. This last-mentioned submission is made in reliance on correspondence, to which I was taken in the course of oral submissions, in which the applicant made certain offers to compromise the proceeding, the first of which was made on 19 January 2010. 4 I should say at the outset that I am not persuaded that, if the applicant is entitled to an order for costs in her favour, those offers were such as to entitle the applicant to an award of costs on an indemnity basis. Without descending to the detail of the correspondence, it is sufficient for me to note that the correspondence covers a number of offers which either represented no compromise at all or represented offers that were open for periods of time that were, in the circumstances, unreasonably and unrealistically short. Moreover, some offers included elements that could not be accepted by the respondent in any event or were extraneous to the applicant's claims, such as "releasing" the bankrupt. The correspondence does show, however, that some attempt was made on the part of the applicant to resolve the proceeding. 5 The respondent's position is that there should be no order as to costs or, alternatively, that the Court should order that the respondent's personal liability for costs be limited to the extent of the assets in the bankrupt estate. Even then, the respondent contends that not all of the applicant's costs should be recovered. 6 Although recognising the usual practice that costs follow the event, the respondent submits that there are special features of the present case that remove it from the usual practice. 7 In this connection, the respondent submits: (a) He was a defendant to the proceeding rather than a plaintiff. (b) He took possession of the Kent Street property, and had it registered in his name, in the face of a claim, initially made by the applicant, that she had entitlements as a mortgagee rather than as beneficial owner of the property. (c) The proceeding had its origins in the desire of the applicant to avoid restrictions imposed by Australian law on the non-resident ownership of Australian real property: see Sheikholeslami at [160]-[186]. In effect, the applicant clothed the bankrupt with apparent legal and beneficial ownership of the Kent Street property. (d) The evidence in the proceeding was conflicting and equivocal as to the true beneficial ownership of the property as between the applicant and the bankrupt. (e) There were unsatisfactory aspects of the applicant's evidence, upon which specific comment was made: Sheikholeslami at [118]-[125]. (f) These features demonstrated that the evidence was not given in a forthright or suitably detailed way. Indeed, the evidence given by the applicant, and the bankrupt in support of the applicant's case, was shown to be both incomplete and inaccurate. (g) Had the applicant's evidence been presented in an accurate and suitably detailed way, costs could have been avoided. The result was that the conduct of the proceeding, particularly the hearing, was factually more complicated than was necessary. (h) Indeed, had the applicant's case been presented in a forthright and detailed way at the outset, it is at least possible that the respondent, in exercising his duties as trustee in bankruptcy, may have been persuaded as to the merits of that case. (i) In the circumstances, the respondent's defence of the proceeding was not only not unreasonable, but was entirely justified, given his duties as trustee in bankruptcy to all creditors of the bankrupt estate. (j) The proceeding was incorrectly commenced in the Supreme Court of New South Wales. It was transferred upon application by the respondent at a time shortly before it had originally been listed for hearing in that court. The need for the transfer undoubtedly added to the costs of the proceeding. Those costs included the costs thrown away by the vacation of an existing hearing date some days before the trial was due to start. 8 In response, the applicant submits that elements of her case, which were shown to be influential for the reasoning leading to the ultimate finding in her favour (see, in particular, Sheikholeslami at [130]-[133]), were always present. She also submits that Ms Ossolinski's evidence, which was also influential (Sheikholeslami at [85]-[94] and [129]) was served prior to the transfer of the proceeding to this Court and was thus available to the respondent well before the actual hearing of the matter. 9 In general, she points to the fact that, in light of this material, the respondent elected to contest the proceeding and to challenge the accuracy of the evidence during the hearing. She submits that, if she is entitled to costs, those costs should not be discounted on account of the matters raised by the respondent. Although there were shortcomings in the affidavit evidence that was prepared on her behalf, the affidavits were not without utility and much of what was contained in them was admitted into evidence. She submits that other shortcomings identified in the evidence arose during the course of the hearing and could not rationally have affected the respondent's decision to contest her claim in the first place.