FEDERAL COURT OF AUSTRALIA
NSW Insurance Ministerial Corp v Abualfoul [1999] FCA 433
BANKRUPTCY – whether respondent indebted to the petitioning creditor – costs order in District Court proceedings – respondent is next friend, but infant attains majority before the proceedings are concluded – whether respondent is liable under costs order
Government Insurance Office (Privatisation) Act 1991 (NSW), Pt 5
Bankruptcy Act 1966 (Cth), ss 41(6A), 44(1), 52
District Court Act 1973 (NSW), ss 148A, 148B
District Court Rules, Pt 1 r 4, Pt 45
Haines v Leves (1987) 8 NSWLR 442, cited
Ex parte Davis (1901) 1 SR (NSW) 187, cited
Bligh v Tredgett (1851) 5 De G & Sm 74; 64 ER 1024, applied
Radford v Cavanagh (1899) 15 WN (NSW) 226, cited
Pritchard v Roberts (1873) LR 17 Eq 222, cited
Rhodes v Swithenbank (1889) 22 QBD 577, cited
Dey v Victorian Railways Commissioners (1949) 78 CLR 62, cited
Pink v J A Sharwood & Co Limited [1913] 2 Ch 286, cited
Stephenson v Geiss [1998] 1 Qd R 542, cited
Davenport v Davenport (1822) 1 Sim & St 101; 57 ER 40, cited
Baile v Baile (1872) LR 13 Eq 497, applied
Brown v Weatherhead (1844) 4 Hare 122; 67 ER 586, cited
Almack v Moore (1878) 2 LR Ir 90, cited
Feeney v Pieper [1964] QWN 55, applied
Carberry (formerly an infant but now of full age) v Davies [1968] 2 All ER 817, cited
Milosevic v Government Insurance Office of New South Wales (1993) 31 NSWLR 323, discussed
Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256, cited
Corney v Brien (1951) 84 CLR 343, cited
NSW INSURANCE MINISTERIAL CORPORATION v ANWAR ABUALFOUL
NG 7545 OF 1998
JUDGE: SACKVILLE J
PLACE: SYDNEY
DATE: 14 APRIL 1999
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IN THE FEDERAL COURT OF AUSTRALIA |
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NG 7545 OF 1998 |
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BETWEEN: |
NSW INSURANCE MINISTERIAL CORPORATION Applicant
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AND: |
ANWAR ABUALFOUL Respondent
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT ORDERS THAT:
1. The applicant’s petition be dismissed.
2. The applicant pay the respondent’s costs of the proceedings.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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NG 7545 OF 1998 |
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BETWEEN: |
NSW INSURANCE MINISTERIAL CORPORATION Applicant
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AND: |
Respondent
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JUDGE: |
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DATE: |
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PLACE: |
REASONS FOR JUDGMENT
1 The applicant, the NSW Insurance Ministerial Corporation (“the creditor”), is created by Part 5 of the Government Insurance Office (Privatisation) Act 1991 (NSW). It succeeded to certain assets of the Government Insurance Office of New South Wales (“GIO”), in consequence of the latter’s privatisation.
2 By a creditor’s petition, presented on 19 May 1998, the creditor seeks a sequestration order against the estate of the respondent. The act of bankruptcy the respondent is said to have committed is his failure to comply with a bankruptcy notice issued by the creditor and served on the respondent on 24 March 1998. The bankruptcy notice claimed that the respondent owed the creditor the sum of $8,880.05. This sum was said to comprise $5,605.34 due pursuant to a District Court judgment obtained on 12 October 1992, together with interest on the judgment debt of $3,274.71. It was common ground that the respondent has neither complied with the bankruptcy notice, nor applied to have it set aside (see Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”), s 41(6A)).
3 The District Court judgment was obtained in proceedings commenced by or on behalf of the respondent’s son, Jalal Abualfoul (to whom I refer as “the son”). The proceedings were commenced by the issue of a statement of claim on 25 March 1988, at which time the son, who was born on 9 May 1971, was aged sixteen years and ten months. The statement of claim bore the title:
“JALAL ABUALFOUL by his next friend
ANWAR ABUALFOUL of 155 Boronia Road, Greenacre, 2190
Plaintiff”.
The defendant in the proceedings was named as the GIO.
4 The plaintiff in the District Court proceedings sought damages for injuries sustained by the son in a traffic accident which occurred on 13 April 1985. Ultimately, the action failed and a verdict was entered for the defendant. According to a certificate of judgment issued on 18 December 1997, which was attached to the bankruptcy notice, the defendant obtained judgment against
“[t]he Plaintiff on 12/10/92, and his costs of the action to be taxed (which costs have since been taxed and allowed at $5,605.34).”
By the time judgment was entered for the defendant, the creditor had been substituted for the GIO as the defendant in the proceedings. The evidence did not reveal the precise means by which the substitution was effected.
5 The respondent’s grounds of opposition to the creditor’s petition raise a large number of issues, most of which were not pressed. The principal ground on which the respondent relies is that he was not indebted to the creditor in the sum alleged or at all. The basis for this contention is that the son had attained his majority on 9 May 1989, well before the creditor obtained judgment in the proceedings. According to Mr Freeman, who appeared for the respondent, this fact meant that the respondent was not liable to meet the costs order or, at the least, those costs incurred by the creditor after the date the son attained his majority. Mr Freeman conceded that his client had taken no steps to remove himself from the District Court proceedings as the next friend of the son, but submitted that this did not result in him being liable under the costs order.
The Facts
6 As I have noted, the District Court proceedings were commenced by the issue of the statement of claim on 25 March 1988. Shortly before the statement of claim was issued, the respondent signed an undertaking in the following form:
“IN THE DISTRICT COURT
OF NEW SOUTH WALES
AT SYDNEY No 003859 of 1987
BETWEEN JALAL ABUALFOUL by his next friend
ANWAR ABUALFOUL of 155 Boronia Road, Greenacre
Plaintiff
AND GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES of 111 Elizabeth Street, Sydney
Defendant
ANWAR ABUALFOUL of 155 Boronia Road, Greenacre in the State of New South Wales undertakes to be responsible for any costs which the Plaintiff might, if he were of full capacity, be required to pay in these proceedings.
DATED this 24th day of Feb 1988
ANWAR ABUALFOUL – Next Friend”.
7 It should be noted that the undertaking executed by the respondent followed precisely the terms of Form 133 in the District Court Rules (“DCR”), as Form 133 stood prior to its amendment on 20 February 1987. On that date, the form of undertaking specified in Form 133 was replaced by a simple form of “Consent tutor to act” (NSW Government Gazette, No 36). This substitution reflected substantial changes made to Part 45 of the DCR on 21 November 1986 (NSW Government Gazette, No 179).
8 The revised Part 45 introduced the concept of a “tutor” as the generic description for a next friend or guardian ad litem. The amendments also repealed a rule which had provided that a person became appointed as the next friend of an infant plaintiff by filing an undertaking to be responsible for any costs which the disable person might, if he were of full capacity, be required to pay in the proceedings: DCR (pre-November 1986), Part 45, r 4(1), (2). Since the District Court proceedings were instituted after November 1986, the DCR did not require the respondent to execute any such undertaking. It may have been that the solicitor acting on behalf of the plaintiff in the District Court proceedings was not aware that the DCR had been amended to remove the requirement for the next friend to sign an undertaking.
9 On 24 February 1988, the solicitor for the plaintiff swore an affidavit stating that the son was a minor, and that the respondent was a proper person to be appointed as guardian ad litem of the son. The affidavit also stated that the respondent had no interest in the proceedings adverse to those of the plaintiff. A consent by the respondent was endorsed at the foot of the affidavit in the following terms:
“CONSENT
Anwar Abualfoul of 155 Boronia Road, Greenacre in the State of New South Wales consents to act as Guardian Ad Litem of the Plaintiff in these proceedings.
DATED 1987
ANWAR ABUALFOUL.”
10 The 1986 amendments to the DCR continued the previous requirement that a next friend or guardian ad litem consent to act in that capacity: DCR, Part 45, r 4(6)(a); cf DCR (pre-November 1986 version), Part 45, r 3(3)(d). The form of consent was provided by the new Form 133, to which I have referred. However, the form of consent executed by the respondent was not that provided for in the (then) recently promulgated Form 133. Moreover, the description of the respondent as a “Guardian Ad Litem” was wrong. The DCR, in their post-November 1986 form, provide that where it is necessary to refer to the office of a tutor, he or she shall be described as a tutor, unless it is necessary to distinguish between the offices of next friend and guardian ad litem: DCR, Part 45, r 1. The expression “guardian ad litem” refers to the person by whom a disable person defends any proceedings: DCR, Part 45, r 2(2). The expression “next friend” refers to the person by whom a disable person brings or makes a claim or carries on proceedings for relief in the Court: DCR, Part 45, r 2(1). This reflects the classification under the general law.
11 On 23 October 1991, a Senior Assistant Registrar completed a pre-trial conference report in the District Court proceedings. The report identified the plaintiff simply as “Abualfoul”, and identified the defendant as the GIO. The Registrar attached a pre-trial conference report, completed by counsel for the plaintiff, which showed that the son’s date of birth was 9 May 1971. Ms Nash, who appeared for the creditor in the present proceedings, accepted that by that time, if not before, the GIO’s legal representatives must have become aware of the son’s date of birth and that he had attained his majority in May 1989.
12 A hearing of the claim took place before an arbitrator on 13 March 1992. At this time, the son was nearly twenty-one years of age. The arbitrator determined the action under the Arbitration (Civil Actions) Act 1983 (NSW) and made an award in favour of the defendant. At this stage, the GIO was still recorded as the defendant in the proceedings.
13 There was no evidence as to what role, if any, the respondent played in the proceedings between the date the son attained his majority and the date of the hearing before the arbitrator. However, the respondent gave affidavit evidence (on which he was not cross-examined) that he was present for part only of the hearing before the arbitrator and was not informed that the arbitrator had found against the plaintiff. The respondent also gave evidence that he knew nothing of the subsequent history of the case, did not attend any further hearings, and executed no further consents. I accept the respondent’s evidence on these matters.
14 On 13 April 1992, the solicitor for the plaintiff in the District Court proceedings filed an application for the rehearing of the arbitrated action, pursuant to s 18 of the Arbitration (Civil Actions) Act 1983 (NSW). The application identified the plaintiff as “JALAL ABUALFOUL by his next friend A ABUALFOUL” and the defendant as the GIO. The matter was heard by a Judge of the District Court on 12 October 1992, who returned a verdict for the defendant. By this time, the creditor had become the defendant in the proceedings.
15 On 8 April 1994, an appointment to tax was sent on behalf of the creditor by post to the son, who was described in the affidavit of service as the “Judgment Debtor”. The address to which the notice was sent was that of the son. The appointment to tax identified the proceedings as between the creditor and “JALAL ABUALFOUL BY HIS NEXT FRIEND ANWAR ABUALFOUL”. A copy of the appointment to tax was also sent to the plaintiff’s solicitors.
16 On 13 May 1995, an Assistant Registrar of the Court issued a certificate of taxation certifying that the defendant’s costs of the action had been taxed and allowed at $5,605.34. There seems to have been no appearance on behalf of either the son or the respondent at the taxation of costs.
17 On 30 June 1997, a letter under the letterhead of “GIO Australia” was sent to the respondent demanding payment of $5,605.34 to the creditor. The respondent’s solicitors (not those appearing for the plaintiff in the District Court proceedings) replied on 17 July 1997. The letter asserted that the respondent could not pay the costs and pointed out that his son had attained his majority in May 1989.
18 On 19 December 1997, an Assistant Registrar of the District Court issued a judgment in the prescribed form (Form 62). This states that on 12 October 1992 it was adjudged that
“1. The Defendant recover against the Plaintiff and costs to be taxed.
2. That the Plaintiff pay to the Registrar costs forthwith after taxation.”
The Judgment recorded that the judgment debtor was “JALAL ABUALFOUL BY HIS NEXT FRIEND ANWAR ABUALFOUL”, and the judgment creditor was the creditor in the present proceedings. On 24 March 1998, the creditor served the respondent with the bankruptcy notice claiming that he owed the creditor the sum of $8,880.05. Upon the failure of the respondent to comply with the notice, the creditor caused the present petition to be issued.
The DCR
19 The DCR, as they applied to the District Court proceedings, provided that a “disable person” could not, except by his or her next friend, bring or make a claim or carry on any proceedings for relief in the Court: DCR, Part 45, r 2(1). The expression “disable person” was defined to mean “a minor or an incompetent person”, while “tutor” was defined to mean “a next friend or guardian ad litem of a disable person”: Part 1, r 4(1). A next friend or guardian ad litem was to be described as a “tutor” unless it was necessary to distinguish between the two offices: Part 45, r 1.
20 Part 45, r 3 provided as follows:
“3(1) Subject to the rules, where a disable person is a party to any proceedings, anything which would, if he were not a disable person, be required or authorised by the rules to be done by him shall or may be done by his tutor.
(2) A tutor must act by a solicitor.”
21 In general, an order appointing a tutor was not necessary (Part 45, r 4(1)), although the Court was given power, on motion by a party to the proceedings or any other person, to appoint a tutor for a disable person for the purposes of the proceedings: (Part 45, r 7(1)). A person could not be a tutor of a disable person in any proceedings in which that person had an interest adverse to that of the disable person (Part 45 r 4(3)). A person could not be made a tutor without his or her consent (Part 45, r 4(4)). A person, other than a tutor appointed by the Court, could not take any step in any proceedings as tutor for a disable person unless beforehand there had been filed the person’s consent to act and a certificate by his or her solicitor that the tutor had no interest adverse to that of the disable person (Part 45, r 4(6)). The prescribed form of consent is that in Form 133.
22 The DCR gave the Court power to remove a tutor:
“8(1) The Court may, on motion by a party to proceedings or by any other person or of its own motion –
(a) remove a tutor; and
(b) stay the proceedings until appointment of a tutor in place of the tutor removed.
(2) A person moving for an order under this rule shall, unless the Court otherwise orders, serve notice of the motion on the tutor whose removal is sought and on the disable person for whom he is tutor.”
23 Where, in any proceedings, a document was required to be served on a disable person, service could be effected only in accordance with Part 45, r 15. This provided for the document to be served on the disable person’s tutor or solicitor or on other persons approved by the Court. Special provision was made where the person to be served was a minor and had no tutor in the proceedings: Part 45, r 15(5).
The Creditor’s Submissions
24 The creditor submitted that it was entitled to rely on the judgment of the District Court. That judgment, as issued by the Court, identified the plaintiff as “Jalal Abualfoul by his next friend Anwar Abualfoul”. As I understood Ms Nash, she contended that judgment had been entered against the respondent as tutor and could be enforced directly against him. She acknowledged that the respondent was not the plaintiff, but she said that as tutor he was liable to satisfy any order for costs made against the disable person.
25 Ms Nash also relied on the terms of the undertaking executed by the respondent. She said that the effect of this undertaking was that the respondent undertook to the Court to pay any costs incurred by the plaintiff, whether or not they were incurred after he had attained his majority.
26 Ms Nash acknowledged that the plaintiff had attained his majority on 9 May 1989 and that the legal representatives of the GIO (then the defendant) would have been aware of this fact prior to the arbitration. However, she submitted that the respondent should have applied to be removed as tutor pursuant to DCR, Part 45, r 8, or the plaintiff should have given notice that he had attained his majority. In the absence of any such application or notice, the respondent remained liable to pay the costs awarded against the plaintiff.
The Next Friend
27 In considering the creditor’s submissions, it is helpful to commence with a brief examination of the office of next friend independently of the DCR. Under the general law, because of an infant’s inability to bind himself or herself, or to incur liability for costs, the infant was incapable of bringing an action without the assistance of some other person responsible to the court for the proper conduct of the suit: Daniell’s Chancery Practice (7th ed, 1901), 116. This person was known as the next friend (or “prochein amy” in the earlier cases), apparently because he or she was usually a near relative of the plaintiff. If an action was instituted by an infant without a next friend, the defendant could apply to have the action dismissed: ibid. The limitation on the capacity of infants did not extend to matters of substantive entitlement or liability, since at common law an infant could sue and be sued: Haines v Leves (1987) 8 NSWLR 442 (CA), at 449, per Street CJ. The limitation on capacity was procedural.
28 One reason for requiring an infant plaintiff to sue by a next friend was so that there would be a person answerable to the defendant for the costs of the litigation, although the defendant could waive this benefit: Daniell’s Chancery Practice, at 116; Ex parte Davis (1901) 1 SR (NSW) 187, at 189. The next friend was liable for all costs incurred in the actions brought by the infant, until the infant attained his or her majority: Bligh v Tredgett (1851) 5 De G & SM 74; 64 ER 1024; Simpson on the Law of Infants (3rd ed, 1909), 391. The next friend could be attached for the non-payment of the costs of an action in which the defendant obtained a verdict: Radford v Cavanagh (1899) 15 WN (NSW) 226. However, the next friend was ordinarily entitled to recover the costs from the infant’s estate (if there was one), provided he or she acted bona fide: Pritchard v Roberts (1873) LR 17 Eq 222.
29 The next friend was regarded as an officer of the court appointed to safeguard the interests of the infant: Rhodes v Swithenbank (1889) 22 QBD 577, at 579, per Bowen LJ; Dey v Victorian Railways Commissioners (1949) 78 CLR 62, at 113-114, per Williams J; Ex parte Davis. The conduct of the proceedings was in the hands of the next friend: Rhodes v Swithenbank, at 578, per Lord Esher MR. The next friend was not, however, a party to the action: Pink v J A Sharwood & Co Limited [1913] 2 Ch 286, at 289, per Eve J. The next friend derived his or her authority from the court, not the infant, and could be removed if, for example, he or she acted improperly or had an interest adverse to that of the infant: Stephenson v Geiss [1998] 1 Qd R 542, at 557, per Lee J; Simpson on the Law of Infants, at 384-385.
30 In general, the next friend would not be allowed to retire without giving security for the costs incurred until that time: Davenport v Davenport (1822) 1 Sim & St 101; 57 ER 40. However, it appears that the substitute next friend, once appointed, was liable to pay all costs in the proceedings for which the infant plaintiff was liable: Bligh v Tredgett, supra.
31 Where an infant plaintiff attained his or her majority, the infant could elect whether or not to proceed with the litigation. The infant was taken to have elected to proceed if he or she did anything which could reasonably be considered an adoption of the proceedings: Baile v Baile (1872) LR 13 Eq 497, at 508, per Wickens VC. If an infant plaintiff came of age and carried on a suit instituted in his or her name, the plaintiff became responsible for all the costs of the suit: Bligh v Tredgett, at (ER) 1026, per Parker VC.
32 After the plaintiff became of full age, the next friend was not entitled to take further steps in the proceedings: Brown v Weatherhead (1844) 4 Hare 122; 67 ER 586. But if the next friend purported to take such steps without proof being given to the court that the infant plaintiff had attained his or her majority, the court would not interfere with the next friend’s actions: Almack v Moore (1878) 2 LR Ir 90, at 93-94, per Palles CB.
33 The course of action which should be taken when an infant plaintiff attained his or her majority, subject to any applicable rules, was described by Philp ACJ in Feeney v Pieper [1964] Qd WN 55:
“When an infant plaintiff attains majority during the proceedings the authority of the next friend in relation to the action ceases and he and his solicitor proceed at their peril. The solicitor upon the plaintiff attaining majority should require instructions from him as to whether he elects to continue the action and if he does, notice that the plaintiff has attained majority should be filed in the Registry and given to the other parties. Subsequent proceedings should be entitled as follows:
‘A.B. late an infant, but now of full age, Plaintiff’.”
Similar observations were made by Harman LJ in Carberry (formerly an infant but now of full age) v Davies [1968] 2 All ER 817 (CA), at 818.
Reasoning
34 It may not be entirely beyond dispute that the District Court had power in October 1992 to make a costs order enforceable against a next friend. The District Court is a court of limited jurisdiction, whose powers are defined by legislation. In Milosevic v Government Insurance Office of New South Wales (1993) 31 NSWLR 323 (CA), it was held that the District Court had no power to award indemnity costs. Kirby P, with whom Cripps JA agreed, considered the history of the District Court’s powers with respect to costs. His Honour held that the Court’s powers were limited by s 148A of the District Court Act 1973 (NSW) (“District Court Act”), in its then form, which provided that a reference to costs in Pt 3 Div 9A (dealing with costs in proceedings) was a reference “to costs payable between party and party”. Thus, although s 148B gave the District Court apparently broad powers to award costs, those powers were limited to costs between “party and party”. It is by no means obvious that the relevant provisions would be read as authorising a costs order against a next friend, who is not, on ordinary principles, a party to the proceedings.
35 Section 148B of the District Court Act, as in force in 1992, was expressed to be subject to the Act and the rules. Prior to November 1986, the DCR specifically provided as follows (Part 45, r 2(2)):
“A next friend in any proceedings shall be liable in the proceedings for any costs which the plaintiff, if he were not a disable person, would have been liable to pay in the proceedings, and any order for costs against the plaintiff or the next friend may be enforced in the proceedings against the next friend.”
However, that provision was repealed in November 1986 and in 1992 the DCR made no specific provision for a costs order to be enforced against the next friend.
36 Neither party addressed the general scope of the District Court’s powers, although Mr Freeman referred to Milosevic v GIO, in connection with a more limited submission. Both Ms Nash and Mr Freeman seemed content to approach the case on the basis that the DCR must be taken to have incorporated by reference the general law learning concerning the liability of a next friend to pay the costs of a successful defendant. This also seems to be the view, for example, of the editors of O’Grady, District Court Practice, par [1825], where they cite Radford v Cavanagh (a decision relating to proceedings in the Supreme Court) for the proposition that a tutor is personally liable to any costs ordered against a disable person. While Div 9A of Pt 3 of the District Court Act was extensively amended by the Legal Profession Reform Act 1993 (NSW), partly to overcome the specific decision in Milosevic v GIO, the issue I have identified might still arise given the present wording of s 148A (which refers to “costs payable by a party”). On the other hand, it may be that s 148A, which is expressed to be subject to the rules, does not prevent a successful defendant from enforcing a costs order directly against a next friend, where the plaintiff is an infant. There appears to be no authority directly on point.
37 Given that the issue was not addressed in argument, I think it appropriate to approach the case on the basis that the parties’ assumption about the operation of the DCR is correct. The question is then whether the making of the costs order in the District Court proceedings in favour of the creditor created a debt due by the respondent to the creditor. It is necessary to answer the question, despite the failure of the respondent to comply with the bankruptcy notice. Section 44(1) of the Bankruptcy Act provides that a creditor’s petition is not to be presented against a debtor unless the debtor owes to the creditor a debt of at least $2,000 and that debt in a liquidated sum payable immediately or at a certain future time. The debt must be shown to have been in existence at the date of the act of bankruptcy: Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256 (Fed Ct Bankruptcy/Gibbs J), at 258. Moreover, s 52(1)(c) of the Bankruptcy Act provides that the Court must require proof of the fact that the debt on which the petitioner relies is still owing: Corney v Brien (1951) 84 CLR 343, at 347.
38 This is not a case in which, at the time the final hearing was conducted and orders made, the plaintiff was an infant. He had attained his majority several years before the hearing conducted by a Judge of the District Court. Nor is this a case where, at the time of the final hearing, the next friend gave instructions to the solicitor acting for the plaintiff or otherwise played a role in the proceedings. It is clear from the respondent’s uncontested evidence that he played no part in the proceedings at any time after the hearing conducted by the arbitrator. It is also an inescapable inference from that evidence that the son, at least from the time he applied for a rehearing of the arbitrated action, adopted the proceedings. In the absence of the respondent playing any part in the proceedings, on the evidence, no-one other than the son could have instructed the solicitors to seek a rehearing and to conduct the rehearing before the Judge.
39 It follows from these findings, assuming the general law principles are incorporated by the DCR, that the son became liable to meet the costs order made in favour of the defendant. As was said in Bligh v Tredgett, if an infant comes of age, and carries on a suit instituted in his name, he or she is responsible for the whole costs of the proceedings. Perhaps this was recognised by the solicitors for the defendant in the District Court proceedings when, in April 1994, they served the son (but not the respondent) with the bill of costs and the appointment to tax.
40 As far as the respondent is concerned, his authority to take steps in the proceedings terminated on the date the son attained his majority. It may be that, if the respondent had actively participated in the proceedings after that date, he would have incurred liability to pay costs awarded in favour of the creditor. Plainly, the respondent took no such steps after the arbitration had concluded. There was no evidence as to whether he had or had not taken any such steps between the son attaining his majority and the arbitration. In these circumstances, I am not prepared to find that the respondent took an active part in the proceedings after the son attained his majority. The creditor bears the onus of establishing that fact. The only evidence that might suggest that the respondent took an active part in the proceedings was that he was present for part of the arbitration and that his name remained on the record as the next friend. But the evidence is consistent with the respondent not giving any instructions to the solicitor in taking any step in the proceedings (as was the case after the hearing before the arbitrator, even though the respondent remained on the record as the next friend during this period as well). I should add that Ms Nash did not invite me to find that the respondent had actively participated in the proceedings after the son attained his majority (otherwise than by allowing himself to remain on the record as next friend). Nor did she suggest that the respondent was liable under the costs order for any reason other than that he allowed himself to remain on the record in that capacity.
41 In my opinion, in the absence of evidence that the respondent played an active part in the proceedings after the son attained his majority, I do not think the respondent became liable for costs incurred after that date. It may be true that the solicitor acting on behalf of the respondent as next friend in the District Court proceedings should have taken the steps described in Feeney v Pieper, once the son attained his majority. That is, it may well be that the solicitor should have advised the District Court registry and the defendant (at that stage the GIO) that the son had attained his majority. The failure of the solicitor to take those steps had the consequence that the respondent remained nominally on the record as the next friend. But that failure, in my opinion, does not mean that the respondent became responsible under the costs order for costs incurred by the defendant after the date the son attained his majority, at least in a case where the son himself adopted the proceedings and thereby became liable under the costs order made in favour of the creditor.
42 None of the authorities to which I have referred decides that the respondent is responsible under the costs order in the circumstances I have described. Nor did Ms Nash cite any authority that would apply in these circumstances. And I do not think that there is any reason in principle why the next friend should be liable in such a case.
43 A question may arise as to whether, in the circumstances of this case, the respondent was liable under the costs order for costs incurred by the defendant before the date the son attained his majority. The better view seems to be that the costs order is not apportionable in this way and that the respondent was not so liable: cf Bligh v Tredgett, at 1026. But, as Ms Nash conceded, it would not assist the creditor’s case even if the respondent was liable for a portion of the costs, since there has been no attempt to quantify that liability: Bankruptcy Act, s 44(1). Similarly, even if (contrary to my view) the respondent were liable under the costs order for costs incurred up to and including the arbitration, it would not assist the creditor in these proceedings.
44 Ms Nash placed some reliance on DCR, Part 45, r 8. She submitted that this provided the sole means by which a next friend could be removed from the proceedings and that a failure to utilise this procedure exposed the next friend to liability under the costs order. It is not evident why, even if the Part 45, r 8, were the sole means by which a next friend could be removed, it would have the consequence she suggested would follow. In any event, it is clear that DCR Pt 45, r 8, is concerned with the removal of a tutor, either by a party to the proceedings or a third person, for reasons connected with the tutor’s unsuitability to remain in the position. This is shown by the requirement in Part 45, r 8(2), that a person moving for an order must, unless the Court otherwise orders, serve notice of the motion on the tutor whose removal is sought. The rule cannot be construed as the sole means by which a next friend secures his or her removal from the proceedings.
45 Ms Nash also relied on the undertaking executed by the respondent. I have explained the source of the form of the undertaking. I think it evident that, whatever force or effect the undertaking signed by the respondent might have in view of the repeal of the rule requiring such an undertaking, it cannot impose on him a liability for costs incurred by the son after he attained his majority and his disability terminated. The words “if he were of full capacity”, in my opinion, are intended to qualify the scope of the undertaking. Any obligation imposed by the undertaking is limited to costs incurred before the plaintiff attained his majority. At the very least, the undertaking cannot make the respondent liable under a costs order in respect of costs incurred after the son adopted the proceedings and became liable for costs as a person of full age and capacity.
46 It follows, in my view, that the creditor has not established that the respondent is indebted in the amount claimed, nor in any amount that would satisfy the requirements of ss 44(1) and 52(1)(c) of the Bankruptcy Act. I do not see this as a case in which I need to go behind the judgment in favour of the creditor, although Ms Nash conceded that, if it were necessary, I could do so. Rather, it is a case of ascertaining the liability, if any, imposed on the respondent by virtue of the judgment in the District Court proceedings or by the undertaking executed by the respondent. As I have held, any liability to which he may have been subject was not such as to satisfy the requirements for the making of a sequestration order against his estate. If, contrary to my opinion, it is necessary to go behind the District Court judgment, I would exercise my discretion to take that course.
47 It is not necessary to address other arguments made on behalf of the respondent. These included the contention that, since the legal representatives of the GIO (as Ms Nash accepted) had become aware at least by 1991 that the son had attained his majority, there was no need for the respondent’s solicitor formally to notify the Registry or the defendant of that fact. Mr Freeman also submitted that, even if the requirements for the making of a sequestration order were satisfied, I should exercise the discretion conferred by s 52(2)(b) of the Bankruptcy Act to decline to dismiss the petition where “for other sufficient cause a sequestration order ought not to be made”.
48 I should mention a final point. I have found, on the evidence in this case, that the son adopted the District Court proceedings and would be liable on the judgment in favour of the creditor. I have made this finding only because it is necessary in addressing the question of whether a sequestration order should be made against the respondent’s estate. The son is not a party to the present proceedings and has not given evidence. Nothing said in this judgment binds him. Similarly, I have made observations about apparent omissions on the part of the solicitors acting in the District Court proceedings. They, too, are not parties to the proceedings and have not had an opportunity to be heard.
Conclusion
49 The creditor’s petition should be dismissed, with costs.
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I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville. |
Associate:
Dated: 14 April 1999
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Solicitor for the Applicant: |
Sally Nash & Co |
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Counsel for the Respondent: |
Mr R P Freeman |
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Solicitor for the Respondent: |
Scarfone & Co |
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Date of Hearing: |
8 April 1999 |
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Date of Judgment: |
14 April 1999 |
