Zeaiter v Reliance Financial Services

Costs 20 It was common ground that once the sequestration order was made, Mr Cassaniti ceased to have standing both as to his defence to the statement of claim and as to his cross-claim. 21 It was also common ground that any award of costs made by the Court would not constitute a debt provable in the bankruptcy in terms of the Bankruptcy Act 1966 (Cth), s 82(1). Unless and until the Court, in exercise of its discretion, makes an order against Mr Cassaniti to pay costs, he is not liable to do so. Hence there was no liability as to costs to which Mr Cassaniti was subject at the date of the bankruptcy and there was no provable debt under s 82(1) (Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 82 ALJR 173 at [65]). 22 The Bankruptcy Act (Cth), s 58(3)(b) provides that except as provided by the Act, after a debtor becomes bankrupt, it is not competent for a creditor, except with the leave of the Court, to take any fresh step in any legal proceeding in respect of a provable debt. 23 It was submitted that this provision prevented the Court from dealing with the statement of claim and the cross-claim. 24 This submission goes further than an argument on costs. It goes to the jurisdiction of the Court to make the declarations I have indicated I would make. 25 In support of the submission, reference was made to Mango Media Pty Ltd v Velingos [2008] NSWSC 202. In that case, Barrett J concluded that proceedings seeking declaratory relief recognising a security interest the plaintiff claimed to have in the defendant's land fell within the provision. 26 The instant circumstances are quite different. Mrs Zeaiter does not sue as a creditor. She seeks to establish that she is not a creditor. She does not fall within the terms of the Bankruptcy Act (Cth), s 58(3)(b). 27 Nor is Mr Cassaniti's cross-claim that of a creditor of his bankrupt estate. Nor is it in relation to a provable debt. Mr Cassaniti seeks to recover moneys he alleges are due to him. If he had been successful, those moneys would have augmented his estate. They would not have constituted a claim upon it. 28 It was submitted on Mr Cassaniti's behalf that an order for costs should not be visited against him because the matter might have been resolved by agreement between Mrs Zeaiter and the trustee without coming to Court. 29 That submission does not affect costs incurred before Mr Cassaniti became a bankrupt and most of the costs were incurred before that event. 30 The proceedings were commenced in July 2006. Mrs Zeaiter sought an order against Reliance for the removal of a caveat lodged by it over her property. Mr Cassaniti was not a party to those proceedings. Reliance filed a cross-claim against Mrs Zeaiter and a bank in August 2006 seeking a declaration that Mrs Zeaiter's property was charged for the payment of moneys allegedly advanced to her and interest accrued and seeking judicial sale of the property and associated relief. In October 2006 Mrs Zeaiter was granted leave to file an amended summons that included Mr Cassaniti as a party and sought relief in the removal of a caveat lodged by him together with an injunction restraining him from lodging any further caveats. By a second-cross claim filed in November 2006, Reliance and Mr Cassaniti sought against Mr and Mrs Zeaiter and a finance house recovery of moneys said to have been advanced to Mr and Mrs Zeaiter, judicial sale and associated relief. It was by a statement of claim filed in December 2006 that the current declaratory relief with respect to the engagement letters was raised by Mrs Zeaiter, as much as by way of defence to the second cross-claim. 31 All Mrs Zeaiter's affidavits establishing her claim and in defence to the second cross-claim were served well before Mr Cassaniti became bankrupt. The last affidavit was sworn in February 2007. 32 Further affidavits were read before me but they were limited to establishing Mr Cassaniti's bankruptcy and the negotiations and discussions with his trustee. 33 Costs were incurred by Mrs Zeaiter because of Mr Cassaniti's resistance to the statement of claim and his persistence with the second cross-claim. 34 Furthermore, the trustee and Mrs Zeaiter did arrive at an agreement that shortened the hearing from the three days for which the matter was set down to but part of one day. 35 It was submitted on Mr Cassaniti's behalf that Mrs Zeaiter had not succeeded on all points. That is so, but this is not a case in which it is appropriate to award costs of separate and discrete issues. The evidence in relation to the alternative relief claimed was inextricably woven together. 36 It was submitted that there had been no hearing on the merits and the appropriate exercise of discretion was that no order for costs should be made against Mr Cassaniti. 37 Reliance was placed upon McHugh J's decision in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622. In that case the prosecutrix had been refused a protection visa by the Minister. She was unsuccessful in a review of that decision by the Refugee Review Tribunal. She commenced proceedings in the High Court shortly after which the Minister granted a protection visa. The prosecutrix did not proceed with the High Court proceedings but sought an order for costs under the High Court Rules. They provided that when for any reason the further prosecution of a proceeding became unnecessary except for the purpose of determining by whom the costs of proceeding should be paid any party might apply to the Court and the Court might make such order as was just. At 624 his Honour pointed out that ordinarily a discretionary power to order costs is exercised after a hearing on the merits and as a general rule the successful party is entitled to costs but where there has been no hearing on the merits the court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. His Honour went on at 625 to say that where it appears that the parties have acted reasonably, the proper exercise of discretion is that no order for costs should be made: "If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases." 38 His Honour did recognise that in an appropriate case a Court will make an order for costs even when there has been no hearing on the merits. 39 This was not a case in which the proceedings were settled or their further prosecution became futile. The trustee did not oppose the relief sought by Ms Zeaiter but she had to establish her entitlement to that relief and that required the Court to analyse the material that she placed before it. 40 The circumstances of this case are distinguishable from those in Lai Qin and, in my view, there is no reason to displace the general rule that costs follow the event. 41 I therefore propose to make an order that Mr Cassaniti pay Ms Zeaiter's costs of the proceedings. Orders 42 I make the declarations in paragraphs 11(i) and (j) and paragraphs 14(i) and (j) of the second further amended statement of claim. I dismiss the second cross-claim. I order Mr Cassaniti, and not his trustee in bankruptcy, to pay Mrs Zeaiter's costs of the proceedings.

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