THE COURT ORDERS THAT:

1.         The respondent pay the applicant’s costs of and incidental to the application including reserved costs, if any, to be taxed if not agreed.

Note:                Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

This is an application for costs by the applicant Maureen Terry consequent upon the setting aside, by consent, of a notice issued pursuant to s 139ZQ of the Bankruptcy Act (Cth) 1966 (“the Act”).  The notice served called upon the applicant to pay a substantial sum of money in respect of an interest in jointly-owned property being transferred to her by her husband, the bankrupt, in circumstances in which it is said or it was alleged that the transfer was to avoid the consequences of the bankruptcy and so as to deprive the bankrupt’s estate of the interest in the property.

The affidavit material in support of the application includes material from Mrs Terry setting out the circumstances surrounding the transfer.  Briefly put, they are that the property was acquired by her from her own funds, the bankrupt providing none of the purchase price such that it was treated as between the parties and, in equity, has been property held jointly by her as to her own interest and by the bankrupt on a resulting trust in favour of her, she being the sole provider of the purchaser funds and improvement funds.  The solicitors for the applicant wrote to the Trustee outlining certain formal defects in respect of the notice and challenging the basis upon which it was asserted in the notice relied upon by the Trustee as entitling him to set aside the transaction as void as against him.

The material at that stage did not particularise the basis upon which Mrs Terry contended that she was not obliged to make any payment as called for in the notice.  The solicitors for the Trustee, by letter of 4 June 1998 responded to the applicant’s solicitors’ facsimile of 1 June 1998 indicating that nothing had persuaded the writer that there were any substantive grounds to the objection to the notice.  However, it concluded:

            “Points 5 and 6 are noted, but unless you provide me with particulars by 5 pm on 5 June I shall be proceeding with my request to the Deputy Official Receiver to amend the notice issued pursuant to section 139QZ”.

The notice required payment be made to Mr Fletcher the Trustee, by 17 June 1998, and continued:

            “Or if you satisfy William John Fletcher that such is not possible, you are required to have made by that date arrangements which are satisfactory to him for the payment of $68,303.17 to him”.

It was submitted that there was no absolute requirement to comply by 17 June 1998 having regard to the proviso at the end.  However, the submission overlooks the fact that the proviso at the end has as an assumption an acknowledgment of liability to pay the amount.  The effect of non-compliance with the demand is to commit a criminal offence.  Therefore, the only safe course to be adopted in circumstances such as this where there is a dispute as to the underlying facts recorded in the notice under s 139ZQ is to apply in a timely way to have the notice set aside before the date for compliance arrives.

In the instant case, the solicitors for the applicant did not respond directly to the solicitors for the Trustee setting out the material which was subsequently contained in Mrs Terry’s affidavit.  Rather, an application was made pursuant to s 139ZS of the Act to set aside the notice and the application, together with affidavits filed in support on 15 June 1998, were served, so I am advised, on the Trustee on 15 June 1998, two days before the time for compliance with the notice.

Consequent upon receiving the material, the material before me indicates that the solicitors for the Trustee forwarded a form of consent order to the solicitors for the applicant.  That consent order provided that the notice be set aside; that there be no order as to costs; and provided for the filing of an application and statement of claim, a defence and for other directions in relation to proceedings of some sort to be instituted by the Trustee.  That consent order was not agreed in and, when the matter came before a Registrar on 7 August 1998, consent orders were agreed in by the parties, namely: that the notice be set aside; that the argument as to costs be adjourned to a date to be fixed; that the cost of the appearance before the District Registrar be costs in the cause.

The applicant seeks an order for costs on the basis that she was obliged to bring an application which was ultimately agreed in by the Trustee and that costs should follow the event.  The Trustee resists that course and seeks an order that his costs be paid or, alternatively, that the costs of the parties of and incidental to the application to set aside the notice be costs in the cause in the Trustee’s proposed application under s 121 of the Act, and in default of proceedings, the matter to be re-listed for a further hearing as to the question of costs.

The principal position taken by the Trustee is that the application was premature in that he was not given material to consider as to whether to continue to resist the application prior to it being filed.  Although there is no material I am told that the proceedings which are intended to be instituted under s 121, and the reason that the Trustee decided not to proceed further in resisting the application to set aside the notice, result from the discovery of land held in far north Queensland which the Trustee will now seek to recover.  It is said that those proceedings will include proceedings under s 121 in respect of the land the subject of this application.

In my view, it is undesirable to leave the question of costs hanging depending upon a view as to whether or not proceedings in respect of the North Queensland land and the Elanora land or just the Queensland land are instituted.  It is redolent with the possibility of running up more costs for the matter to come back for a further argument.  The question of costs should be resolved today. 

On balance, I am of the view that the ordinary rule ought to apply and that costs ought follow the event.  To the extent that it is said that counsel should not have appeared on the directions hearing before the Registrar, it seems to me that the parties have dealt with that by their consent order as to how the costs of that appearance should be treated.

In any event, whether or not costs of counsel are to be recoverable in default of agreement is a matter for the taxing officer to decide. 

Accordingly, I order that the respondent pay the applicant’s costs of and incidental to the application including reserved costs, if any, to be taxed if not agreed.

Associate:

Dated:              18 September 1998