Theo, Sol v Official Trustee in Bankruptcy & Ors [1997] FCA 57

3. Mr Theo pay the costs of the Official Trustee and the costs of the statutory trustees of and incidental to the application filed 21 March 1997, including reserved costs, to be taxed, if not agreed.

4. Mr Theo pay the statutory trustees' costs of and incidental to the application dealt with by judgment on 8 April 1997, including reserved costs, to be taxed, if not agreed.

NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA No QB 1422 of 1990 GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND BETWEEN: SOL THEO Applicant AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY First Respondent AND: ANTHONY JAMES BENNETT Second Respondent AND: KENNETH PHILP Third Respondent CORAM: Drummond J DATE: 23 May 1997 PLACE: Brisbane REASONS FOR JUDGMENT

The application now before me is brought by the statutory trustees for sale in respect of the order I made on 8 April 1997, reserving the question of the costs of Mr Theo's application, which I dismissed on that day, in respect of Mr Philp and his co-trustee's entitlement to tax costs under two orders made by Kiefel J, one in September and one in October 1996.

The reason I reserved the costs, which I indicated at the time, was that Mr Theo then had pending an appeal to the Full Court, which may possibly have resulted in the setting aside of the two orders of Kiefel J, in respect of which the costs then in question were ordered to be paid by Mr Theo. If the Full Court had set aside those orders, that would have been a relevant consideration to take into account to decide what should be done with the costs of Mr Theo's application which I disposed of against him on 8 April, but which I reserved.

The appeal has been heard. Mr Theo's challenge to the orders of Kiefel J has been rejected. There is no reason why the costs of Mr Theo's unsuccessful application disposed of on 8 April should not be awarded to Mr Philp and his co-trustee.

The only reason advanced by Mr Theo is that he apparently has an application for special leave pending but undisposed of before the High Court in respect of the Full Court decision. That provides no ground at all in the circumstances for denying Mr Philp and his co-trustee the costs of their successful opposition to Mr Theo's application I dealt with on 8 April 1997.

I will order that Mr Theo pay the costs of Mr Philp and the other respondent of and incidental to the application which I disposed of by judgment on 8 April.

The Official Trustee seeks his costs of applications filed on 17 March and 21 March 1997 by Mr Theo. These applications are brought by Mr Theo in respect of the orders made by Kiefel J on 2 September, 3 October and 20 December last year, and by Spender J on 10 March 1997. These orders have been the subject of extensive litigation, all instigated by Mr Theo in attempts to avoid the enforcement of these orders, which include orders for costs. Mr Theo no longer wishes to pursue these two applications against the Official Trustee in so far as they remain alive, having regard to inter alia the decision of the Full Court on 28 April last.

The real issue today is with respect to the costs of today's hearing of these two applications. Mr Theo says he should not have to pay the Official Trustee's costs of today of the two applications because of dealings he says he had at Court in the afternoon of 15 May last with the solicitor for the Official Trustee on the hearing of another of his applications in an unrelated matter, which he had brought against the Official Trustee and others. It is common ground that Mr Theo spoke with Mr Hewison, the solicitor representing the Official Trustee that day, about resolving the applications of present concern by consent, and that Mr Hewison said, after taking instructions from his client, that his client would want his costs.

This is where the parties depart. Mr Theo says he agreed to this, without qualification. Mr Hewison, however, says that when he told Mr Theo his client would want an order for costs, there was no agreement on Mr Theo's part to pay any of the Official Trustee's costs. The next thing that is certain is that by letter dated 20 May 1997, Mr Hewison wrote to Mr Theo enclosing a draft of the consent orders which Mr Hewison said his client would want from the Court in relation to the two applications now before me. These draft orders include orders for costs against Mr Theo.

Mr Theo says he did not receive this letter until after business hours on 22 May, ie, yesterday, when it was too late to avoid today's hearing and the associated costs of today. I accept Mr Hewison's evidence that on 20 May 1997, he sent not only the letter of 20 May that I have referred to, with the draft consent orders dealing with the costs of the two applications now before me, but a second letter of the same date to Mr Theo in the matter I have mentioned which was heard on 15 May 1997. I accept that both were delivered together to Mr Theo, by courier, at Mr Theo's home at Deception Bay.

It is plain that Mr Theo received both those letters in sufficient time for him to prepare and file in this Court before the Registry closed yesterday certain material in answer to material relating to the matter heard on 15 May which was forwarded to him by Mr Hewison under the second of the letters of 20 May. I therefore reject Mr Theo as a reliable witness with respect to what he says about receipt of the letter of 20 May 1997, exhibit 1, enclosing the draft consent orders. I accordingly consider his evidence of his discussion with Mr Hewison on 15 May unreliable, where it conflicts with Mr Hewison's evidence.

I accept Mr Hewison's evidence on the critical matter of whether there was any agreement by Mr Theo to pay the costs of the two applications now before me, up to at least that time. I find that Mr Theo did not make any offer to pay any of the Official Trustee's costs of either of those applications. In my opinion, Mr Theo was engaged upon a manoeuvre to attempt to avoid any liability for the costs of the two applications in question, which he chose to file and bring the Official Trustee along to court to answer, in circumstances where his assessment was that those applications were doomed to fail if he should bring them on before the Court for hearing.

It follows that it was, in consequence, necessary for the Official Trustee to come to court today to get its costs by order of the Court against Mr Theo in respect of the two applications.

The statutory trustees' position is similar to the Official Trustee. They are also respondents to the same applications that Mr Theo brought against the Official Trustee and which he now no longer wishes to pursue. It is common ground that on 16 May 1997, Mr Theo telephoned Messrs Bennett and Philp, and spoke not to Mr Philp who was absent, but to his partner, Mr Bennett, the other statutory trustee. It was Mr Philp, however, who had the carriage of the matter.

I accept that the best account of what took place is contained in Mr Bennett's diary note which is in evidence. Mr Bennett, in his note, wrote this:

"He [Mr Theo] said he was ringing me to see if we could proceed 'upon a consent basis on Friday … [ie, today] so that we do not need to have an appearance'.

I said that he should really address these matters to Ken [ie, Mr Philp]. However if he wants we can probably advise a figure which he can agree to pay us to resolve all issues of costs. He said that wasn't what he wanted. What he wants is simply a consent order to be made. I said these are matters for Ken and I will refer the conversation to him."

Mr Theo made it clear that his position, at least today, is that it is true, as Mr Bennett says, that Mr Theo did not himself mention costs; Mr Theo claims he believes that Mr Bennett would have understood he was offering to pay Messrs Bennett and Philp's costs when he spoke of resolving the matter by consent. I do not accept that Mr Theo believed any such thing. I am of the clear view that, once again, Mr Theo's approach to Mr Bennett on 16 May 1997 was designed to procure a situation whereby he could extract himself from the applications that he had filed against the statutory trustees, which he did not want to pursue, probably because he realised they were doomed: he was trying to insulate himself from what he saw as the very likely liability in costs that he was facing, if those matters proceeded.

In any event, Messrs Bennett and Philp wrote to Mr Theo on 21 May 1997 enclosing draft orders which dealt with the question of the costs which they said that Mr Theo should pay in respect of the two applications. Mr Theo did not respond to this letter; he says he did not receive it until after the close of business on 22 May 1997. It is unnecessary for me to make any findings in relation to that because, in any event, I am of the view that there was no agreement on 16 May, in the course of discussions between Mr Bennett and Mr Theo, as to anything to do with the costs of today.

The position throughout has been that Messrs Bennett and Philp had no reason from what Mr Theo said to Mr Bennett on 16 May and what transpired thereafter, until today's hearing, to believe that Mr Theo would agree to pay any of Messrs Bennett and Philp's costs unless compelled by court order. They considered that it was essential, if they were to get the costs they are entitled to in respect of the two applications that Mr Theo saw fit to bring them to court on but not to pursue, that they would have to get a court order. In any event, it seems to me very plainly reasonable for Messrs Bennett and Philp to have brought the matter back before the Court today so that the question of their entitlement to costs could be resolved.

Both the Official Trustee and Messrs Bennett and Philp claim, not only their costs on a party and party basis, but costs on an indemnity basis. The Full Court, when it dismissed Mr Theo's appeals against the orders of Kiefel J on 28 April, referred to the long history of the litigation between Mr Theo, the Official Trustee and the statutory trustees, to the one victory that Mr Theo had in winning his appeal in the Full Court in November 1996 which is at the core of Mr Theo's persistence in bringing this multitude of applications before the Court, and said this, in relation to an application made after delivery of the judgment dismissing the appeal by the Official Trustee and the statutory trustees for sale for indemnity costs:

"However, the court is not prepared to order costs on an indemnity basis. A litigant in person should not too readily be punished for mere mistakes of a legal nature. At the same time, Mr Theo should understand that unreasonable persistence in claims already dealt with could place him in the position where such an order would become appropriate."

So far as the Official Trustee's claim for indemnity costs is concerned, it is based essentially on the proposition that Mr Theo has persisted today in a case which he must have known was without merit. There is a good deal to be said for the Official Trustee's characterisation of Mr Theo's behaviour in that way. However, I am not, in the circumstances of the case, prepared to find in that consideration sufficient justification for ordering Mr Theo to pay the Official Trustee's costs of today's application on an indemnity basis.

Mr Philp, on behalf of the statutory trustees, makes a similar application. He has put before me material indicating offers were made to settle all outstanding questions of costs between the statutory trustees and Mr Theo, both prior to the institution of the two applications now before me and subsequently. However, it is apparent from the offers that were made (and they were made as open offers so far as any question of costs might be concerned), were not confined to settling the statutory trustees' claims for costs, but rather to settling those claims and the multitude of other claims that Mr Theo had brought against the statutory trustees. I do not therefore see, on the basis of that correspondence, a sufficient foundation for ordering that Mr Theo pay the statutory trustees' costs of the two applications now before me, including today's costs, on an indemnity basis.

But it is quite obvious, not only from the remarks made by the Full Court, but from the conduct of Mr Theo in today's proceedings, that time is fast running out and that if he persists in bringing applications and maintaining applications that turn out to be utterly without substance, he will, sooner rather than later, be confronted, when an unfounded application by him is dismissed, with an order for indemnity costs.

I certify that this and the preceding seven pages are a true copy of the reasons for judgment herein of the Honourable Justice Drummond. Associate: Date: 23 May 1997